Is your business ready for growth, do you have a growing business or are you curious about how you can continue to grow your business? I'm happy to tell you more about it in this blog. It is not self-evident that a business will grow. In fact, research on the 'state of SMEs' shows that 90% of all Dutch SMEs before the coronacrisis had little or no growth (De Staat van het MKB, 2017) . E-commerce companies, on the other hand, are an oddity. The total turnover of webshops in fact grew by 85% between 2010 and 2016 (CBS,2017) .
A key reason for strong growth of e-commerce businesses is the convenience they bring to consumers. In addition, the store closures during the corona lockdowns have further accelerated the pace of the digital transition. The growth of online sales is expected to continue (Voss & Zwijnenburg, 2022) . In short, plenty of opportunities for e-commerce businesses to grow successfully in the coming years! But how do you deal with growth in your e-commerce business? Managing growth could prove to be a challenge for many companies. To provide you with a concrete answer to the question above, I will address the following questions in this blog:
What is business growth?
To answer these questions, we must first get a clear understanding of what we mean by business growth. In my view, growth means development. Developing your business can be understood in different ways. There are books full of various definitions of growth. In my view, you can specify growth as follows:
These various forms of growth are regularly accompanied by uncertainty and growing pains. After all, growth requires investment, and often that means: pressure on the cash position within your company.
E-commerce related growth scenarios
Finding a solution to the pressure on your cash position starts with awareness and insight. An entrepreneur without insight, is like a captain sailing through dense fog without a compass.
So make a budget for the coming year and get a grip on your figures. That creates clarity and gives peace and confidence. And helps you to steer your strategic goals. Take a look at the three steps to come to an investment budget.
As an e-commerce entrepreneur you may have to deal with different growth scenarios. In each scenario, you'll encounter different challenges, each with specific opportunities.
The four most common growth scenarios for e-commerce entrepreneurs:
Structural sales growth
At the end of the current month, you exceed the previous month's sales. Your business is on the rise! This is a dream scenario, but at the same time it can also cause problems. Growth can cause all the cash to be invested in buying inventory. After all, you want to keep meeting the increasing demand!
The consequence of not having enough cash in the account can be that your growth is restricted. An entrepreneur I spoke to recently translated this into his practice as follows: "Every month is about the same. Demand exceeds supply so that sometimes I have to sell 'No' as early as the 20th of the month because I simply don't have any stocks left."
At the moment when you are growing fast, it is important to manage this growth as well as possible. It is important to make a choice. There are several possibilities:
Rabobank can help you find a suitable financing that meets your growth needs. A financing specialist will first assess your eligibility for financing on the basis of your application and requirements. Depending on the situation, he will also examine which product suits you best. Possible solutions for structural growth are:
A (temporary) shortage of cash on your account
"Cash is king!" A well-known statement, with a large core of truth. It is believed that the cash flow position of a company is the most important indicator of viability. Within the e-commerce business we regularly encounter entrepreneurs who have or are expecting little cash in the account. They knock on our door for financing because there is an event for which additional supplies are needed. Here you can think of:
Professionalizing your business
Professionalizing your business can contribute to efficiency, effectiveness and speed. Within your company a stable basis has been established on which you want to build further. Your company may have entered a certain growth phase, causing other interests to get attention. Think for example of optimizing your margin, generating quality leads or using smart tools so you can get the most out of your business.
In short, you wish to make a professionalization move to achieve your goals. What might you think about when it comes to professionalizing your business?
Purchasing discounting through economies of scale
Finally, we focus on the company's purchasing organization where purchasing discounts can play an important role in business considerations. In a saturated market, where margins are thin, it is difficult to play with your price. Implementing a minimal price increase will be able to lead to a sharp decline in sales.
If you want to improve your margin in a displaced market, it is easier to tinker with costs. Rabobank's latest sector forecast shows that the availability and cost price of products are under pressure. Purchasing costs can therefore play an important role in the formation of price and margin. In general, the following rule applies from suppliers: 'The more you buy, the bigger the total discount on your order'. In short, bulk discounts. So scale can help reduce the cost of your product.
Rabobank can help generate more purchasing power! There are a number of financing options imaginable that might suit this situation. Again, it is advisable to coordinate with a Customer Success Manager at Rabobank. The following solutions may possibly offer a solution:
Simply apply online for a product that fits your situation or discuss your options with an advisor.
A guest blog by Peter de Best, working within Rabobank's New Horizons department that is concerned with integrating financing solutions with platforms of other companies.
