#1 reason for e-commerce failure: shit cash flow management.
Cash is your biz oxygen. Without it you’re fucked.
After building + exiting five multi-million dollar brands, here are the 5 biggest cash flow problems ecom entrepreneurs fall into (plus how to fix each one): 🧵
Cash is your biz oxygen. Without it you’re fucked.
After building + exiting five multi-million dollar brands, here are the 5 biggest cash flow problems ecom entrepreneurs fall into (plus how to fix each one): 🧵
Cash flow problem #1: You're thinking in revenue, not profit.
"We did $50K this month!"
Cool. How much did you keep?
Revenue pays for vanity metrics. Profit pays for rent.
"We did $50K this month!"
Cool. How much did you keep?
Revenue pays for vanity metrics. Profit pays for rent.
Solution #1: Track your actual profit margins daily, not monthly.
Know exactly how much you keep from every sale.
Set up daily P&L tracking.
If you can't tell me your profit margin right now, you're flying blind.
Know exactly how much you keep from every sale.
Set up daily P&L tracking.
If you can't tell me your profit margin right now, you're flying blind.
Cash flow problem #2: Your payment terms are trash.
You're paying suppliers upfront but customers pay you in 30 days.
That's a recipe for bankruptcy.
You're funding everyone else's business except your own.
You're paying suppliers upfront but customers pay you in 30 days.
That's a recipe for bankruptcy.
You're funding everyone else's business except your own.
Solution #2: Negotiate better terms everywhere.
Push suppliers to NET 30 terms.
Incentivize customers for faster payments with 2% discounts.
Use payment processors that pay out daily, not weekly.
Control the timing of money flowing in and out.
(And whatever you do, stay the fuck away from Paypal)
Push suppliers to NET 30 terms.
Incentivize customers for faster payments with 2% discounts.
Use payment processors that pay out daily, not weekly.
Control the timing of money flowing in and out.
(And whatever you do, stay the fuck away from Paypal)
Cash flow problem #3: You have no cash reserves.
One ad account ban, one supplier issue, one chargeback wave = game over.
You're one bad week away from bankruptcy.
One ad account ban, one supplier issue, one chargeback wave = game over.
You're one bad week away from bankruptcy.
Solution #3: Keep 3-6 months of operating expenses in cash.
Boring? Yes.
Worth it if you want to save your fucking business.
This isn't dead money - it's insurance that keeps you alive during rough patches.
Build this reserve BEFORE you need it.
Failing to prepare is preparing to fail.
Boring? Yes.
Worth it if you want to save your fucking business.
This isn't dead money - it's insurance that keeps you alive during rough patches.
Build this reserve BEFORE you need it.
Failing to prepare is preparing to fail.
Cash flow problem #4: You're scaling too fast.
More sales = more inventory = more cash tied up.
Growing from $10K to $100K months sounds sexy until you realize you need $300K in inventory to support it.
More sales = more inventory = more cash tied up.
Growing from $10K to $100K months sounds sexy until you realize you need $300K in inventory to support it.
Solution #4: Scale your cash reserves with your revenue.
For every $10K increase in monthly revenue, add $30K to your cash reserves.
Unglamorous but necessary.
Growth without cash reserves is a house of cards.
For every $10K increase in monthly revenue, add $30K to your cash reserves.
Unglamorous but necessary.
Growth without cash reserves is a house of cards.
Cash flow problem #5: You don't understand your cash conversion cycle.
Time from when you pay for inventory → Time when customer pays you.
The longer this cycle, the more cash you need.
Most people have no idea how long their cycle is.
Time from when you pay for inventory → Time when customer pays you.
The longer this cycle, the more cash you need.
Most people have no idea how long their cycle is.
Solution #5: Map out your cash conversion cycle.
Calculate exactly how long money is tied up.
Optimize every step to shorten the cycle.
The faster you convert inventory to cash, the less working capital you need.
Calculate exactly how long money is tied up.
Optimize every step to shorten the cycle.
The faster you convert inventory to cash, the less working capital you need.
Cash is oxygen for your business.
You can be profitable and still suffocate.
Master cash flow management or watch your "successful" business collapse when you least expect it.
Boring advice that saves businesses.
RT to save other ecommerce leaders from going out of biz 👇
You can be profitable and still suffocate.
Master cash flow management or watch your "successful" business collapse when you least expect it.
Boring advice that saves businesses.
RT to save other ecommerce leaders from going out of biz 👇
https://twitter.com/2676634174/status/1970872959469281695
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