With the global eCommerce market set to top revenues of $6.5 trillion in 2024 it would be easy to think businesses in the sector are enjoying year-round success, with founders and managers giving little thought to cashflow problems.
While that might be the case for some of the industry’s bigger players it’s simply not true for many hard-working entrepreneurs whose ventures rely on spikes in the sales calendar to see them through tougher trading periods.
If this is the case at your company, the chances are that any seasonal revenue peaks are matched by times when financing your operations is a distinct challenge. And irregular income isn’t the only headache that can blow a hole in your business plan; eCommerce companies face a range of common issues that might leave you needing to repair your bottom line.
Let’s examine some of the events that could cause you problems, and consider what you can do if they’re making you worry about your finances.
Four common cashflow gaps in eCommerce
- Fluctuations in demand: Many eCommerce businesses set up shop knowing that they are likely to have peak periods but also seasonal slumps. That’s easy enough to foresee even if it still requires some financial magic to manage leaner times. But what if unseen factors hit your sales? Rising inflation across global markets remains an issue, with the result that a section of your customer base might not have as much disposable income to spend with your business for some time.
- Getting caught in a cyber attack: Sadly, cyber crime is a growing threat to online businesses and eCommerce is no exception. According to estimates cyber attacks such as phishing scams and other forms of online payment fraud were set to cost the industry $48bn in 2023. While shoring up your company’s defenses is one issue, the failure it can cause in your systems, alongside financial and reputational damage, can take a big bite out of your cash reserves.
- When the bandwagon moves on: eCommerce trends come and go faster perhaps than in any other industry. The latest craze today can be easily forgotten by consumers tomorrow, especially when social media influencers and other celebrities push products that might be made or sold by your direct rivals. Fierce competition means the focus can move away from your business fast, potentially leaving your revenues high and dry.
- Taking a hit from supply chain disruption: eCommerce businesses rely heavily on efficient supply chains. They can span locations in several parts of the world, with each link in the chain a critical component of your overall offer to customers. So if there’s unrest in any part of the world or other unexpected events – your key products and your revenues could suddenly be put at risk.
Close the gap with revenue based financing
In most of the cases outlined above there will be little prior warning of trouble and your finances could be knocked off course in short order. As such, it’s vital that eCommerce business owners consider how best to access emergency finances should the worst happen. After all, having funds to tide you over can give you certainty – and your business resilience – when you need it most.
That’s why revenue based financing (RBF) could be the perfect fit. RBF offers a unique, attractive alternative for eCommerce companies that are seeking a fast injection of capital to get them through a crisis. With RBF, you receive capital in exchange for a percentage of your future revenue. You retain ownership of your business and control of your operations without the oversight of investors.
Repayments are made based on weekly income. If your business has no sales activity by the end of a week, you won’t need to make a repayment that week. At the other end of the scale, we do cap the maximum you’ll need to pay us back; so if you have especially high sales one week you’ll still only need to pay back a fixed amount. What’s more, the investor’s goals mirror your own. If your revenues grow well with their support their returns are higher too.
Even better, the application and approval process with Stenn is simple, streamlined and swift. This quick access to capital is crucial during cashflow emergencies when time is of the essence. If your application is successful, your eCommerce business can use RBF to address your immediate needs without a lengthy waiting period.
eCommerce businesses in particular, with their unique revenue models, can benefit from the flexibility of RBF. Whether your business relies on subscription revenue, one-time sales, or a combination of both, RBF can be structured to align with specific revenue streams – and provide the answer if your company runs into short-term trouble.