Scaling is essential to the longevity of any business. Planning the next step in the life of your enterprise might be daunting, but it is certainly exciting. Whether you are hoping to expand your inventory, hire more staff, or open up a brick-and-mortar location, it is important to keep in mind the tried-and-tested strategies for keeping a business alive.
However, as the adage goes, you have to spend money to make money. While scaling is a wonderful reason to think about financing, the real world is far more complicated. There are moments and situations when the life of your business will depend on your level of liquidity, and for such moments, financing will be necessary if your funds are currently low.
In this article, we will talk about the right times to seek financing to both grow and keep your business alive.
1. Seasonal highs and lows
Depending on the industry you cater to, you may experience highs and lows in your sales. While most businesses generally enjoy spikes around November and December, you can expect inconsistencies in your sales to follow certain schedules—such as winter clothes being more popular in colder seasons and swimwear being more popular around spring.
Make sure to have a strong and detailed grasp of your fixed expenses. These are the expenses that stay the same, no matter what level of profit you are making. These can include employee salaries, utilities, rent, and so on.
This might be difficult if your business is undercapitalized in its early stages, and you don’t have reserved money to help get you through the harder months. As such, it would do well to plan carefully and think about financing, at least in the beginning.
2. Sudden economic downturns
Now more than ever, it is important for businesses to plan their finances well. You never know what disasters and economic downturns are just around the corner. Ideally, your commercial insurance should cover your current losses, but if your coverage has run out or your commercial insurance was still a future plan, turning to financing for some capital might just keep your business alive
3. Rapid growth
Sometimes, a business can succeed in ways it never expected to, but rapid growth rarely ever comes without its own set of challenges. A sudden spike in demand, for example, might require you to mass-produce more of your products in greater quantities. Certainly, you can use some of the money you earned from profits, but profits are often delayed—sometimes, up to 90 days.
Financing can help you meet the sudden rise in customer demand (and the other complications of rapid growth). It can ensure your product stays relevant and that your company or enterprise grows at a sustainable rate.
Whatever industry you cater to, and whatever product or service you provide, it is important to maintain a good level of financial liquidity. It is important to have some money in the bank for rainy days. As this is not always possible in the real world, financing is a legitimate option for any business, especially one that wants to survive and grow.
If you’re looking for an accounting firm for your e-commerce business, send us a message at The ECommerce Accountant. We have the best strategies for the savviest online businesses, and we can help take you and your brand to greater heights.