As an Amazon seller, you know that growth is key to success. But what if you don't have the money to plant the seeds you need to grow? That's where outside capital can help. In this post, we'll discuss how to get started with seeking outside investment and scaling your Amazon sales with it. Every day is a race to grow your company, so let's get started!
- Where do you need to spend Capital
- How to use capital grow your business
- How much capital do you need
- Get funded
1. Identify growth opportunities.
Whether it’s being able to make larger inventory purchases or buy more online ads, you need to figure out what takes priority when it comes to your growth. Maybe you have an opportunity to buy more inventory at a lower price, but you don’t have enough cash on hand to make it happen. Or, maybe you want to use proven digital marketing strategies to turbocharge your sales with online ads but don’t have enough cash on hand to currently offset the rising CPC prices.
Perhaps there is an opportunity to improve your businesses infrastructure with the implementation of a unique order management software, an Amazon Repricing Tool, like Aura, or some other automation could help you boost sales by over 30% and reduce inefficiencies.
Or, maybe you’ve determined that your best path to growth is taking on additional product offerings and adding additional SKUs.
Whatever the best opportunity seems to be for the growth of your business, don’t wait to put your plans into flight.
2. Determine how much capital you need
There are a number of factors to consider when making this determination, including the price of the product, current sales volume, projected growth rate, sales history, account health, and desired inventory levels.
It might make sense to make the following considerations:
- Can you stock up on your product for a considerably lower price if you buy from your supplier in bulk?
- Are your competitors advertising to your customers and outranking your listings?
- By how much are you planning on increasing your Marketing budget?
- Are your costs and fees—whether for shipping, FBA, or something else—going up?
- With supply chain issues still persisting would it be cheaper and faster to find a way to manufacture your products domestically?
These are a few key questions to evaluate when deciding how much funding you need for your ecommerce business. You can also look at different metrics, like your cash conversion cycle, to get a better understanding of how much cash you would need to ramp up.
You can calculate your CCC using the following formula:
CCC = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) – Days Payable Outstanding (DPO)
CCC = DIO + DSO – DPO
DIO = (average inventory / cost of goods sold x number of days)
DSO = (accounts receivable x number of days / total credit sales)
DPO = (accounts payable x number of days / cost of goods sold)
3. Research your funding options
There are a variety of options available for Amazon sellers, from traditional loans to credit cards to cash advances to venture capital investments. Here’s a short list of ways you can get funding for your business:
- Bootstrap with your own funding
- Get family and friends to invest
- Traditional bank loan
- Small business loan
- Angel investors and venture capitalists
- Use a credit card (but beware of high interest rates)
There’s one other option worth highlighting specifically for Amazon and eCommerce entrepreneurs. There are now a number of online working capital providers that offer fast, convenient financing for small businesses and online entrepreneurs like you.
The process usually involves connecting your online marketplace and then getting financing in as little as 24 hours. In addition, these services typically have a more favorable fee structure, making it easier to manage the cost of growth.
Where a credit card can come with an interest rate of around 16% to 24%, these companies typically offer rates between 2% and 5% and remit as a portion of your sales, so you don’t have to go into debt or dilute your ownership.
If you're looking for fast financing to help grow your small business, a company like Payability is a great option to consider. They offer next-day payouts for Amazon sales to help sellers improve cash flow so they can scale. They can also help you unlock your account level reserve. We highly recommend Payability to get funding fast when you’re dealing with a time-sensitive opportunity.
Get started with Payability and see your funding options in minutes.
It's important to carefully consider every angle before making a decision. By taking the time to understand your options, the application processes and your business needs, you set yourself up for optimal success once you get funding.
4. Close the deal and get funded
It’s important to realize that not all of these options are one-size fits all. Once you’ve lined up a variety of different offers and met with several companies, make sure to have a thoughtful conversation with your team on the option that is best suited for you. It’s important to continuously think about all of the suggestions and tips for scaling your business from above.
Once funded, you can start putting your plans in motion. Buy more inventory. Invest in new products. Launch new ads campaigns. Invest in new automation for your business. Do anything you need to keep your Amazon business growing.
So, whether you’re just starting out and need a small boost to get your business off the ground or you’ve been in business for a while and want to take it to the next level, using outside capital can absolutely help. The four steps we outlined are a great place to start, but they’re not exhaustive. It’s up to you to fill in the blanks and decide what the best option is for your business.
If you want to grow your Amazon business but don’t have the capital to do it on your own, there are options available to you. By following these four simple steps, you can identify opportunities and get funded so you can take your business to new heights.