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Every Amazon seller and eCommerce brand builder knows that one of the biggest challenges when growing your business is cash flow.
How do you continue to finance growth with so much inventory expenditure needed?
The good news is that there are a lot of solutions available to you, and in this week’s podcast episode we’re joined by Piers from Storfund to explore these options.
In this episode you’ll learn more about the strengths and weaknesses of the various options available to you so you can make informed decisions about funding the growth of your business.
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Ben Donovan
Hey folks, welcome back to another episode of The Brand Builder show in today’s episode, we’re going to be talking all things that cashflow. I’m here with my good friend who potentially has the coolest name in E commerce, Piers Everleigh. Piers, welcome to the show.
Piers Everleigh
That’s very kind of you Ben. Thanks very much for having me on here. Really glad to be speaking with you again. And thanks for this time for bringing stuff on onto the podcast.
Ben Donovan
No, no happy to happy to have you here. I think it’s like such a, you know, great thing to be able to have relationships like this in E commerce and to be able to have you back on the show, talk through all things. financing cash flow is going to be great, because, as we were just saying before we started recording, if there’s one thing ecommerce sellers struggle with and discuss and lament over, especially in the last couple of years, it is cash flow. It’s a cash flow intensive business. And so we’re going to talk through some solutions and talk through some different options that people have when it comes to cash flow. But I suppose you know, first question, just to really open this up and, you know, help people understand why this is such a big issue. Maybe for people that are at the beginning of the journey. They’re just getting started with the idea of an E commerce business and want to start selling online. What are the big cashflow challenges that ecommerce sellers face? Why do they face such challenges with cashflow?
Piers Everleigh
Yeah, sure. Good question to kick things off. So I saw some crazy statistic, the other day of which mentioned that over 80% of failed businesses cited cashflow as the main reason why they’re not making it. So the scale of the problem is enormous, and within ecommerce is even bigger than in other spaces. So to break it down in simple terms, if you consider a business that sells say phone chargers over the counter via a bricks and mortar shop, they know that when they make that sale, they’re going to receive the cash for what they’ve just sold immediately over the counter. So it’s very easy to forecast, they can then reinvest that money into the business on advertisement on purchasing new stock, etc. It’s down to them on how they want to use that capital to continue growing the company. ecommerce businesses have a bit of a more difficult time when they’re trading via marketplaces like Amazon or any other online marketplace. Because whilst Amazon and other marketplaces have transformed ecommerce for the better in our opinion, they have also introduced these lengthy disbursement terms. That means that sellers don’t receive that money for what they’ve sold immediately, and instead have to wait for payment cycles of weeks or potentially even months. So on average, sellers will wait over 40 days to receive the money for what they’ve sold in total, because you’ve got weeks until the payment date. And you’ve also got things like account level reserves or unavailable balances that sit in the account that marketplaces will withhold from sellers as well. So the scale, as I say, the scale of the problem is enormous, Storfund have a very simple goal. And we’re trying to make immediate payments, the norm for sellers that sell via these marketplaces with our solution.
Ben Donovan
That’s great. And this is obviously something that’s quite surprising to people when they do, especially Amazon. Shopify is a lot quicker, but Amazon especially is, you know, you can make a sale now like you say, in 40 days, I mean, I didn’t realize it was that long to be fair, but it certainly feels like it. But you know, you can make a sale and then because of the processing time, the two week, disbursements, etc, etc. You know, if you start selling today, you might not receive money in your account for four to six weeks as a new seller. It’s very normal. And then you need to try and reorder and there’s all of those kinds of challenges involved. And so it’s a very real issue. For a number of sellers, what are some of the solutions and obviously, we’ll get to the kind of the unique solution that Storfund is presenting, but what are some of the general solutions that people can look to, if they are a growing ecommerce business, they’re struggling to keep up with their cash flow.
Piers Everleigh
Yeah, that there’s a there’s an array of solutions out there. So Storfund is by no means the only solution. And now, our customers see Storfund as a complementary service to other forms of cash flow solutions or financing options that are out there. So people might look at us as a cash advancement tool, but also have equity on the table. They might have lines of credit with their banks and that West or HSBC, they may also be using revenue based financing options with the likes of a way flyer or an uncapped, or they might be using invoice invoice based financing options. So that there is a ton of options out there for sellers. And I think one thing that I would advise sellers doing before making any decisions is just to make sure that the research has been done upfront, each different option will have their benefit and their drawback. And I’m not by any means standing here saying for people to not look at other forms of financing, because in some cases, other forms of financing will be better solutions than Storfund for that particular business. But given the current climate, like we were saying before, we just kind of went live. You know, we’re living in a time at the moment where we’ve got continued supply chain problems. We’ve got rising inflation, interest rate hikes. So borrowing money at the moment has become a lot more expensive. And with margin compression already affecting a lot of businesses in a particularly negative way. Businesses are already fragile, which is why businesses at the moment are looking for non dilutive forms of financing like cash advancements, which don’t actually change the underlying structure of your business.
Ben Donovan
So just to clarify in that, then, because people will be maybe looking at all the different options available to them. You said specifically, you know, Faster Payments is something that can be very helpful, as opposed to simply taking out a loan, or you mentioned non diluted solutions, meaning that you don’t give ownership of any of the company away. But what is it about just receiving payments faster, specifically, that’s going to be more beneficial to someone than taking, you know, a traditional loan, for instance?
Piers Everleigh
Yeah, I mean, let them the main benefit is like, you’re going to be able to access liquidity much quicker once the product has been sold. So instead of having to wait potentially weeks or months, as we said, you know, 42 days, like I mentioned earlier, is the average across all marketplaces with Amazon, it’s a bit sooner. But with the unavailable balance or account level reserve plus the disbursement cycle, you’re still going to have to wait. So the main benefit is that you’re going to be able to receive that money immediately. You can forecast that into your into your accounting, and then you can make a decision on how you want to deploy that capital back into the business to continue growing. So cash advancements are a particularly useful tool for businesses who are looking to grow the business, you can restock quicker. And stock outs are probably the things that most people that are selling via marketplaces fear most because it affects your reputation, it affects your listing, and it probably will affect your future sales as well. So the last thing you want to do is run out of stock. So immediately, you’d be able to purchase more stock. We’ve also seen with a lot of our customers, they’ve been able to actually utilize the deployment of capital to negotiate better terms with their suppliers as well, because they can pay them quicker. So all of all of this ties back to ultimately being able to reinvest proceeds much quicker back into the business to continue scaling at this trajectory that business can do. Yeah.
Ben Donovan
And are there any specific stages of a business that you feel someone should be out before accessing this solution versus others? Like what would be take for instance, Storfund, what would be your ideal customer? What stage of the business are they at for this solution?
Piers Everleigh
Yeah, so a lot of people see cash advancements as a tool for early stage businesses. Which I was quite surprised when coming into the business because I’d already met with a number of the team and understood kind of the ideal seller profile, or at least had an overview of our customer base. On average, most of our customers are already at that seven figure mark in terms of annual sales. So we actually have a minimum revenue threshold of 250,000. And, and the business also has to have been trading for six months to utilize the solution. At that stage, you’re probably going to want to utilize the solution alongside something else, unless you have equity from, I don’t know, close, closest sources. But ultimately it’s become, as you probably know, very hard to scale a business on Amazon, just bootstrapping it these days, because everything has become more expensive. You know, the cost of inventory, the cost of shipping, the cost of launching new products, the cost of advertisement, you really need to get that cash flowing in order to hit those milestones that you’re hoping to achieve when you when you start your business.
Ben Donovan
Yeah, yeah, no, that’s absolutely true. It’s harder and harder these days to start with a small amount of money and scale up a big business without ever taking on financing next impossible, really. So these kinds of solutions are super valuable, and to try and, you know, show people the difference, maybe between a cash advance to a traditional loan or other lending opportunities, I think it would be good to talk through maybe an example of how Storfund works. Now I know you’ve not come I know, literally to spend the whole episode pitching stuff and, and so hopefully, our listeners can have a bit of grace for the idea behind giving us a full run through of your solution as an example of what a cash advance would look like, if that makes sense. So feel free, obviously, to use Storfund, still funds, fee structure set up structure. Now walk us through it, how does it work? Someone wants to do a cash advance kind of structure to be able to access more cash, what’s the starting process?
Piers Everleigh
Okay, so luckily, for me, this question is a pretty simple service. We brand ourselves as sell today and get paid today. And that’s what we’re doing. So at a very high level Storfund is integrated with marketplaces, such as Amazon, so that when you the seller registers to use our service, we will consume your sales data from Seller Central, or any other marketplaces dashboard for that matter. And we read this data over 24 hours. So at the end of every day, we make a calculation, and we pay sellers on that day for what they’ve sold, instead of them having to wait two weeks or longer depending on the marketplace. Yep. So let’s assume that on the day a seller joins our solution, they are owed 100,000, hypothetically, that’s the account level reserve plus the daily sales from that day. So that same day, what we do as a business as we advance 80%, of the total balance, so 80,000. And then subsequently, every day following the first day, we’re going to advance 80%, again, of your daily sales. So if you’re doing 100,000 pounds in sales every day, it’s going to be 80,000. Now, when Amazon or any other marketplace distributes. So maybe after two weeks, Amazon is actually going to distribute into a collection account that we set up with our disbursement partner in the league, in the name of the legal entity, of the customer we’re working with. So Amazon will make the disbursement after two weeks into that account. And then we will simply forward the remaining 20% to the seller. So a lot of people will say well, why are you advancing? 80%? Not 100%. And that 20% is good, our buffer. So that accounts for any returns any refunds or any unforeseen platform costs during that time. Yep. Still fund is not holding that money. But we are advancing against the promise that Amazon pays out in two weeks. Yep. So after that two weeks, we simply forward the remaining money.
Ben Donovan
And that would be obviously 80% of the net proceeds like after Amazon fees, etc.
Piers Everleigh
But that’s it. So the API integration allows us to consume the you know, the sales, plus the refunds, the Commission’s the PPC costs, etc. So, so on a daily basis, we work out the net sales. Yeah. And then we advanced 80% of that.
Ben Donovan
Got it. Good stuff. Okay. And then obviously, the next question is going to be how much does this this service cost me of my precious precious margin.
Piers Everleigh
Of course, fees fees are very important and that we we are a very cost competitive solution in this space. I know that because I’ve done the analysis. We charge a one to 2% fee on the sellers net sales. So in very simple terms, if you have a seller that is selling a million pounds on Amazon, and Storfund advance a million pounds over the course of a year, as long as Amazon sticks to its Too weak disbursement, and there’s no carryover balance, and we apply a 1.5% fee, then the fee that the seller pays over the course of the year is going to be 15,000. For us service, and so
Ben Donovan
then the seller would just need to do the math and consider, can I use that quicker money to generate a higher return on investment? which in most cases is going to be of course, yes. Because you can turn that around into more inventory, etc, etc.
Piers Everleigh
Yeah, I mean, on average, with our customers, we’re able to double, a lot of times, we’re able to triple the number of times a business can churn its cash throughout the year. So you’re able to fit more cash cycles into the course of the year. If you’re ready, as I said, I really see the value in Storfund solution and other cash advancement tools. It is down to the sophistication of the seller, and what the seller decides to use it on. But if you’re reinvesting this into restocking into launching new PPC, or launching new products or expanding into new markets, then what you’ll see is the compounded effect of quicker cash cycles over the course of a year, and naturally, you’ll see your sales velocity going up and ultimately,
Ben Donovan
yeah, yeah, no, yeah. And that’s 100%. So, so powerful, like you say, compounding of your cash flow, because I did a YouTube video on it must be a couple of years ago now, but kind of did a spreadsheet of all of the scenarios that if you can turn your cash around four times in a year, rather than three times, you can speed up the journey towards a much bigger business much quicker. And so, you know, if you can then do that five times with some financing, then it’s not just about the 1% 1.5% fee, you’re paying now, it’s about what your business is worth in three years time, it could be worth two or three times the overall amount, which could be millions of dollars, you know, in comparison to these fees you’re paying? So I think it is yeah, it’s having those those things in perspective, isn’t it?
Piers Everleigh
100%, I’ll have to check that video out.
Ben Donovan
Yeah, I’ll try and remember to link it in the description as well. Because it’s, I mean, it’ll be a bit dated, because it will probably be using numbers, like when we used to be able to ship containers for you know, $100, a cubic meter and all that kind of stuff. And now it’s like three or four times the price, but the principles remain, you know, it’s like, the quicker you can turn your cash around that the better. And so that’s why you got a product that you can ship by air, and you can restock it six times in a year from that from selling through that inventory. Even if you’re paying 20, 30 40% more on your shipping is gonna, you know, you’re going to help, it’s gonna help you grow quicker. And these are the same principles, right? The more fuel you can add to that fire, the quicker you can turn your cash around, you know, is essential. So because at the end of the day, it’s about return on investment, isn’t it not not just profit margin?
Piers Everleigh
No definitely, and we spend time with every customer as part of our onboarding service. So each customer when they come on board with Storfund gets a dedicated growth advisor. And part of the onboarding is to have a video call with the seller to look at the model to look at the cash cycles to look at the overall picture of the business, and really make this service bespoke for their needs. So, you know, we will quite candidly say, if you’re not going to use this money to try and grow the business, that ultimately is just going to be another fee that the business doesn’t really need yours. If you don’t want to grow, then why not wait two or three or four weeks just to receive that money?
Ben Donovan
Yeah, so this is for businesses that want to grow? For sure. 100%? Yeah, definitely. Yeah, no, that’s really good. Because obviously, what how this would differ to say like a line of credit, you know, traditional line of credit, you don’t need to be paying the fees when you access the money or you draw down the money. Whereas this obviously, would be an ongoing, you’d always be using it because there would be those daily payouts. So you’re right is really suited for those people that want to aggressively grow over two, three year timelines.
Piers Everleigh
Yeah. And sometimes, sometimes sellers need a loan. And the line of credit is a much better option. But sometimes people don’t need a line of credit. And don’t need the variable repayment terms or the complex accounting. You just need to be paid quicker. Yeah. And they can they can keep the structure of the business as it is.
Ben Donovan
Yeah. And it’s good for people that would be nervous about taking on debt.
Piers Everleigh
Definitely.
Ben Donovan
So the How does it work on it from an accounting perspective, there’s no like you said, there’s no debt on the p&l, etc.
Piers Everleigh
There’s no debt on the p&l. So it’s, it can be a supplementary service to taking on debt. And you know, if you wanted to use it, you could even use it to pay off the debt. So we do have businesses that have got all of these different tools or instruments being utilized at one time. In terms of the accounting, it’s kept very simple. It would be your standard accounting, except instead of receiving the funds after however many weeks you just received them every day. So normally we’re working with someone within the financial department to make them aware of how the disbursements look. But it’s very simple. All of our sellers have their user interface, their dashboard that they can log into. And when they sign up to the service, they will input the bank details that they’d like the money to be transferred to. Yeah, and the money will just be transferred to there just before midnight every day.
Ben Donovan
Yeah, no, that’s good. Yeah. Yeah, good. No, download the balance sheet, I should say not the p&l, but which I think would be a real is a real concern for some sellers. They don’t want this this debt on the balance sheet that they think well, I’m gonna, you know, what, if the worst happens, then I’m liable for this money. But it does bring me to a question. What if the worst does happen? Amazon? We don’t hear about it much these days. I don’t know if it’s just less Blackhat stuff going on? or Amazon or got better? I don’t know. But so you’ve paid out 80% of $100,000 kind of settlement and Amazon do close the account with hold the funds. What happens then?
Piers Everleigh
Yeah. Fortunately, we spent a lot of time on the way in. So at the end of the day, you know, we’re not selling KitKats. Basically, we’re we’re giving away hundreds of 1000s of pounds. We’re not giving away but we’re advancing hundreds of against Amazon’s promise. So as part of our onboarding, you know, we have our risk team, we have our compliance team. We have our due diligence team that makes sure that we’re comfortable working with the sellers that we onboard, which is also a reason why our service has kind of gravitated towards the more sophisticated end of the market, I think as well. Yeah. But we’re fortunate enough to not end up in these positions because of the processes that we have in place.
Ben Donovan
Yeah, definitely. No, that’s good.
Piers Everleigh
You know, if I flip that the other way around, if it’s not going well, for a seller, then a really good competitive advantage of ours is that we offer complete flexibility with this. So sellers can opt to turn this on and off throughout the year. Or they can stop it whenever they need to. There’s no time periods or no notice periods with Storfund, which I think really does set us apart to other forms of financing in the market.
Ben Donovan
Yeah, and that’s a great feature, isn’t it? If you want to really have a quick burst of extra growth, or if you have like a somewhat seasonal business, you know, for Q4, you want to stock up. You know, that’s some that’s a real good feature there
Piers Everleigh
Definitely Q4 Coming up, we, you know, we had a great German customer of ours in August asked us to just deactivate that, but there is a on and off button on the dashboard. Meaning that sellers can simply say that because of lack of demand at this time of year. We just we don’t require the extra two weeks. We don’t require the fee. But let’s reactivate at the end of September when the pinch point for the year is and we need to start stocking up for Black Friday, Cyber Monday. exactly five Christmas season. Yeah, yeah,
Ben Donovan
definitely. Definitely. Now that’s really useful. It would be good if you like, I know, I haven’t prepared for this question. So no worries if I’m putting you on the spot here. But like if you do have any sort of case studies of clients like that, that it has helped grow and maybe how it’s helping them grow. I suppose leading into that would be the question of what are most people using these these funds? What do you tend to find it is just restocking inventory? Or is anything more creative that anyone’s doing? Can you give us any more insight into how your most successful clients are using this kind of this plan?
Piers Everleigh
I’d say most cases it is one restocking quicker than they get to beforehand. And two, with as I said before, we’ve seen a lot of our customers have been able to negotiate better rates with suppliers and manufacturers because they’ve been able to pay them quicker. And another thing and this relates back to the restocking is just being able to access their liquidity quicker. And in this day and day and age, control and flexibility has become a really important feature. Not only within ecommerce, but just in people’s livelihoods at the moment. So not having to give part of the business away, not having to take that onto the balance sheet where you’re never quite sure on whether the return on investment is going to be worth taking on the bit on the debt. With this solution. It’s simply a case of us already paying two sellers what they’re owed by the marketplace but just have not been paid. In terms of success stories, we had one of our private label sellers sold two of his brands to an aggregator at the height of the aggregator craze in 2021. You know what why is that a success story loads of people did sell their businesses to aggregators, but when he first came to us this seller was very, very, very small. And he’s adamant that he could not have scaled at the rate he did without utilizing this solution. So that really shows the immediate impact that this had on his business. We’ve seen that on hundreds of occasions now. So you know, we have the data over the last five years of offering this solution to show that it really works.
Ben Donovan
Yeah, that’s really good, really good and helpful, too. Quick question in terms of different currencies, like if someone’s selling in the US, and also Europe, or other marketplaces, is there? You know, is there a setup for multiple currencies?
Piers Everleigh
Yeah, so Storfund is truly global. We integrated across 17 Amazon marketplaces, so sellers can opt, whether they want to use this across all of their marketplaces, or just one or two of their marketplaces. But ultimately, we can cater for most marketplaces on Amazon, and around 10 or so other marketplaces of Amazon now, we do offer a wallet solution if people require it. So if you are paying suppliers in multiple currencies, or you have payments going cross border on frequent occasions, and you want to consolidate and hold currencies and benefit from low FX rates, then we can apply it. We wouldn’t suggest that unless a business was in that situation. So that will be part of the longer onboarding calls. Sorry.
Ben Donovan
Yeah. Yeah. Sounds good. Sounds good. Awesome. I mean, just looking at Georgia close, is there anything that you maybe I haven’t asked that you thought I should have asked anything that you wanted to make sure it’s covered about the whole process of cash advances. And then just to finish out, give us give us some info on how people can take advantage of stuff.
Piers Everleigh
I can’t think of any other questions, but I probably will in five minutes. But in terms of sign up, it’s all via the website. So if people want to go on the website, there’s an apply now section in the top right, sign up takes place in five very easy steps where we’ll ask for standard documentation, proof of identity, proof of address, that kind of stuff and other teams on hand if people do have any difficulties there. We will also offer a two week free trial for anyone that comes fire Brand Builder unit. Yeah. So people can test the solution over the first two weeks without any fees or commitments whatsoever. either love it, or are you free to leave. So you know, we feel confident that we will or people will see the immediate value and impact we can have. So if people want us to apply that offer, then you can just reach me directly. Pie[email protected]. And we’d be happy to offer that.
Ben Donovan
That’s awesome. Yeah, we’ll make sure we get that info into the description and show notes for everyone. PC has been really helpful. I think it’s opening a lot of people’s eyes up to, you know, financing the growth of their business beyond traditional funding. So thanks for coming on the show sharing these thoughts, and I’m sure a bunch of people will be coming to check it out.
Piers Everleigh
Yeah, no problem. So Ben, thanks again for having me.
Ben Donovan
It’s been a problem. Good stuff. Thanks, guys for joining us on the show today. If you have liked this episode, make sure you hit the thumbs up on YouTube. Subscribe on your podcast players and we’ll see in the next episode real soon.
Hey folks, welcome back to another episode of The Brand Builder show in today’s episode, we’re going to be talking all things that cashflow. I’m here with my good friend who potentially has the coolest name in E commerce, Piers Everleigh. Piers, welcome to the show.
Piers Everleigh
That’s very kind of you Ben. Thanks very much for having me on here. Really glad to be speaking with you again. And thanks for this time for bringing stuff on onto the podcast.
Ben Donovan
No, no happy to happy to have you here. I think it’s like such a, you know, great thing to be able to have relationships like this in E commerce and to be able to have you back on the show, talk through all things. financing cash flow is going to be great, because, as we were just saying before we started recording, if there’s one thing ecommerce sellers struggle with and discuss and lament over, especially in the last couple of years, it is cash flow. It’s a cash flow intensive business. And so we’re going to talk through some solutions and talk through some different options that people have when it comes to cash flow. But I suppose you know, first question, just to really open this up and, you know, help people understand why this is such a big issue. Maybe for people that are at the beginning of the journey. They’re just getting started with the idea of an E commerce business and want to start selling online. What are the big cashflow challenges that ecommerce sellers face? Why do they face such challenges with cashflow?
Piers Everleigh
Yeah, sure. Good question to kick things off. So I saw some crazy statistic, the other day of which mentioned that over 80% of failed businesses cited cashflow as the main reason why they’re not making it. So the scale of the problem is enormous, and within ecommerce is even bigger than in other spaces. So to break it down in simple terms, if you consider a business that sells say phone chargers over the counter via a bricks and mortar shop, they know that when they make that sale, they’re going to receive the cash for what they’ve just sold immediately over the counter. So it’s very easy to forecast, they can then reinvest that money into the business on advertisement on purchasing new stock, etc. It’s down to them on how they want to use that capital to continue growing the company. ecommerce businesses have a bit of a more difficult time when they’re trading via marketplaces like Amazon or any other online marketplace. Because whilst Amazon and other marketplaces have transformed ecommerce for the better in our opinion, they have also introduced these lengthy disbursement terms. That means that sellers don’t receive that money for what they’ve sold immediately, and instead have to wait for payment cycles of weeks or potentially even months. So on average, sellers will wait over 40 days to receive the money for what they’ve sold in total, because you’ve got weeks until the payment date. And you’ve also got things like account level reserves or unavailable balances that sit in the account that marketplaces will withhold from sellers as well. So the scale, as I say, the scale of the problem is enormous, Storfund have a very simple goal. And we’re trying to make immediate payments, the norm for sellers that sell via these marketplaces with our solution.
Ben Donovan
That’s great. And this is obviously something that’s quite surprising to people when they do, especially Amazon. Shopify is a lot quicker, but Amazon especially is, you know, you can make a sale now like you say, in 40 days, I mean, I didn’t realize it was that long to be fair, but it certainly feels like it. But you know, you can make a sale and then because of the processing time, the two week, disbursements, etc, etc. You know, if you start selling today, you might not receive money in your account for four to six weeks as a new seller. It’s very normal. And then you need to try and reorder and there’s all of those kinds of challenges involved. And so it’s a very real issue. For a number of sellers, what are some of the solutions and obviously, we’ll get to the kind of the unique solution that Storfund is presenting, but what are some of the general solutions that people can look to, if they are a growing ecommerce business, they’re struggling to keep up with their cash flow.
Piers Everleigh
Yeah, that there’s a there’s an array of solutions out there. So Storfund is by no means the only solution. And now, our customers see Storfund as a complementary service to other forms of cash flow solutions or financing options that are out there. So people might look at us as a cash advancement tool, but also have equity on the table. They might have lines of credit with their banks and that West or HSBC, they may also be using revenue based financing options with the likes of a way flyer or an uncapped, or they might be using invoice invoice based financing options. So that there is a ton of options out there for sellers. And I think one thing that I would advise sellers doing before making any decisions is just to make sure that the research has been done upfront, each different option will have their benefit and their drawback. And I’m not by any means standing here saying for people to not look at other forms of financing, because in some cases, other forms of financing will be better solutions than Storfund for that particular business. But given the current climate, like we were saying before, we just kind of went live. You know, we’re living in a time at the moment where we’ve got continued supply chain problems. We’ve got rising inflation, interest rate hikes. So borrowing money at the moment has become a lot more expensive. And with margin compression already affecting a lot of businesses in a particularly negative way. Businesses are already fragile, which is why businesses at the moment are looking for non dilutive forms of financing like cash advancements, which don’t actually change the underlying structure of your business.
Ben Donovan
So just to clarify in that, then, because people will be maybe looking at all the different options available to them. You said specifically, you know, Faster Payments is something that can be very helpful, as opposed to simply taking out a loan, or you mentioned non diluted solutions, meaning that you don’t give ownership of any of the company away. But what is it about just receiving payments faster, specifically, that’s going to be more beneficial to someone than taking, you know, a traditional loan, for instance?
Piers Everleigh
Yeah, I mean, let them the main benefit is like, you’re going to be able to access liquidity much quicker once the product has been sold. So instead of having to wait potentially weeks or months, as we said, you know, 42 days, like I mentioned earlier, is the average across all marketplaces with Amazon, it’s a bit sooner. But with the unavailable balance or account level reserve plus the disbursement cycle, you’re still going to have to wait. So the main benefit is that you’re going to be able to receive that money immediately. You can forecast that into your into your accounting, and then you can make a decision on how you want to deploy that capital back into the business to continue growing. So cash advancements are a particularly useful tool for businesses who are looking to grow the business, you can restock quicker. And stock outs are probably the things that most people that are selling via marketplaces fear most because it affects your reputation, it affects your listing, and it probably will affect your future sales as well. So the last thing you want to do is run out of stock. So immediately, you’d be able to purchase more stock. We’ve also seen with a lot of our customers, they’ve been able to actually utilize the deployment of capital to negotiate better terms with their suppliers as well, because they can pay them quicker. So all of all of this ties back to ultimately being able to reinvest proceeds much quicker back into the business to continue scaling at this trajectory that business can do. Yeah.
Ben Donovan
And are there any specific stages of a business that you feel someone should be out before accessing this solution versus others? Like what would be take for instance, Storfund, what would be your ideal customer? What stage of the business are they at for this solution?
Piers Everleigh
Yeah, so a lot of people see cash advancements as a tool for early stage businesses. Which I was quite surprised when coming into the business because I’d already met with a number of the team and understood kind of the ideal seller profile, or at least had an overview of our customer base. On average, most of our customers are already at that seven figure mark in terms of annual sales. So we actually have a minimum revenue threshold of 250,000. And, and the business also has to have been trading for six months to utilize the solution. At that stage, you’re probably going to want to utilize the solution alongside something else, unless you have equity from, I don’t know, close, closest sources. But ultimately it’s become, as you probably know, very hard to scale a business on Amazon, just bootstrapping it these days, because everything has become more expensive. You know, the cost of inventory, the cost of shipping, the cost of launching new products, the cost of advertisement, you really need to get that cash flowing in order to hit those milestones that you’re hoping to achieve when you when you start your business.
Ben Donovan
Yeah, yeah, no, that’s absolutely true. It’s harder and harder these days to start with a small amount of money and scale up a big business without ever taking on financing next impossible, really. So these kinds of solutions are super valuable, and to try and, you know, show people the difference, maybe between a cash advance to a traditional loan or other lending opportunities, I think it would be good to talk through maybe an example of how Storfund works. Now I know you’ve not come I know, literally to spend the whole episode pitching stuff and, and so hopefully, our listeners can have a bit of grace for the idea behind giving us a full run through of your solution as an example of what a cash advance would look like, if that makes sense. So feel free, obviously, to use Storfund, still funds, fee structure set up structure. Now walk us through it, how does it work? Someone wants to do a cash advance kind of structure to be able to access more cash, what’s the starting process?
Piers Everleigh
Okay, so luckily, for me, this question is a pretty simple service. We brand ourselves as sell today and get paid today. And that’s what we’re doing. So at a very high level Storfund is integrated with marketplaces, such as Amazon, so that when you the seller registers to use our service, we will consume your sales data from Seller Central, or any other marketplaces dashboard for that matter. And we read this data over 24 hours. So at the end of every day, we make a calculation, and we pay sellers on that day for what they’ve sold, instead of them having to wait two weeks or longer depending on the marketplace. Yep. So let’s assume that on the day a seller joins our solution, they are owed 100,000, hypothetically, that’s the account level reserve plus the daily sales from that day. So that same day, what we do as a business as we advance 80%, of the total balance, so 80,000. And then subsequently, every day following the first day, we’re going to advance 80%, again, of your daily sales. So if you’re doing 100,000 pounds in sales every day, it’s going to be 80,000. Now, when Amazon or any other marketplace distributes. So maybe after two weeks, Amazon is actually going to distribute into a collection account that we set up with our disbursement partner in the league, in the name of the legal entity, of the customer we’re working with. So Amazon will make the disbursement after two weeks into that account. And then we will simply forward the remaining 20% to the seller. So a lot of people will say well, why are you advancing? 80%? Not 100%. And that 20% is good, our buffer. So that accounts for any returns any refunds or any unforeseen platform costs during that time. Yep. Still fund is not holding that money. But we are advancing against the promise that Amazon pays out in two weeks. Yep. So after that two weeks, we simply forward the remaining money.
Ben Donovan
And that would be obviously 80% of the net proceeds like after Amazon fees, etc.
Piers Everleigh
But that’s it. So the API integration allows us to consume the you know, the sales, plus the refunds, the Commission’s the PPC costs, etc. So, so on a daily basis, we work out the net sales. Yeah. And then we advanced 80% of that.
Ben Donovan
Got it. Good stuff. Okay. And then obviously, the next question is going to be how much does this this service cost me of my precious precious margin.
Piers Everleigh
Of course, fees fees are very important and that we we are a very cost competitive solution in this space. I know that because I’ve done the analysis. We charge a one to 2% fee on the sellers net sales. So in very simple terms, if you have a seller that is selling a million pounds on Amazon, and Storfund advance a million pounds over the course of a year, as long as Amazon sticks to its Too weak disbursement, and there’s no carryover balance, and we apply a 1.5% fee, then the fee that the seller pays over the course of the year is going to be 15,000. For us service, and so
Ben Donovan
then the seller would just need to do the math and consider, can I use that quicker money to generate a higher return on investment? which in most cases is going to be of course, yes. Because you can turn that around into more inventory, etc, etc.
Piers Everleigh
Yeah, I mean, on average, with our customers, we’re able to double, a lot of times, we’re able to triple the number of times a business can churn its cash throughout the year. So you’re able to fit more cash cycles into the course of the year. If you’re ready, as I said, I really see the value in Storfund solution and other cash advancement tools. It is down to the sophistication of the seller, and what the seller decides to use it on. But if you’re reinvesting this into restocking into launching new PPC, or launching new products or expanding into new markets, then what you’ll see is the compounded effect of quicker cash cycles over the course of a year, and naturally, you’ll see your sales velocity going up and ultimately,
Ben Donovan
yeah, yeah, no, yeah. And that’s 100%. So, so powerful, like you say, compounding of your cash flow, because I did a YouTube video on it must be a couple of years ago now, but kind of did a spreadsheet of all of the scenarios that if you can turn your cash around four times in a year, rather than three times, you can speed up the journey towards a much bigger business much quicker. And so, you know, if you can then do that five times with some financing, then it’s not just about the 1% 1.5% fee, you’re paying now, it’s about what your business is worth in three years time, it could be worth two or three times the overall amount, which could be millions of dollars, you know, in comparison to these fees you’re paying? So I think it is yeah, it’s having those those things in perspective, isn’t it?
Piers Everleigh
100%, I’ll have to check that video out.
Ben Donovan
Yeah, I’ll try and remember to link it in the description as well. Because it’s, I mean, it’ll be a bit dated, because it will probably be using numbers, like when we used to be able to ship containers for you know, $100, a cubic meter and all that kind of stuff. And now it’s like three or four times the price, but the principles remain, you know, it’s like, the quicker you can turn your cash around that the better. And so that’s why you got a product that you can ship by air, and you can restock it six times in a year from that from selling through that inventory. Even if you’re paying 20, 30 40% more on your shipping is gonna, you know, you’re going to help, it’s gonna help you grow quicker. And these are the same principles, right? The more fuel you can add to that fire, the quicker you can turn your cash around, you know, is essential. So because at the end of the day, it’s about return on investment, isn’t it not not just profit margin?
Piers Everleigh
No definitely, and we spend time with every customer as part of our onboarding service. So each customer when they come on board with Storfund gets a dedicated growth advisor. And part of the onboarding is to have a video call with the seller to look at the model to look at the cash cycles to look at the overall picture of the business, and really make this service bespoke for their needs. So, you know, we will quite candidly say, if you’re not going to use this money to try and grow the business, that ultimately is just going to be another fee that the business doesn’t really need yours. If you don’t want to grow, then why not wait two or three or four weeks just to receive that money?
Ben Donovan
Yeah, so this is for businesses that want to grow? For sure. 100%? Yeah, definitely. Yeah, no, that’s really good. Because obviously, what how this would differ to say like a line of credit, you know, traditional line of credit, you don’t need to be paying the fees when you access the money or you draw down the money. Whereas this obviously, would be an ongoing, you’d always be using it because there would be those daily payouts. So you’re right is really suited for those people that want to aggressively grow over two, three year timelines.
Piers Everleigh
Yeah. And sometimes, sometimes sellers need a loan. And the line of credit is a much better option. But sometimes people don’t need a line of credit. And don’t need the variable repayment terms or the complex accounting. You just need to be paid quicker. Yeah. And they can they can keep the structure of the business as it is.
Ben Donovan
Yeah. And it’s good for people that would be nervous about taking on debt.
Piers Everleigh
Definitely.
Ben Donovan
So the How does it work on it from an accounting perspective, there’s no like you said, there’s no debt on the p&l, etc.
Piers Everleigh
There’s no debt on the p&l. So it’s, it can be a supplementary service to taking on debt. And you know, if you wanted to use it, you could even use it to pay off the debt. So we do have businesses that have got all of these different tools or instruments being utilized at one time. In terms of the accounting, it’s kept very simple. It would be your standard accounting, except instead of receiving the funds after however many weeks you just received them every day. So normally we’re working with someone within the financial department to make them aware of how the disbursements look. But it’s very simple. All of our sellers have their user interface, their dashboard that they can log into. And when they sign up to the service, they will input the bank details that they’d like the money to be transferred to. Yeah, and the money will just be transferred to there just before midnight every day.
Ben Donovan
Yeah, no, that’s good. Yeah. Yeah, good. No, download the balance sheet, I should say not the p&l, but which I think would be a real is a real concern for some sellers. They don’t want this this debt on the balance sheet that they think well, I’m gonna, you know, what, if the worst happens, then I’m liable for this money. But it does bring me to a question. What if the worst does happen? Amazon? We don’t hear about it much these days. I don’t know if it’s just less Blackhat stuff going on? or Amazon or got better? I don’t know. But so you’ve paid out 80% of $100,000 kind of settlement and Amazon do close the account with hold the funds. What happens then?
Piers Everleigh
Yeah. Fortunately, we spent a lot of time on the way in. So at the end of the day, you know, we’re not selling KitKats. Basically, we’re we’re giving away hundreds of 1000s of pounds. We’re not giving away but we’re advancing hundreds of against Amazon’s promise. So as part of our onboarding, you know, we have our risk team, we have our compliance team. We have our due diligence team that makes sure that we’re comfortable working with the sellers that we onboard, which is also a reason why our service has kind of gravitated towards the more sophisticated end of the market, I think as well. Yeah. But we’re fortunate enough to not end up in these positions because of the processes that we have in place.
Ben Donovan
Yeah, definitely. No, that’s good.
Piers Everleigh
You know, if I flip that the other way around, if it’s not going well, for a seller, then a really good competitive advantage of ours is that we offer complete flexibility with this. So sellers can opt to turn this on and off throughout the year. Or they can stop it whenever they need to. There’s no time periods or no notice periods with Storfund, which I think really does set us apart to other forms of financing in the market.
Ben Donovan
Yeah, and that’s a great feature, isn’t it? If you want to really have a quick burst of extra growth, or if you have like a somewhat seasonal business, you know, for Q4, you want to stock up. You know, that’s some that’s a real good feature there
Piers Everleigh
Definitely Q4 Coming up, we, you know, we had a great German customer of ours in August asked us to just deactivate that, but there is a on and off button on the dashboard. Meaning that sellers can simply say that because of lack of demand at this time of year. We just we don’t require the extra two weeks. We don’t require the fee. But let’s reactivate at the end of September when the pinch point for the year is and we need to start stocking up for Black Friday, Cyber Monday. exactly five Christmas season. Yeah, yeah,
Ben Donovan
definitely. Definitely. Now that’s really useful. It would be good if you like, I know, I haven’t prepared for this question. So no worries if I’m putting you on the spot here. But like if you do have any sort of case studies of clients like that, that it has helped grow and maybe how it’s helping them grow. I suppose leading into that would be the question of what are most people using these these funds? What do you tend to find it is just restocking inventory? Or is anything more creative that anyone’s doing? Can you give us any more insight into how your most successful clients are using this kind of this plan?
Piers Everleigh
I’d say most cases it is one restocking quicker than they get to beforehand. And two, with as I said before, we’ve seen a lot of our customers have been able to negotiate better rates with suppliers and manufacturers because they’ve been able to pay them quicker. And another thing and this relates back to the restocking is just being able to access their liquidity quicker. And in this day and day and age, control and flexibility has become a really important feature. Not only within ecommerce, but just in people’s livelihoods at the moment. So not having to give part of the business away, not having to take that onto the balance sheet where you’re never quite sure on whether the return on investment is going to be worth taking on the bit on the debt. With this solution. It’s simply a case of us already paying two sellers what they’re owed by the marketplace but just have not been paid. In terms of success stories, we had one of our private label sellers sold two of his brands to an aggregator at the height of the aggregator craze in 2021. You know what why is that a success story loads of people did sell their businesses to aggregators, but when he first came to us this seller was very, very, very small. And he’s adamant that he could not have scaled at the rate he did without utilizing this solution. So that really shows the immediate impact that this had on his business. We’ve seen that on hundreds of occasions now. So you know, we have the data over the last five years of offering this solution to show that it really works.
Ben Donovan
Yeah, that’s really good, really good and helpful, too. Quick question in terms of different currencies, like if someone’s selling in the US, and also Europe, or other marketplaces, is there? You know, is there a setup for multiple currencies?
Piers Everleigh
Yeah, so Storfund is truly global. We integrated across 17 Amazon marketplaces, so sellers can opt, whether they want to use this across all of their marketplaces, or just one or two of their marketplaces. But ultimately, we can cater for most marketplaces on Amazon, and around 10 or so other marketplaces of Amazon now, we do offer a wallet solution if people require it. So if you are paying suppliers in multiple currencies, or you have payments going cross border on frequent occasions, and you want to consolidate and hold currencies and benefit from low FX rates, then we can apply it. We wouldn’t suggest that unless a business was in that situation. So that will be part of the longer onboarding calls. Sorry.
Ben Donovan
Yeah. Yeah. Sounds good. Sounds good. Awesome. I mean, just looking at Georgia close, is there anything that you maybe I haven’t asked that you thought I should have asked anything that you wanted to make sure it’s covered about the whole process of cash advances. And then just to finish out, give us give us some info on how people can take advantage of stuff.
Piers Everleigh
I can’t think of any other questions, but I probably will in five minutes. But in terms of sign up, it’s all via the website. So if people want to go on the website, there’s an apply now section in the top right, sign up takes place in five very easy steps where we’ll ask for standard documentation, proof of identity, proof of address, that kind of stuff and other teams on hand if people do have any difficulties there. We will also offer a two week free trial for anyone that comes fire Brand Builder unit. Yeah. So people can test the solution over the first two weeks without any fees or commitments whatsoever. either love it, or are you free to leave. So you know, we feel confident that we will or people will see the immediate value and impact we can have. So if people want us to apply that offer, then you can just reach me directly. Pie[email protected]. And we’d be happy to offer that.
Ben Donovan
That’s awesome. Yeah, we’ll make sure we get that info into the description and show notes for everyone. PC has been really helpful. I think it’s opening a lot of people’s eyes up to, you know, financing the growth of their business beyond traditional funding. So thanks for coming on the show sharing these thoughts, and I’m sure a bunch of people will be coming to check it out.
Piers Everleigh
Yeah, no problem. So Ben, thanks again for having me.
Ben Donovan
It’s been a problem. Good stuff. Thanks, guys for joining us on the show today. If you have liked this episode, make sure you hit the thumbs up on YouTube. Subscribe on your podcast players and we’ll see in the next episode real soon.
