At the end of the day – you started your business to make money. If you do not make profit – then all the effort results in no return for you.
In this article we cover some ways you can make your cash stretch further to help your business grow.
Tip 1 Start Small and Cycle
Start with a small order of 100 to 500 units and do all the marketing possible to sell these units. Once you’ve sold them, you can reinvest into an order twice the size, and then cycle and repeat. That way you can turn a small $2000 investment into $10,000 or more of stock that you are selling each month.
You might be starting out with only a small amount of capital, but there are several ways to boost your cash flow and profits that will allow you to scale faster.
Make sure you find the time to optimize your product and listing, and within a few months it can become a decent profit center. If you only place small trial orders for every new item, you minimize how much cash you need and also greatly reduce your risk.
This will slow down your long-term growth, but will also prevent big mistakes from buying too much of a bad product.
Tip 2 Just In Time Stock
If you are manufacturing in China and it takes 60 days to make your product and ship it, you’re going to need at least 120 days of stock on order at any one time. If you have 60 days worth of stock in Amazon, you have to reorder because just as the stock in Amazon runs out your new order should arrive.
If you are selling 20 units a day that means you have to have enough money for 2400 units at a time. But, if your lead time and freight were only 30 days, you would only need 600 units in stock and 600 units on reorder.
You can use cash cow pro’s built-in calculator to see how lead time affects the investment and your returns.
Your production lead time can make or kill your business.
Tip 3 Freight
If you ship by air it might take 7 days for your product to arrive, whereas by sea you could wait 30 days or more.
If you’re getting low on stock, using air freight means you can order less each time and get into Amazon quickly. If your products have to go by sea because they are large and heavy, you need to buy more and there’s a higher risk of running out of stock.
To reduce the amount of cash you have tied up in products, try to go for light, small items that you can restock in small quantities.
Tip 4 Supplier Credit
A great way to boost your cash flow is to request credit or better payment terms from a supplier you’ve used for a few orders.
Instead of paying a 30% deposit they may let you pay before shipment, or if you have a very good relationship they may only request payment after delivery. If you’ve been dealing with the supplier for more than a year you might be able to stretch it out to 30 or 90 days payment terms.
That means you could sell the product before you even owe them the money.
Tip 5 Freight Payment
Freight costs can add up.
Some factories are willing to pay this on your behalf provided that you pay them after delivery. Usually they won’t do this on the first order, but from the second order onwards this could help you free up cash.
Tip 6 Credit Card
There are a lot of different expenses involved in the Amazon business, from pay per click to paying for software subscription fees.
Get a credit card that lets you pay as late as possible without interest. Basically you’ll use it to finance part of your cost, interest-free, adding 15 to 30 days or more to the date when you owe the money.
Tip 7 Lower Cost Products with High Margin
Your cash is dependent upon your product margin.
If your product costs one dollar and sells for $20, you will have a lot of spare cash because you don’t need to reinvest much to reorder. But if your product costs nine dollars and sells for $20 most of the money that you made will go back to reorders.
The larger your margin the higher your cash balance will be. Do everything you can to negotiate the price down, and bundle products to increase the value of your item.