eCommerce CFO

How To Improve Cash Flow & Profits By 50% in 6 Months?

Using the Power of One approach will help to improve your eCommerce business’s cash flow and profitability even by 50% in a relatively short period.

The Power of One shows the impact of a 1% or 1-day improvement of the 7 drivers (Price, Volume, Cost of Goods, Overheads, Receivables, Payables, Inventory) on profit and cash flow; and ultimately, on the value of your business.

Let’s use the Power of One approach with one of my client’s businesses (40mln in revenue, 2.6mln in cash flow, 2.5mln in operating profit). The same principles will apply to smaller businesses too. 

Profitability drivers are made up of 2 key relationships.
The first critical relationship is Price and Volume.
What is the impact on Profit and Cash Flow of a 1% increase in Price or Volume?

The second critical relationship is the Cost of Goods Sold and Overheads.
What is the impact on Profit and Cash Flow of a 1% reduction in Cost of Goods or Overheads?

So far, so good! We have improved the Net Cash Flow by 32% and the Operating Profit by 36%. OK., let’s work further.

Working Capital is made up of 3 key drivers that will impact your Cash Flow.
What is the impact on Cash Flow of a 1-day reduction in Receivables or Inventory or a 1-day increase in Payables?

Wow! Only 1% and 1-day improvement of the above 7 drivers would increase the cash flow by 44% and operating profit by 36%.
Obviously, the numbers may be different in your company. Nevertheless, it will unquestionably improve your cash flow and profitability.
My Power of One approach applies to any size eCommerce business in any country.

Marek Niedzwiedz

Trained & Experienced Business Finance Expert

Forbes Business Council Official Member

Entrepreneur For 2 Decades (3 Exits)

Freelance Investor Relations Consultant

This guy is amazing. We scaled up cash by 40% in the first 6 months of working together. Profit 25% up in the first FY.

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Amanda Syfred
Co-Founder, Guzeros

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