Your Amazon business resembles an engine. Railway engines need fuel to turn their wheels, in the same way as you need cash to drive your growth on Amazon. The faster you turn your wheels around over time the further ahead you will end up.
The question is how to turn your cash wheel faster when your Amazon disbursements are coming at a constant and somewhat steady speed. Can you pump cash faster into your business engine to accelerate your growth?
Every seller invests an initial amount of capital to purchase or manufacture the merchandise sold on Amazon. That capital is tied up for a number of days and it can be months before the seller receives her initial investment plus profit. The purpose of the current article is to demonstrate that by accelerating your Amazon cash cycle you will grow faster and as direct consequence yield more profits. The additional profits will keep fueling your growth on Amazon.
Mary has a bricks & mortar business and wants to expand to Amazon. She is a seasoned entrepreneur and likes to believe that she has a good grasp of business fundamentals. Before she places her first order for her private label brand she decides to do some math.
Mary will place an order of $5,000 with her supplier and after 30 days the merchandise will be delivered to the Amazon warehouses.She plans to list her ASINs and launch the following day and estimates to have sold the whole lot in 20 days.
Amazon will settle the total balance within two weeks and her bank needs an additional 3 days to clear the funds.
All in all, it will take 67 days to turn the wheel of cash once.
Turn the Wheel Once
Mary’s initial capital of $5,000 will generate $10,000 in gross sales out of which Amazon related fees and charges should approximately amount to $2,500. She will end up earning $2,500. Her new capital equals the initial $5,000 plus her profits of $2,500.
Turn the Wheel Twice
Mary knows that growing fast is the path to sustainability on Amazon. Her plan is to reinvest all of her proceeds and go for a second run. The assumptions remain the same: all of the merchandise is sold for a 25% profit on gross sales and it takes another 67 days to turn the wheel around once more. All in all it will take 134 days (67 x 2) to turn the initial capital of $5,000 into $11,250.
Can Mary Turn the Wheel Faster?
Mary turns her money every 67 days, approximately 5 times per year, yielding in her base scenario $33,000 in profits. The fuel for her engine are the profits generated and re-invested in her business.
Mary sees the numbers in her spreadsheet and knows that she can do better. She wants to accelerate her growth with her own money and as her business is still “young”, she cannot really apply for bank financing. Her orders cannot be delivered in less than 30 days nor can she turn her Amazon inventory faster.
It all comes down to how fast Amazon disburses her funds. And that can’t change either. What can Mary do?
Mary found out about Storfund through a friend and she decides to register. She understands the value of turning her money more quickly and the positive implications on her Amazon growth.
Thanks to Storfund she will receive her total Amazon balance, available + unavailable on day one.
Daily payments will help Mary turn her capital 7 times over a year. This is 2 extra times compare to her current state with Amazon. Let’s see how significant this is for her business finances.
What a Difference a Day Makes
After some quick calcs she realizes that the impact on her bottom line will be enormous. She will turn her capital 40% faster over a year and that will amount to an extra $190,000 in sales and $47,000 in profits!
Bigger Business, Higher Valuation
Higher profits stem from a much larger turnover. Access to daily payments will help Mary increase her turnover by 145%. Mary plans to sell her Amazon business after 2-3 years. She wants to remain debt free and grow by shortening her cash cycle.She believes that if she turns over larger and larger volumes she will be able to command a higher price for her Amazon business.
At What Cost?
Mary ended up paying $4,825 in Storfund fees over a year, which is 1.50% of her gross sales. This is how much it cost Mary to make an extra of $42,000 in profit!
Storfund accelerates your marketplace payouts across multiple geographies and allows you to manage your finances in one place. Storfund helps e-commerce sellers drive sales and increase profitability by shortening their cash cycle, thus allowing them to purchase additional inventory and never run the risk of being out of stock. Our clients receive their sales the same day, irrespective of the marketplaces’ actions, be it rolling reserves or 14- or 30-day payment cycles. Storfund is available in 17 Amazon marketplaces and in the French marketplace Cdiscount. We work with companies registered in the European Economic Area (EEA), the United Kingdom, the United States, Canada, Australia and New Zealand.