E184: Dealing with Cash FlowOctober 1, 2018 in Ecom-Crew-Podcast
Very few people go into ecommerce with a comfortable cash cushion. Most start off with just a wee bit of savings and often need the help in bankrolling their business, at least initially.
Dave and I are great examples of this as we experienced the opposite ends of the spectrum when we were first starting our ecommerce businesses.
I was fortunate enough to have some financial advantage when I first got into ecommerce, having achieved success as a poker affiliate a few years back. Dave, on the other hand, had to pool capital from different sources. He used $5,000 of his money, got a $20,000 cash injection, and had to be approved for a $40,000 line of credit from HSBC Canada.
Our varying experiences have taught us a thing or two about how to effectively deal with cash flow. This forms a central part of our discussion on this podcast.
Below is a list of the lessons and realizations that we’ve arrived at in our quest to grow our respective ecommerce businesses while inching towards a respectable inventory turnover.
- Build a relationship with your Chinese suppliers. Earn their trust and confidence.
- Leverage on that relationship you’ve built by paying less money to your Chinese suppliers. Ask for absurd payment terms like 60 days or more. They won’t say yes but will likely negotiate and you’ll still end up with terms that you’re happy with.
- Less Than Container (LCL) is an absolute killer in terms of transit time. It adds about 2 to 3 weeks in transit time because all the shipments in that one container need to be sorted out and accounted for. If it is your own container, you can immediately pick it up at the port and ship to Amazon or to your warehouse.
- Having your own container might be expensive at a glance, but you could potentially end up saving more in terms of cash flow cost if your turn inventory quicker.
- It is less expensive to ship a half-full container than an LCL if you factor in the fact that you won’t be losing 2-3 weeks in your inventory turnover cycle.
- As your business gets bigger, you’ll have a lower profit margin.
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Michael started his first business when he was 18 and is a serial entrepreneur. He got his start in the online world way back in 2004 as an affiliate marketer. From there he grew as an SEO expert and has transitioned into ecommerce, running several sites that bring in a total of 7-figures of revenue each year.