“With Insight Matters on our side, we feel much more in control of our business – no more sleepless nights filled with worries and questions about our cash flow!”
– Co-owner of Duotz
Duotz* is a fast growing eCommerce business that specializes in trading consumer electronics. The company had plenty going for them — among other things, they enjoyed high margins, and their profits were growing month-on-month.
But there was one problem: they never had enough cash on hand. It was a struggle to purchase inventory, and the founders couldn’t even afford to pay themselves.
Knowing that something had to change, Duotz enlisted Insight Matters to review their finances, and rework their strategy. We also helped Duotz to get access to external financing; with their inventory problems solved, Duotz could now bring in $500,000 worth of extra profit in the next 12 months.
About Duotz: The Backstory
Duotz is a trader in consumer electronics. The company has grown significantly since they first launched in 2015, and they currently sell through several platforms, including Amazon, retail chains, and their own eCommerce store.
Duotz’s primary problem: no cash flow
Duotz was facing the very same problem that plagues millions of small business owners from around the globe — they didn’t have enough cash flow.
Interestingly enough, the owners of Duotz had no clue where their money was disappearing to. Back when they first went into business, they invested over $500,000 of their own money as capital, but it was as though all their cash had evaporated into thin air.
Again, Duotz was experiencing decent growth, and their sales were taking off. If they were moving so much inventory every day, how was it that they didn’t have any cash on hand?
How Duotz’s Money Woes Were Limiting Its Growth
Without sufficient cash flow, Duotz couldn’t purchase inventory. This resulted in various problems; among other things, a shipment of products that they owed to a retail brand was delayed by two months. This one case alone caused Duotz to miss out on almost $250,000 worth of revenue.
Because Duotz kept running out of inventory, they were also forced to put their Amazon listings on hold. This hurt their rankings and visibility, and sales from Amazon slowly dwindled. As a stop-gap measure, Duotz started shipping in a small batch of products by air every time they had an inflow of cash — but this was disastrous for their margin.
How Insight Matters Restructured Duotz’s Cash Flow
When Insight Matters stepped in to help Duotz, our priority was to minimize their growing pains, and allow them to realize their full potential. We conceptualized and put into place a three-step action plan, and this turned things around for Duotz — it even brought them an extra $500,000 in profit.
Our first step was to map out and visualize Duotz’s working capital cycle. With this step, the goal was to help the owners trace their working capital, and gain insights on why they did not have any cash available despite their good sales and margins. We soon realized that the long delivery times from China to Europe and Duotz’s payment terms to their supplier were tying up their money.
Next, Insight Matters set up a rolling forecast system for Duotz. Given that Duotz was working with long lead times and working capital constraints, it was critical for them to plan their sales, purchasing and cash flow more carefully.
Based on the sales and cash flow forecast that we developed, it was clear that Duotz would need extra capital to meet their orders. In the third step, Insight Matters helped Duotz get access to a credit line from a bank. We both prepared the material needed and coached the Duotz owners through the financing process.
The Outcome: Peace Of Mind And An Extra $500,000 In Profit
The rolling forecast system enabled Duotz to be better prepared when it came to their finances, and their new credit line gave them bandwidth to fulfil their orders. Now that Duotz had finally overcame their bottleneck, their productivity increased, and they had capacity to add an extra $500,000 to their gross profit in just 12 months.
Here’s what one of the owners of Duotz, has to say about his experience working with Insight Matters:
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* The name Duotz is tweaked at request of the owners. At request, the real name and contact details are available.