Having the key factor such as capital can grow your business daily.

 

Financing the growth of your Amazon business with one key factor-capital

As an Amazon seller, you probably think about ways you can grow your business every day. And as endless as those opportunities might be, they typically come back to one key factor – capital.

For early stage businesses, capital can be just what you need to turn your side hustle business into a full-time opportunity. For more established businesses, extra capital can unlock opportunities to invest in taking on additional inventory, increasing your marketing budget, or taking on additional staff to handle issues like customer service or fulfillment.

Regardless of which opportunity (or opportunities) you pursue, you likely have equal number of options in terms of financing that growth. One of the biggest decisions you may need to make, particularly as it relates to an early-stage company, is whether you’re willing to give up equity, or ownership. Equity financing involves taking on additional investors who will own a portion of your business, in exchange
for financing you need to pursue new opportunities.

Here are some things to consider when weighing equity financing:

– For early-stage companies, equity financing might be a good option to get to scale quicker, not only through the financing that the investor(s) can offer, but also through the expertise and experience they may offer from operating a business already at scale.

– Equity financing also can help align your company’s interests with your shareholder’s interests. Your shareholders will only see a return on their investment should your business scale and become profitable.

  – On the other hand, a potential downside to this type of financing is the fact that you’ll need to give up ownership in return. For some business owners, this may be a viable option as the future of the company – and its ability to become profitable – is not certain. For many others, however, shared ownership of the company means shared decision making across many key functions of your business. And depending on how much equity is given up, this shared decision making model could prove challenging as the company matures.

An alternative to equity financing is often called “revenue-share” or “revenue-based” financing. Companies like Yardline Capital offer this as an alternative to equity financing and refer to it as “growth capital”.

The simple way this often works is as follows: in exchange for an upfront infusion of capital to the business, the borrower will make automatic repayments based on a fixed portion of their sales.

When sales are up, the company will pay back a larger amount on a dollar-for-dollar basis.

When sales are down, repayment amounts will be lower.

Here is a typical scenario of how this type of financing can help your business:

If you’re a profitable Amazon business and have a comfortable margin after COGS, marketing, platform fees, and other expenses like payroll, look at taking on some growth capital, without giving up a stake in your business.

With some additional funding in hand, now you’re in a position to invest incrementally in areas like inventory and marketing. And, if you assume demand for your product is virtually unlimited, you’ll now be able to order in larger quantities, becoming more efficient on a unit cost basis. Bigger investments in inventory and marketing can result in higher monthly incremental revenues –exponentially.

The faster you grow, the more velocity you have on platforms like Amazon or your website, the higher your listings become. Remember, there is no cap on how big your business can be!

There are lots of available financing options for sellers today – from the more traditional like credit cards, lines of credit or even loans from friends or family members, to the ones we’ve discussed today.

Whatever option you choose, be sure and do research on all your available options, the costs associated with each and the expected returns you wish to see from the incremental investment.