Getting tired of running in circles with your cash flow and stock and having your back against the wall EVERY.SINGLE.TIME?
Let’s face it, we all got to a point in our businesses where we can no longer scale fast enough because we can’t bring enough products into the country or can’t produce products quick enough. Sometimes the problem is we just don’t have enough funds to upscale!
Cash flow is one of the most important, if not the most important factor in any business. If you don’t have enough funds to see you through sales, then you will easily lose in just a blink of an eye. And if you noticed, this scenario always happens to startups and to business owners who are too scared to let it all out.
Most of the e-commerce structures we have dealt with are paying cash upfront before the actual manufacturing of the products commence or before the items are dropshipped to the customers. While this may be the usual standard, it might not be the most sustainable in the long run. So, in order to solve this, we need to know how important cash flow in ecommerce businesses is and where to actually get it.
If you are ready to absorb all this info then head on straight below! Early disclaimer though, if you have enough funds to cover a part or all of your business for months and even years, then the methods covered below might not be applicable at all to you.
Here are the top resource ideas in getting that cash flow in your ecommerce businesses:
Friends and Family
This is a rather obvious first choice but the most disastrous if not taken care of initially. Getting money from your family members or closest friends should be handled with the utmost care, as relationships can be damaged if expectations have not been managed from the get-go. If you have someone in your circle who is willing to lend some money and has a general interest in your business, it could be worth considering. Going this way you need to make sure there are clear expectations. With close relationships on the line, this one might be one to avoid for you.
You can borrow up to 35% of your annual PayPal sales. So anything you put through PayPal in a year, they will allow you to borrow 35% of that. But here’s the catch, remember they’ve already taken a clip-on that $100,000 in sales through their fee as they’re taking a percentage of each sale, right? So you could be giving up to 30% of each sale to repay the PayPal on this money on top of the money you are paying them for the cash advance.
This is pretty straightforward. You go to your bank and apply for one. The downside of this is the unusually long approvals particularly with small amounts and the strict guidelines if you are, let’s say, a home-based business owner. There are some small financial institutions that specialise lending to small businesses. These guys generally get how business works and try to make the process as easy as possible. And lastly, there are your brokers. Brokers connect to a number of different lenders and essentially take on all the hard work of finding the best fit for your business.
A lot of e-commerce stores start this way, some even advertise their products at a highly discounted price just for people to order first and wait for their orders to be available. Yes, this may be good right now, but at the rate of social media hype and instant gratifications, more and more customers are wanting their orders yesterday so this might not be plausible for a long haul.
Crowdfunding has traditionally been a place for startups, but now retailers are starting to realize the power behind crowdfunding. Platforms such as Kickstarter or Pozible continue to increase in popularity. Even established brands are turning to crowdfunding platforms to raise capital for the release of new products. Essentially it is similar to a presale but you can set yourself a minimum goal so you can ensure you get the capital you need.
So, there are options out there to improve your cash flow. All have their own risks attached to them and all will suit (or not) your business in different ways. As with any important business decision, it is important to do your research and explore potential outcomes. The important thing in all of this is these different avenues are all available to help a business as yours grow.
So what are you doing in 2020 to take your business to the next level?