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CCC: How fast can your Amazon business afford to grow?
February 06, 2019
The Cash Conversion Cycle (CCC) is a metric that expresses the length of time (in days) it takes for a company to convert resource inputs into cash flows.
It is also helpful when it comes to effectiveness of a company's management and, consequently, the overall health of the entire company.
Knowing your CCC makes you understand how fast a company can convert money to grow.
CCC is a fundamental metric for success which enables to evaluate company's ability to function and to grow as it is no secret that the growth sucks cash.
We know that money loves speed.
However, when you are running a company, you also want and need to know, what this speed currently is.
In Amazon, even when it is just you and your Amazon seller account, this is your small company. Having an overview and being aware of the entire process will be beneficial in countless reasons.
Time and money saver
CCC is going to save a lot of time, money and effort. When you have hired someone, it helps your entire team to be more aligned and faster.
They also have better understanding about the big picture. Therefore, we recommend that you adapt it in as early stage as possible.
CCC also helps you understand that if you put money into your company, then how many days does it take for you to get it back.
We need to understand, how to measure this in a fast and easy way.
It is important that you remember to keep on tracking not only how much money, but also how much time you put into your Amazon business as your time is also money.
What is possible with CCC?
CCC is a tool which helps you to focus on clarity, priorities, metrics and improvements.
Most importantly, it enables you to answer the key questions:
“Where is the constraint? Where are the bottlenecks of the company?”.
The sad truth about it is that Peter Drucker was right when saying that, in most organizations, the bottleneck is at the top of the bottle.
In other words, it is in leadership and in management.
In fact, this is the main reason we need to adapt and start using this technique as fast as possible.
It is not only about the repeated mistakes, but it also means that it will take longer to convert money into profits.
Who needs CCC?
We´d say it is crucial, not to say an absolute necessity, to use CCC, especially when you hired employees and there is more complexity in the company.
CCC helps every person in the company to see their part in the product lifecycle.
It will make them understand how important their role is and will make them see their contribution.
CCC enables you to monitor the tasks and expenses involved, helps you to ask better questions, and empowers you to make better decisions faster.
It may seems like a judgment day but that´s the power of the CCC.
Where to start?
By now, everyone should have understood and agreed that it is important to start using CCC. Nevertheless, it still leaves us with the question, where to start.
First of all, we need to start collecting data. To do so, we´ve created the CCC template.
This is a tool which gonna change the way you think about releasing new products.
The mentioned template has different phases marked: research, sourcing, preparation, launch, optimization, ranking. In addition, the template has the exact timeframe with different cost and profit categories connected to those five phases.
When filling in the data, the template will calculate the outcome. From there, we can also see the valuable prognosis we can take into account when leading our company.
Basically we will have the big picture about each and every Amazon product you have.
Once finished with the article, you will find the link with more detailed information and an example of the CCC template.
What is the product template good for?
CCC product template is made for only one product and you´re going to work with it every single day.
Basically, after every step you make, you´ll mark it into this template as well.
From our template, you´ll find the product lifecycle and predetermined steps which we have already provided.
Of course, if you do something different, feel free to add your own things.
However, make sure not to go into every crazy detail. The idea is to capture the tasks that take more than one day.
When doing so, remember the main reason we want to know CCC: To identify bottlenecks. To resolve them. And, to be faster next time.
How fast can you go?
Our goal is to use CCC to improve the speed of the cashflow that comes into the company.
Our recommendation is that, after you´ve gathered the information for your first or second product lifecycle, set a 90-day goal to reduce the length of that cycle to at least 30%.
This way, every time you´ll release a new product, you´ll be faster and faster and faster..
And that's the beauty of CCC as it enables you to see where are you making mistakes, and in which part of the process you are too slow.
This really helps you to adjust your focus to improve with every time.
What happens, if…?
Let us point out few of the problems you´ll be likely to face when not starting with CCC.
You will most probably have lack of focus, and you don't know why you are not getting further. Also, because you do random things over and over again, you have uncertainty, uncomfortability
and no clarity.
Most of all, you don't see or understand the big picture.
When getting new people, there is more complexity. As a result, you are no longer aligned with your goals any more. Instead, everyone is just doing some random stuff you have no control over.
Working smart
The foundation of the constraints comes from Eliyahu M.Goldratt´s little book called “The goal” which has sold over 3 million copies.
This is a really good and helpful book that speaks about how to speed up your process, which is the same reason of doing CCC. (By the way, there is a free version of it available. You can listen to it on Youtube, so, you don't even need to buy it).
In conclusion, CCC is about focus and working hard.
But at the same time, we highly recommend to also work smart. It is an efficient tool that helps you to monitor the entire process and to make better decisions faster.
Doing it a few times will practice your knowledge about CCC, making you aware where and how much you are spending time.
From this position, it is easy to speed up, to set new goals, and to find new ways how to make your Amazon business prosper.
By Kristi
February 06, 2019
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