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Scaling Smarter: Financial Strategies for E-commerce Growth

As an e-commerce entrepreneur, you’ve seen no shortage of challenges. From inflation to changes in marketplace policies and shifting customer behaviors, there’s always something new on the radar.

While many e-commerce challenges can be solved with any combination of new marketing promos, products, or tech, the fact is — these things cost money.

Is your financial strategy fit for scaling in the current e-commerce climate? 

With a clear plan for success, you can pursue a range of growth strategies, no matter the circumstances.

A Plan For Smarter Scaling

  • Things To Think About Before Scaling Your E-Commerce Business
  • 7 Financial Strategies For Rapid E-Commerce Growth
  • How To Choose A Financial Partner

Things To Think About Before Scaling Your E-commerce Business

As you set out to expand your e-commerce business, give some thought to how you can be as intentional as possible. Here are three things to do before you take action.

Define Your Goal

First, decide exactly how you want to start scaling. What makes the most sense for your business right now?

For instance, do you want to:

Do some brainstorming on different growth options and approaches. Then get clear on which ones are right for right now.

Determine How Much Funding You Need

Next, figure out how much funding you need to launch these new initiatives. 

While debt and debt financing often get a bad name, approaching funding responsibly can spell tremendous momentum for your business, so don’t be afraid to dream big.

To run the numbers, start by:

  • Analyzing your current cash flow levels by creating a cash flow statement
  • Using analytics tools to generate an accurate sales forecast
  • Calculating your projected ROI on any planned investments

Once you have a strong estimate of how much e-commerce funding you need, you can start approaching potential financing partners to see how their offers compare.

Create A Clear Plan For How You’ll Use It

Some lenders will have strict requirements about how you can qualify for and use their funds. If you’re not careful, you could end up with a tight repayment schedule and a high interest rate that has you pinching every penny.

Even if you find a more flexible funding option with fair fees and terms, it still takes smart financial planning to maximize your growth.

Before you get started:

For optimal flexibility, be sure to choose a funding partner that allows you to use your funds as you choose. Some will limit funding usage to things like inventory or advertising expenditures. 

7 Financial Strategies For Rapid E-commerce Growth 

For profitable scaling, you need two things: a solid plan of action and the right financial tool to get where you’re going.

Let’s take a look at seven effective strategies based on a variety of e-commerce growth scenarios.

1. Use A Revenue Advance To Access Funds Faster

Marketplace payouts can take a while (and that’s putting it mildly). When your scores drop or your marketplace introduces confusing new seller policies, unforeseen account holds or suspensions can delay your funds even further.

At worst, you could see a snowball effect that leads to lost sales and stockouts. If the majority of your sales comes from marketplaces with long seller payment schedules, you need a financial strategy that delivers fast access to capital so you can replenish your inventory and keep pushing sales.

That’s where a Revenue Advance can make a big difference.

With a revenue advance, your funding partner uses your historical sales data to advance your funds within a couple of days.

In order to set up a revenue advance, a funder will typically:

  • Take a close look at your recent sales history and predicted payouts
  • Determine how much to advance based on that data
  • Work with you to determine right repayment schedule
  • Disburse the funds within a specified timeframe

With the right e-commerce funding partner, you could get your payouts within 48 hours or less, with interest rates starting as low as 1% and terms that work for you.

2. Get Bridge Financing To Maintain Growth During A Capital Raise

When you’re in the midst of a major fundraising round, keeping up with day-to-day operations can be a challenge.

Bridge financing can help keep your business running smoothly when your funding timelines are unclear. This type of financing typically comes in the form of Working Capital, like a term loan or credit limit.

When Icelandic Glacial announced a massive expansion of its brand, it still had to wait on the funding for a major capital raise.

“From securing a potential investor through due diligence, documentation, and finally, capital infusion, the process took several months,” explains CFO Raymond Thu. “We had to balance our needs between those efforts versus driving the business.”

Icelandic Glacial turned to a Working Capital solution for:

  • Flexible funding with different types, amounts, terms, and rates
  • Quick, short-term financing with funds available in just a couple of days
  • The competitive interest rates and repayment schedules they needed

With the right amount of fair and flexible bridge financing, Raymond and the team at Icelandic Glacial were able to keep their sales momentum going while they completed fundraising.

3. Do More For Your Customers Now To See Increased ROI Later

Sometimes scaling isn’t just about maximizing profits

It could be about offering a better customer experience. With 82% of shoppers saying they “want a brand’s values to align with their own,” investing in mission-driven choices now can mean lasting customer loyalty later.

For UK dental brand Diamond Whites, the core mission is to deliver “straight teeth without the expense”. So when the leadership team set out to offer accessible payment options to a wider range of customers, they needed an influx of capital to offer 12-month non-regulated loans as payment for popular products, similar to a Buy Now, Pay Later solution.

“In order to do this, we needed the capital to cover the costs we took on,” says CEO and cofounder Ben Reed. “It’s helped us grow 110% year over year.”

With a Working Capital solution, the company was able to support its expansion to a wider customer base without sacrificing existing sales or inventory.

4. Use Invoice Factoring To Exponentially Expand Your Reach

For e-commerce businesses who distribute their products directly to Amazon or other retailers, meeting inventory demands can be a challenge. If you’re waiting one, two, or even three months for invoice payouts, how do you maintain enough liquidity to fill new orders?

Take CROSSNET. At the end of 2021, they received the largest potential deal in their company’s history: a Q4 order from Sam’s Club for tens of thousands of units of their innovative, volleyball/four square crossover game.

“We immediately thought, ‘There’s no way we’re going to have the cash flow to pay for this amount of inventory,’” says cofounder Chris Meade.

But with invoice factoring, they were able to access their payments from retailers without waiting the usual 60-90 days, giving them the cash in hand they needed to produce all that inventory.

With invoice factoring, you can submit your unpaid invoices and get cash back in as little as 48 hours. A small percentage, called a factoring fee or discount rate, is taken, and the funder collects on your invoices for you.

Invoice factoring is a perfect option for e-commerce manufacturers, distributors and sellers who want to expand into brick-and-mortar.

5. Manage Your Inventory Needs With Upfront Invoice Funding

Invoice factoring also works for marketplace and other e-commerce sellers who don’t have a distribution arm. With this type of invoice financing, also known as Invoice Flex, you get cash to pay off your suppliers and providers, freeing up your capital for new growth opportunities.

You can fill more and larger orders as you expand your customer base, and keep your inventory levels balanced, so you never run out of stock.

This type of funding can also free you up to place fewer, larger POs and negotiate volume discounts with your suppliers. Plus, the extra stock could help avert supply chain issues, especially during peak sales seasons or factory closings, such as Chinese New Year.

With some invoice factoring arrangements, you’re not limited strictly to invoices for your SKUs. You can also pay off invoices related to marketing, office supplies, and operational expenses.

Because the terms of these types of invoice financing arrangements are shorter, they may also offer lower interest rates than other types of funding, but they can require a bit more attention to fixed payment deadlines.

6. Expand Your Geographical Reach With Global Payments

Expanding globally can be an expensive endeavor any way you slice it. Currency conversion rates and fees can quickly add up, while VAT and GST can be an expensive headache. That’s even before you consider hidden fees and potential security risks.

As you expand overseas, you’ll need a strategy for managing global payments. You’ll also need a system for transacting with a diverse set of suppliers and seamlessly exchanging funds.

Look for a global payments solution that offers:

  • Built-in currency conversion
  • Payments in your local currency and a way to pay your suppliers in theirs
  • A simplified way to pay VAT and GST
  • The ability to transact with hundreds of countries through a single, unified platform
  • Fast payments that can be completed in as few as 1-2 days

By paying suppliers in their local currencies, you may be able to negotiate better deals, save money and improve your supplier relationships.

7. Track KPIs With Powerful Analytics

Once you set your plan in motion, you need a plan for figuring out what’s working. 

Deep visibility into your sales and financial data can help you determine what’s paying off, and where to course-correct.

Look for an all-in-one analytics platform that tracks your core KPIs and can make recommendations on how to boost your sales. You want a platform that can tell you which SKUs and campaigns are performing best. To get the most complete view of your data, choose one that integrates with all of your accounts. 

If you sell on Amazon, make sure your platform also tracks inventory, pricing, reviews and other metrics that keep your Amazon score healthy.

How To Choose A Financial Partner

Most traditional lenders can’t meet the needs of fast-growing e-commerce businesses. Their eligibility terms don’t consider the factors that make your company a promising investment and as a result, they often require risky commitments like personal collateral.

Even for sellers who meet the requirements, you’re still looking at wait times of up to several weeks, or even months, before you can access the funds.

You need a financing partner who understands the unique needs of e-commerce and the stringent certification requirements every reputable financial institution must undergo.

Faster Scaling On Your Terms

To find and capture the best growth strategies for your e-commerce business, you need an agile financial strategy that can move just as fast as your business.

With flexible funding from SellersFi, you get the cash you need at your pace. With no usage restrictions, you’re free to spend as you see fit, so you can grow your business on your terms.

Explore SellerFi’s full suite of financial solutions and start scaling smarter today.

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