With the rapidly changing circumstances in the world due to COVID-19 many businesses are getting hit hard.
Times are uncertain right now, but there are always things you can do to improve your situation.
It’s stressful, but you can actually use this crisis and time in lockdown to improve your business and to come out stronger.
It doesn’t matter if you sell on Amazon, Shopify, Magento, or WooCommerce. Every ecommerce business needs to take these steps to ensure that your business not only survives but thrives.
My goal is to make this post as actionable as possible to give us all the best chance of staying in business and saving jobs.
Let’s get started.
Cashflow Keeps You In Business
Businesses don’t fail because they don’t make a profit. They fail because they run out of cashflow.
Physical products are challenging for cashflows to begin with. During these trying times, it is make or break.
The best way to stay on top of your cashflow is with sales and cashflow projections. You need to diligently project out your cash inflows and outflows for the next few months in order to identify times when you may need to find some solutions to stay cashflow positive and avoid going out of business.
In these times of uncertainty and with things changing daily, you need to update your cashflow projections every week as sales projections change. There is no point in making cashflow projections if they aren’t accurate.
When you make your projections, professionalism and presentation matters.
This is because you can leverage sales projections to get better payment terms with your suppliers. If you can show them your sales and cashflow projections, you can approach them as a partner.
They want you to stay in business just as much as you do. Your projections have to be accurate and believable by your partners otherwise there is no point. Don’t try to hack it together yourself or with your VA. Get help from someone with experience.
Create two-month Crisis Cash Flow Projections taking into account any anticipated changes in your business. Review and update every week to give you the best chance to stay in the green.
Leverage new credit cards and financing options to boost your cashflow
There are new credit cards and payment methods that have been launched in the last few years that you can leverage to alleviate your cash flow.
Check out the Brex Card, which will give you 60 days no interest payment terms. This extra 60 days for payments can make or break your business.
Next, sign up for Plastiq which allows you to pay almost any bill with your credit card, for only a 2.5% fee.
The Brex + Plastiq combo can be really powerful and save your business in tight times.
In times like this, it can be easy to panic. But you are smart and capable, and you can use this as a great opportunity to take care of some serious business.
Sign up for Brex and Plastiq to give yourself a needed cashflow boost.
Get Clarity on Your Financials
The economy is about to take a hit in major and uncertain ways.
You need to know your numbers in order to survive. This is the foundation for everything and needs to be done ASAP.
At a minimum, you must complete your Bookkeeping, prepare Profit and Loss statements and Balance Sheet. This will open you up to options that may be necessary to survive and give you the clarity you need to make important decisions.
In order to be eligible for loans and acquisition, your finances need to be done completely and correctly. With uncertain times ahead you don’t want to be caught in a situation where you need a loan badly but can’t get it because your books are incomplete or incorrect.
Bookkeeping and accounting is tricky for ecommerce because of COGS. Thus, it is crucial that your bookkeeper specifically understands eCommerce.
The best way to ensure you are on top of what you need is to consult with an eCom experienced bookkeeper or accountant. If you don’t have one, send me a message and my team will review your books for free.
Once you have clarity on your financials, you can dive into your numbers to find opportunities to increase profits which may be critical for your survival.
Make sure you have complete and correct bookkeeping and are doing a monthly Profit and Loss statement and Balance Sheet. If you are unsure, consult with someone with experience.
Ruthless Expense Reduction
Once you have clear optics on your finances, you can move into attack mode.
Bloated businesses will not survive. So, you need to examine and cut down all unnecessary expenses.
What can be cut? What can be renegotiated?
Start with your biggest expenses because those will have the biggest impact on your bottom line.
I recommend reviewing your last few months of bank and credit card statements and noting every expense that isn’t 100% necessary. Then, cut it.
If you don’t want to review these things yourself, then get the help of a diligent person who can do it for you.
Review your last months of bank statements and credit card charges and cut anything that is not completely necessary.
Supply Chain Optimization
In order to ensure business continuity during uncertain times, it is crucial for you to have backup options to fulfill your products.
Many sellers have been forced into this with Amazon’s recent announcement that they are only accepting inbound shipments of Essential products (Food, Medicals, Baby good, Pet supplies).
For those sellers in need, I’ve been referring people to AMFLAT Logistics. They have warehouses in CA and can offer Seller Fulfilled Prime to people who need a warehouse solution asap.
Many sellers can also save expenses and increase profit and cashflow on their supply chain.
Get multiple freight quotes before you send a shipment and make sure your third party logistics contractor (3PL) provides the most cost-effective warehousing solutions for your needs.
Many eCom businesses use the first FF that they started working with and never price compare. This can be a good opportunity to save money on every future shipment.
If you sell primarily on Amazon FBA, you can further save money by holding excess inventory in a 3PL vs the FBA warehouses because those have very high storage fees. Which now many sellers are forced to do with the recent inbound shipment restrictions.
If you want help comparing prices and warehouses, send us a message. Since we manage a large volume of freight for our clients, we have been able to get preferred rates that we can pass on to you.
You cannot afford to overspend on warehousing or overpay for storage fees.
Finally, make sure you have backup suppliers. The spread of the COVID-19 virus is causing interruptions in the global supply chain, and you need to ensure your supply chain stays intact.
Find a backup warehouse, price check freight quotes on your next shipment, source additional suppliers for your products as backup.
Efficient Inventory Management
Holding efficient inventory will allow you to minimize your invested capital so you can save your cashflow.
The goal is to hold the least amount of inventory necessary while still avoiding going out of stock.
So how do you hold efficient inventory and stay in stock?
Get in front of your supply chain management.
This means having a good reorder tracker and sales projections in place to project your future needs. Closely monitor how much inventory you currently have, the velocity that your inventory is moving, days left in stock, how long reorders take etc.
That will provide you the insight you need to make orders when you need to stay in stock yet not have cash tied up with excess inventory.
Create reorder tracker and sync with your sales projections. Update and review weekly.
So there you have it. Six steps to take action on NOW to give your business the best chance of surviving during any crisis.
What do you think? Anything else you can do?
Please share with anyone you think this may be able to help.
We are all in this together. To save our businesses and save jobs.