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If you’re a DTC or Omnichannel brand
and you’re based in New York City,

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or if you just want to travel to New York,

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00:00:05,250 –> 00:00:07,650
I’ve got a special invitation for you.

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00:00:08,310 –> 00:00:13,290
OMG Commerce and Raindrop Plus
Google are hosting an exclusive

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00:00:13,470 –> 00:00:17,700
invite only event at the Google
offices in Manhattan at the St.

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John’s terminal. This is
an epic Google office,

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but the content is going to
be even better. My buddy,

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Jacque Spitzer and I from Raindrop are
going to be showing you how to scale your

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brand using YouTube, but there’ll also
be some very special guests there,

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including Dara Denny as
her Firestone, Nick Sharma,

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plus some executives from YouTube.
Here’s the deal. This event is free,

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but space is extremely limited
and you do have to apply and be

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approved to attend. And OMG Commerce
and Raindrop clients do get first dibs.

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But if you’d like to know more,

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visit omg commerce.com/nyc event. Again,

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that’s omg commerce.com/nyc event.

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00:01:01,350 –> 00:01:03,720
Click there to get all
the details to apply,

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00:01:03,990 –> 00:01:08,010
and I can’t wait to see you in New York
City and help you dominate with YouTube

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ads.

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Well, hello and welcome to another edition
of the E-Commerce Evolution podcast.

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I’m your host, Brett Curry, CEO
of OMG Commerce. And today, man,

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am I pumped about my
guest. I have the one,

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the only Andrew j Faris
host of the Andrew Faris

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podcast, CEO, founder of AJF Growth,

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and just had the privilege of being on
his podcast a couple of weeks ago talking

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about YouTube. We hit it off.

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I wanted to have him on the podcast
to talk about p and l design and

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forecasting,

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and also why e-commerce brand owners
should back off from the ledge if you find

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yourself there because of
all the craziness going on
with tariffs and whatnot,

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and so pumped to get
into your story, Andrew,

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but then also deliver some value for
our guests. So welcome to the show, man,

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and thanks for taking the time.

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Yeah, thanks, Brett. You asked
me how I like to be introduced,

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and I think the one the
only is good. That’s all I.

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Need. Just the one, the
only, that’s all we need.

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Yeah, yeah, that’s right.
So that was good. Thanks.

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It’s so funny, one time I was traveling
with my team, three team members,

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and I was not in first class, but it
was just sitting in front of the plane.

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They were in the back of the plane and
they all separately walked by and they

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touched me on the shoulder and
they’re like, are you the Brett Curry?

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And the people sitting around
were like, who is this guy?

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Should we know this guy? The name
doesn’t ring a bell, but who is this guy?

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And I’m like, it’s my team. It’s just
being nuts. So anyway, huge deal.

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Fun times. Yeah, yeah, yeah, right,
exactly. So dude pumped about this,

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but for those that don’t know
you give us a little background.

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I believe you told me you’ve
held every seat in e-comm,

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just about. And so talk us through
that and then what are you doing now?

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Yeah, well, what I just try to tell people
is that in the e-commerce ecosystem,

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at least on the marketing side,

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I have been in just about every kind
of organization in most of the seats.

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So I started off working at klo,

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selling silicone wedding rings on the
internet as a media buyer. I was trained,

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working directly, closely.

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I was Taylor Holiday who had been
a friend for a while at that point.

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And so Taylor and I became
good friends and crossed,

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crossed paths over that time.
Well, we were already friends,

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but crossed paths or continued to work
together in a bunch of different ways.

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So I was working with Common Thread
collective from there as a growth

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strategist,

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and then eventually the head of growth
there led strategy at CTC for a while.

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At some point, CTC spun off its own brands
into an aggregator called Four Rifle,

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400,

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and I led growth there and then
became the CEO promptly ran that

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into the ground. I always
try to clarify this.

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It sounds like when you tell a
story like this, it’s like, wow,

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look at my great career advancement where
I’m only ever successful and it’s just

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not true.

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I learned a lot. Never happens that way.

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Never happens that way. We
did some good things, 4, 400,

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1 of those brands still is going
Bamboo Earth and Bamboo Earth. Yeah,

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it’s profitable, but sold off all of
’em, but won. And I ended up leaving.

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And I would just add, I learned,

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especially the longer I’ve
reflected on the experience,

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I’ve learned a lot from my
mistakes there. From there, now,

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I’ve been running AJF Growth,

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which is a boutique agency
where we service right

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now four brands,

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and I’ve got a team of a few of us in
the US and seven or eight more in the

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Philippines and work together to
do a great job as good of a job as

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we can do servicing brands,
really meta adss focused,

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but we end up functioning sort of

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almost like an outsourced
mix of CMO CFO kind of

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deal. CFO is too strong of a word. We’re
not forecasting somebody’s cashflow,

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but we do actually take on the forecasting
of the full business in terms of DTC

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cohort forecasting, that kind of stuff.

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And then we ladder our media plan to
that and then end up being in a lot of

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conversations around marketing
efforts and stuff like that.

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Which is super, super
interesting. Yeah, I love that.

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And I’ve always been a
believer, I’ve always,

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always been a fan of infomercials
and marketing that drives results,

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and I’ve always believed that marketing
should build your bottom line in

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addition to your top line.

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But now the trend is you’re
putting real legs behind

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that where as a marketer,

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you’re helping run the forecast and
you’re helping manage the p and l,

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not from a gap accounting perspective,
but from a practical, helpful,

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let’s hit these profit targets lens
and you’re doing it and doing it well.

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And so it’s super, super
exciting. And also, man,

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I really appreciate you sharing, hey,
not everything in business goes well,

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right?

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And there’s one of these things I heard
Alex Hormoz say recently where it’s

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like, Hey, you expect for entrepreneurship
running a business to be hard,

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but then you’re discouraged because it’s
even way harder than you think, right?

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You go in thinking this is hard
is, but it’s really, really hard.

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And so you have to be ready for
that. Yeah, yeah, that’s right.

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Yeah, I think some people,
sometimes when I hear people,

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you talk about people
being talked off the ledge.

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I actually think one of the things that
happens in conversations about the ledge

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in e-commerce is that sometimes people’s
expectation is just that it’s going to

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be easy the whole time or that.

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Or.

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That you should always grow
prospect lifestyle each.

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Stage up to the right.

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Yeah.

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I think if you thought that somebody was
going to hand you millions of dollars

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on the bottom line, that’s
not an e-commerce problem.

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Just so anyway,

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I think there is a real thing there
where people need to expect that there’s

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going to be challenges along the way,
and not every outcome is what you expect.

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Dude, totally. I know you’re
a family man, I’m as well.

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But it’s almost one of
those things where pre-kids,

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you see a family from a distance and you
see a kid acting out and you’re like,

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my kid will never do that. My
family’s never going to be like that.

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And then you’re like, you have no
idea what you’re talking about,

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everything you want to
avoid or not have happen.

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It’ll humble you for sure, but
business is the same way. It’s really,

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really hard, but it’s also rewarding
and fun and exciting at the same time.

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So let’s talk about that a little bit.

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You hosted a podcast or delivered a
podcast recently where you said, Hey,

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I’m still bullish on e-comm, and so we
don’t want to fully unpack that, right?

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People just need to go listen that
episode. But why did you say that?

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And I agree with you by the way,

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I’ve got a couple of things
I want to add to this,

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but why are you still bullish on?

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Well, there’s a lot of reasons,
but at the end of the day,

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I think there’s more intelligence about
how to operate an e-commerce business

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now for a larger market of customers
than there have ever been for e-commerce.

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And I think most of the
headwinds are more short term.

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Most of the tailwinds are more long term.
So tariffs being the biggest headwind.

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And I just should clarify really quickly,

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if your brand is existentially threatened
by Chinese tariffs, I understand.

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I’m not trying to make light, that
sucks. I’m not trying to say it’s.

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A big, big.

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Deal and no, obviously.

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Even taring are currently they were
super high and now they’re low,

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and who knows what they’ll be with when
this is recorded, but still volatile.

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Exactly. Yeah, and I just think
so anyway, so having said that,

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there’s a carve out there, but yeah,

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I just think that the tools
are also getting amazing.

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This is something people will
sit here and talk about how AI is

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producing all of this value to make it
so that the ad platforms are performing

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better and delivering
business results better.

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And they’re doing that
in all kinds of ways,

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and also creative is getting cheap to
make at endless scale and all this stuff.

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And then they won’t take
the next step and say, oh,

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who does that accrue value to?
It accrues values to meta it,

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accrues values to Google it
accrues values to chat GPT,

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who’s going to charge you
to do it and all that stuff.

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But it also cruises values to brands,

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values to brands who reduce
their opex meaningfully.

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So if that’s the future you believe
in to where the distribution of your

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ad creative is getting much, much cheaper,

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the labor involved with things like
customer service and all these things is

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getting much, much cheaper.
And then at the same time,

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the production of your ad creative
and of other creative assets in your

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business, including copy on your website
and social media and all those things,

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that’s all getting cheaper as
well, drastically, phenomenally,

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ridiculously cheaper.
If that’s all happening,

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then that means you can run your business
more efficiently at every level, And

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that means it accrues
value to you. So you can’t,

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it’s just really hard to say both those
things at the same time that now the

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counter argument to that is
that the barrier to entry
is getting so low that all

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of these people will do it, and
there will be very few winners,

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and I don’t know quite
what to make of that.

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I think if there’s still
more winners ultimately,

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and if it’s very cheap to
test the idea, then yeah,

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there are going to be some
losers, but, but anyway,

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so the combination of all those things
makes me still bullish and I just try

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to tell people as far as putting
my money where my mouth is here,

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I’m starting a brand right now. I just
got another sample, the sample yesterday.

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Love it. So just like.

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When will this brand be
released? Will it be launched.

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T by October? Hopefully.

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That.

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Would be,

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but that means for sure later than that
because that’s how this kind of thing

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goes. So.

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Yeah, I fully agree with you.

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I’ve invested in some retail and
DTC brands even over the last

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year. Yes, there headwinds.

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We have an Amazon practice at
OMG. Amazon is challenging.

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There are always challenges there.

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The game is always shifting
a little bit there,

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but people are going to buy in the
future more online, not less online.

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I’m very, very confident in that.

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I do believe we’re in a world where
great products and great marketers will

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win. And so it’s difficult.
It’s challenging, yes,

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if you’re getting hammered
by tariffs, sympathy to you,

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empathy, all of those things.

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But there are still big
opportunities in this space.

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And I was listening to the operators
podcast recently, Mike Beckham,

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00:11:02,160 –> 00:11:06,930
co-founder of Simple Modern, and
he imports everything from China,

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00:11:08,760 –> 00:11:11,800
or maybe he’s actively working
to not do that, but Currently’s.

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00:11:11,830 –> 00:11:13,890
The case. Yeah, they stood up a
manufacturing facility in Oklahoma City.

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I’ve been there and it’s
really, really cool and awesome,

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00:11:16,080 –> 00:11:18,600
but when you hear them talk
about it, it’s a tremendous pain.

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00:11:18,900 –> 00:11:21,600
So it’s really.

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00:11:21,600 –> 00:11:25,860
Difficult. Exactly. But he talked about
on a recent episode, he is like, Hey,

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this is chaotic,

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00:11:26,760 –> 00:11:31,740
but there’s more surface area right
now for me to make changes and pivots

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and shake things up.

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And I’m confident this is going
to be going to create windfalls

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for our business.

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And so I think if we remind ourselves
that during every time of uncertainty,

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every economic downturn,

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fortunes are made and people
transform their business in a powerful

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way, it’s just a good mental reset.

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That’s right. Because.

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00:11:52,620 –> 00:11:56,140
Sometimes being an entrepreneur is lonely
and we get down and discouraged and I

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got to give myself a pep talk on
occasion. And so I’m glad you did that.

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00:12:00,280 –> 00:12:02,710
Thanks for posting that episode.
Everybody should go check that out.

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00:12:02,950 –> 00:12:04,630
Well, maybe I need to have
you back on again, Brett,

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00:12:04,630 –> 00:12:08,680
because Taylor is one of
the biggest critics of my
e-commerce is a good business

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00:12:08,680 –> 00:12:12,940
mentality, and he said, you need to bring
somebody on who agrees with you. Yeah,

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00:12:13,090 –> 00:12:13,090
yeah.

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00:12:13,090 –> 00:12:15,340
Yeah, I know he is. Yeah. Well,

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00:12:15,340 –> 00:12:18,910
because you tweeted recently
with your friend fan,

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00:12:18,910 –> 00:12:21,640
I think that 50% of e-comm
brands are worth nothing.

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00:12:21,640 –> 00:12:24,400
And Taylor tweeted back
that it’s like 95%.

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95%.

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And that is a good clarification because
fans sample is brands that are trying

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to exit, and so.

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That.

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Skews disproportionately
towards brands that have some.

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Value, a little bit, little
bit of cherry pick there.

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And I didn’t mean,

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I just didn’t think about that when I
proposed that I wasn’t trying to be click

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fatty or whatever, but it’s
a fair point. But yeah,

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00:12:46,210 –> 00:12:47,043
anyway, it’s.

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00:12:47,410 –> 00:12:50,950
Still money to be made still
success to be had. Road’s not easy,

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00:12:50,950 –> 00:12:54,310
but still there. So I want to talk about
this. We’re going to get to p and Ls.

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00:12:54,310 –> 00:12:56,320
I want to talk about how
to design it, and again,

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00:12:56,320 –> 00:12:58,660
not from an accounting perspective,
but how to look at it as a marketer,

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as a business owner to drive profits,

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00:13:01,060 –> 00:13:03,820
drive real business and finance outcomes.

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00:13:04,120 –> 00:13:07,420
But we were talking about something really
interesting prior to hitting record.

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You’re a big baseball guy. I’m
more of a basketball football guy,

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but I love baseball too.
We love the same movie,

250
00:13:13,750 –> 00:13:15,340
and you were inspired more by the book,

251
00:13:15,790 –> 00:13:20,560
but tell us about the book that
maybe shaped you as a marketer

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00:13:20,560 –> 00:13:23,230
that will, I think, surprise
people, but talk about it and why.

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00:13:24,070 –> 00:13:24,903
Yeah, Moneyball.

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00:13:25,570 –> 00:13:27,850
Moneyball I think shaped a lot of
people in a lot of ways actually.

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00:13:27,850 –> 00:13:31,390
I think it did. It did. Reach
was well beyond baseball fans.

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00:13:32,170 –> 00:13:32,830
For sure.

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00:13:32,830 –> 00:13:35,980
Because in my experience,

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00:13:37,150 –> 00:13:39,640
so I grew up playing baseball
as a huge baseball fan,

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and when I heard about analytics
in baseball and the early stage,

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I had the same reaction as a
lot of people, which is like,

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00:13:44,710 –> 00:13:47,740
this is soulless and these nerds are,

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00:13:48,040 –> 00:13:49,780
they don’t understand how
baseball really works.

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And then I read the book and was totally
convinced that I was wrong about that.

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00:13:53,530 –> 00:13:53,920
A hundred percent.

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Percent.

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00:13:56,740 –> 00:14:01,660
But what ended up happening
is that that book exposed to

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me, not so much just a
statistical paradigm for baseball,

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but it taught me how smart,

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analytically minded people think
about everything about the world.

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So I’m a big Dodgers fan of
wearing my Dodgers hat right now.

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The guy who runs the Dodgers, the
president of baseball operations,

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00:14:17,830 –> 00:14:21,550
his name is Andrew Friedman, he came
from Wall Street. He was a traitor.

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And so he had an ability to think about

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00:14:26,650 –> 00:14:30,010
statistical probabilities and some of
those things and how you use data to

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00:14:30,010 –> 00:14:31,930
inform better quality decision making,

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00:14:31,930 –> 00:14:35,470
and to think about the world as a matter
of bets that you place and things like

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00:14:35,470 –> 00:14:38,260
that. Working with him for a long time,

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00:14:38,260 –> 00:14:41,020
a guy who eventually ran the Giants
eventually got fired and is now back as a

279
00:14:41,020 –> 00:14:44,710
specialist of the Dodgers. His name is Dr.
Farhan Idi, who has a PhD from MIT

280
00:14:46,300 –> 00:14:48,520
and has never played serious baseball.

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00:14:49,540 –> 00:14:53,270
And there’s teams that have various
levels of those kinds of guys.

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Some former players now are
those kinds of guys or whatever.

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00:14:55,330 –> 00:14:56,330
So it’s not only that,

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00:14:56,330 –> 00:15:00,410
but the point is those guys were not
thinking about baseball first when they

285
00:15:00,410 –> 00:15:01,340
developed those muscles,

286
00:15:01,340 –> 00:15:03,590
they just took a set of muscles
and applied them to baseball.

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00:15:03,590 –> 00:15:05,030
And what I did was the opposite direction.

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00:15:05,450 –> 00:15:10,250
Moneyball for me was the
way that I learned how to
think about how to look at a

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00:15:10,250 –> 00:15:13,040
set of numbers and think about what they
mean and how to interpret them and what

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00:15:13,040 –> 00:15:15,770
they don’t mean, which crucially,
and I mean Brett, I’ll just tell you,

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00:15:15,920 –> 00:15:18,350
I think I actually just
tweeted about this today.

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00:15:18,350 –> 00:15:22,520
I think that people’s
inability to have a baseline

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00:15:22,520 –> 00:15:26,750
understanding of then the concept of
probabilistic thinking about outcomes

294
00:15:27,470 –> 00:15:30,260
and of the difference between signal
and noise and how to make a distinction

295
00:15:30,260 –> 00:15:31,160
between those two things

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00:15:33,110 –> 00:15:37,670
is a gigantic hole in their
thinking, especially media buyers.

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00:15:37,670 –> 00:15:40,040
Media buyers are terrible
at this hundred percent,

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00:15:41,150 –> 00:15:45,860
and they overreact to tiny samples. And
just for the record, I am media buyer.

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00:15:45,920 –> 00:15:50,120
I am the person that we’re talking about.
So all of my thinking about how best

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00:15:50,120 –> 00:15:52,700
to optimize a lot of media
buying approaches is like,

301
00:15:53,030 –> 00:15:57,290
how do I get the machine to
make the decisions for me
because I am so bias prone

302
00:15:57,290 –> 00:16:00,470
in all of my thinking. So
anyway, Moneyball, for me,

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00:16:00,530 –> 00:16:05,450
the book really helped me to start
working out those muscles and those

304
00:16:05,450 –> 00:16:08,210
muscles then became transferable
to other things eventually.

305
00:16:08,210 –> 00:16:10,580
Also listening to the Freakonomics
podcast helped me a lot with this.

306
00:16:10,940 –> 00:16:12,920
Listening to the Planet Money podcast
helped me a lot with this. Really,

307
00:16:12,920 –> 00:16:16,040
Freakonomics I think was
especially helpful as well
because very similar thing,

308
00:16:16,040 –> 00:16:16,190
right?

309
00:16:16,190 –> 00:16:20,090
You’ve got guys who are sort of exploring
the world through the lens of data and

310
00:16:20,090 –> 00:16:23,480
what data can and can’t tell you,
and sort looking under the surface,

311
00:16:23,840 –> 00:16:25,790
little taglines, exploring
the hidden side of everything.

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00:16:25,790 –> 00:16:29,420
And the hidden side is how data creates
incentives and some of that. So they

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00:16:29,420 –> 00:16:33,320
have all kinds of really fun things,
outcomes of like, oh, look at that.

314
00:16:33,320 –> 00:16:35,000
If you look at the
numbers underneath this,

315
00:16:35,000 –> 00:16:38,420
you see patterns and
behaviors emerging. Yeah,

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00:16:38,450 –> 00:16:43,310
I just think a lot of people would do
really well to, if you like baseball,

317
00:16:43,310 –> 00:16:47,750
you have the best world for this because
it’s the place where a lot of this

318
00:16:47,750 –> 00:16:52,190
stuff is the most publicly digestible.
But if you’re a basketball fan, Brett,

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00:16:52,550 –> 00:16:54,020
surely over the last bunch of years,

320
00:16:54,020 –> 00:16:56,390
the thing you’ve noticed the most
is the rise of the three pointer.

321
00:16:56,690 –> 00:16:58,010
It is a simple calculation,

322
00:16:58,190 –> 00:17:02,570
which is a three pointer is worth more
than 50% of a two point. It’s worth 50%.

323
00:17:02,570 –> 00:17:03,230
It’s worth 50%, right? More.

324
00:17:03,740 –> 00:17:04,490
Yeah.

325
00:17:04,490 –> 00:17:08,270
Sorry. It was worth more, which
is 50% more than a two pointer,

326
00:17:09,140 –> 00:17:12,650
and therefore there’s a massive
incentive unless you make it

327
00:17:14,090 –> 00:17:16,130
essentially your shot doesn’t have,

328
00:17:16,250 –> 00:17:21,140
you can be a fairly amount less
efficient at the level of the shot and

329
00:17:21,140 –> 00:17:24,980
still be a more efficient use
of your shot in that case. And.

330
00:17:24,980 –> 00:17:25,550
So.

331
00:17:25,550 –> 00:17:27,860
That kind of little tradeoff, it’s like,
oh, once you see that, that’s good.

332
00:17:27,860 –> 00:17:28,693
And by the way,

333
00:17:28,760 –> 00:17:31,430
if anybody ever goes and plays pickup
basketball and you’re playing with ones

334
00:17:31,430 –> 00:17:33,800
and twos as instead of twos and threes.

335
00:17:34,100 –> 00:17:37,790
That’s even crazier. It’s not twice as
much. You should shoot a two every time,

336
00:17:38,180 –> 00:17:42,170
every time. If you’re a drive
to the bucket type of player.

337
00:17:42,230 –> 00:17:42,530
You’re doing.

338
00:17:42,530 –> 00:17:44,420
It wrong. You can’t play in a
game, that’s one versus two.

339
00:17:44,420 –> 00:17:47,150
It’s like you’ve got to develop that
three point shot, which I don’t have.

340
00:17:47,330 –> 00:17:49,190
I grew up in an era where
I was a post player,

341
00:17:49,500 –> 00:17:53,220
we just pounded down low to take
a close shot. That’s all we did.

342
00:17:53,220 –> 00:17:56,520
But I’m so glad you brought this
up and we will talk p and l,

343
00:17:56,520 –> 00:17:57,570
we will talk about e-commerce.

344
00:17:57,570 –> 00:17:58,403
Yeah, whatever. We can
talk whatever you want.

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00:17:59,280 –> 00:18:04,170
But I love that we got into this because
people are not failing right now in

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00:18:04,170 –> 00:18:08,820
e-commerce or in any business for lack
of data. That’s not an issue right now.

347
00:18:08,820 –> 00:18:11,850
It’s not lack of data. It’s
understanding what does the data mean,

348
00:18:11,850 –> 00:18:13,920
but more importantly, what
does the data not mean?

349
00:18:14,220 –> 00:18:18,540
And then based on what it means, where
am I going to place bets and why?

350
00:18:18,720 –> 00:18:20,070
And can I confidently say this,

351
00:18:20,070 –> 00:18:24,420
why I’m going to place bets in this
place and not in that place? And yeah,

352
00:18:25,260 –> 00:18:27,690
dude, it is just so good.
I love the movie Moneyball,

353
00:18:27,690 –> 00:18:30,420
so many quotable things
in that movie. And.

354
00:18:30,420 –> 00:18:32,640
As it happens, I’m also
a big Aaron Sorkin fan.

355
00:18:32,640 –> 00:18:36,750
So once Moneyball became both Moneyball
book and also written by Aaron Sorkin.

356
00:18:38,280 –> 00:18:39,113
Was in.

357
00:18:39,450 –> 00:18:39,540
He’s.

358
00:18:39,540 –> 00:18:42,000
One of the best, wait, what are some
of the other Aaron Sorkin movies?

359
00:18:42,030 –> 00:18:44,190
Well, there’s a lot. I mean,

360
00:18:44,460 –> 00:18:48,600
he wrote Charlie Chicago Seven
is one that people liked a lot.

361
00:18:48,600 –> 00:18:49,440
I think that won some.

362
00:18:49,440 –> 00:18:53,250
Did he write Molly’s game? The
poker? He did, yeah. Just so good.

363
00:18:53,550 –> 00:18:56,460
But the West Wing is maybe his still most
famous thing in some ways because the

364
00:18:56,460 –> 00:18:59,650
West Wings a lot of people and
West Wing I love too. Yeah. So.

365
00:18:59,650 –> 00:19:03,450
You’ll be a better media buyer,
better business operator,

366
00:19:03,450 –> 00:19:07,620
better Econ Pro. If you watch or
read Moneyball, go check it out.

367
00:19:08,820 –> 00:19:13,740
That’s awesome, man. So let’s break
down. P and Ls mentioned to you,

368
00:19:13,740 –> 00:19:17,970
I actually love math. I excelled at
math in schools. It was just fun for me.

369
00:19:18,330 –> 00:19:21,240
I hated accounting class in
college, slept through it, hated it.

370
00:19:21,240 –> 00:19:22,530
I’ve never taken one, so that’s fine.

371
00:19:22,960 –> 00:19:25,470
Okay, I regretted it once I started
a business. I was like, oh shoot,

372
00:19:25,470 –> 00:19:29,040
I should have paid closer attention.
So I’ve had to get better there.

373
00:19:29,490 –> 00:19:30,840
There’s some differences.

374
00:19:30,960 –> 00:19:33,930
There’s gap accounting principles which
are useful and there’s a reason for that

375
00:19:33,930 –> 00:19:34,860
and there’s a world for that.

376
00:19:35,220 –> 00:19:38,970
But then there’s p and ls that are
useful for marketers and business owners.

377
00:19:38,970 –> 00:19:43,020
And so talk to me about how
you think about p and ls,

378
00:19:43,740 –> 00:19:47,910
why it’s important, and what function
does that serve for you as a marketer?

379
00:19:48,990 –> 00:19:50,310
So at the baseline level,

380
00:19:51,180 –> 00:19:55,890
what I really think here is
that many brands are dead on

381
00:19:55,890 –> 00:19:57,570
arrival and don’t realize it.

382
00:19:57,660 –> 00:20:00,930
And the reason they don’t realize it is
that they have never done the work of

383
00:20:00,930 –> 00:20:01,950
forecasting

384
00:20:03,750 –> 00:20:06,840
every part of their p
and l, the whole thing,

385
00:20:07,560 –> 00:20:08,970
at least in large chunks.

386
00:20:08,970 –> 00:20:13,110
So I am not saying you have to forecast
your Shopify bill six months out or your

387
00:20:13,140 –> 00:20:15,480
Klaviyo bill six months out or
whatever, down to those details,

388
00:20:16,170 –> 00:20:20,280
but maybe you should, but

389
00:20:21,900 –> 00:20:22,733
I’ll tell you this,

390
00:20:22,740 –> 00:20:25,170
there are worse things to do with your
time in e-commerce than to get that

391
00:20:25,170 –> 00:20:26,003
detail in your forecast.

392
00:20:26,430 –> 00:20:27,263
For sure.

393
00:20:30,420 –> 00:20:34,950
But I think a lot of
brands just don’t have a

394
00:20:34,950 –> 00:20:39,090
viable business or it’s going to be
really hard or they have filed business,

395
00:20:39,090 –> 00:20:44,010
but they are strategically
so turned around and don’t

396
00:20:44,010 –> 00:20:48,280
know it because they just
haven’t done the work of having a

397
00:20:48,640 –> 00:20:52,540
goal. And then forecasting to
that goal in a way that says,

398
00:20:53,440 –> 00:20:57,670
here is what is actually likely or if
they do the forecast is rooted in hope.

399
00:20:57,820 –> 00:21:00,580
And that’s not a forecast. Hope is
not a forecast, it’s not a plan,

400
00:21:02,650 –> 00:21:06,910
but to have some reason for why they
believe the future will be a certain way

401
00:21:06,910 –> 00:21:09,670
and then to forecast their whole
business through that lens.

402
00:21:09,670 –> 00:21:13,870
And I think that basically the tool to
do that with is a cohort-based forecast

403
00:21:13,870 –> 00:21:16,270
for e-commerce brands where you’re
actually forecasting new and returning

404
00:21:16,270 –> 00:21:19,360
customer revenue differently. And then
depending on if you’re omnichannel,

405
00:21:19,600 –> 00:21:21,850
how you work those channels in as
well, this gets more complex. But

406
00:21:23,350 –> 00:21:25,330
basically having that kind of thing,

407
00:21:25,660 –> 00:21:28,420
it sounds like ridiculous
advice to say to people,

408
00:21:28,840 –> 00:21:31,390
you need to forecast your business.
Like duh, everybody knows that.

409
00:21:31,420 –> 00:21:35,470
But I am telling you, I just see over
and over that people do this again,

410
00:21:35,470 –> 00:21:40,390
either they don’t do it with any
seriousness or they do it or they

411
00:21:40,390 –> 00:21:44,080
do it with no or no connection to
reality in terms of what’s happened,

412
00:21:44,080 –> 00:21:45,100
or they do it, like I said,

413
00:21:45,460 –> 00:21:48,130
the Hope vibes forecast kind
of thing where it’s like, here,

414
00:21:48,160 –> 00:21:50,230
we’re just going to increase
spend for forever every month,

415
00:21:50,230 –> 00:21:52,720
and it’s always going to be at the same
roas and it’s going to just be great,

416
00:21:53,590 –> 00:21:56,140
or we’re going to have all this revenue
and there’s no separation with no

417
00:21:56,140 –> 00:21:58,660
understanding. It says return
customers, new customers, whatever.

418
00:21:58,810 –> 00:22:00,520
So that’s the basic principle,

419
00:22:00,700 –> 00:22:04,510
because if you can do this exercise
well and disciplined and clearly,

420
00:22:04,690 –> 00:22:05,740
and if you need help,

421
00:22:05,740 –> 00:22:07,390
there are a lot of people who
help you with this by the way.

422
00:22:07,690 –> 00:22:08,560
But if you could do it well,

423
00:22:13,090 –> 00:22:17,080
then what you end up with is a map
and compass to the outcome that to the

424
00:22:17,080 –> 00:22:17,920
treasure that you want.

425
00:22:20,630 –> 00:22:25,270
And that is the key step
for so many brands to do

426
00:22:25,270 –> 00:22:28,990
because if you do the exercise and you
get really realistic about it and the

427
00:22:28,990 –> 00:22:33,880
outcome of that exercise is not some
profit number and some growth number

428
00:22:33,880 –> 00:22:35,110
that is satisfying to you,

429
00:22:35,380 –> 00:22:38,830
then that gets shoved back in your
face and you now have to deal with the

430
00:22:38,830 –> 00:22:42,760
reality of, oh, this is
not going to actually,

431
00:22:43,030 –> 00:22:44,440
I actually don’t have
a business that works.

432
00:22:44,440 –> 00:22:46,030
And then you could start
trying to solve the problem.

433
00:22:46,030 –> 00:22:48,850
And maybe I can break down at some
point, I’ll pause here in a second,

434
00:22:48,850 –> 00:22:52,960
but break down what kinds of problem
surfaces and what makes a good and bad

435
00:22:53,290 –> 00:22:55,750
E-commerce p and l. But that basic thing,

436
00:22:56,110 –> 00:22:58,990
I think a lot of people have not done
the hard work of just doing that in a

437
00:22:58,990 –> 00:22:59,980
disciplined and careful way.

438
00:23:01,090 –> 00:23:01,450
Yeah,

439
00:23:01,450 –> 00:23:04,900
it’s so good because I think there’s a
lot of businesses that are in a scenario

440
00:23:04,900 –> 00:23:08,650
where you can’t get there
from here where it’s not just,

441
00:23:08,650 –> 00:23:11,590
I’m going to work harder,
I’m going to do more of this,

442
00:23:12,160 –> 00:23:16,690
but you are doing the wrong
things and the basis of your

443
00:23:16,690 –> 00:23:19,840
business is flawed. The ratios
in your business are flawed.

444
00:23:20,080 –> 00:23:24,940
You are never going to get to those profit
numbers that you want to hit based on

445
00:23:24,940 –> 00:23:29,290
the way you’re operating right now. And
yeah, no amount of wishful thinking,

446
00:23:29,290 –> 00:23:30,190
positivity,

447
00:23:30,190 –> 00:23:33,880
new creatives on meta are going to get
you there because it’s fundamentally

448
00:23:33,880 –> 00:23:36,760
broken. And I remember as
an agency several years ago,

449
00:23:36,760 –> 00:23:39,760
and we’ve always been profit actually
every year we’ve been profitable.

450
00:23:39,760 –> 00:23:42,580
We’ve had some struggles and we’ve
gone through some issues and had to do

451
00:23:42,580 –> 00:23:46,250
layoffs a little over a year ago and
some other things. But I remember when we

452
00:23:46,250 –> 00:23:49,250
started talking to some PE groups and
they started talking to others and they

453
00:23:49,250 –> 00:23:52,310
explained the way they look at agencies,
the way they look at businesses,

454
00:23:52,730 –> 00:23:57,560
I was like, oh wait, we’ve been kind of
lazy in a couple of areas financially.

455
00:23:58,130 –> 00:24:01,010
And it just forced me to think about
the business in a totally different way.

456
00:24:01,010 –> 00:24:04,130
And even though we never sold to PE
and actually we’re looking at acquiring

457
00:24:04,130 –> 00:24:05,120
agencies right now,

458
00:24:05,660 –> 00:24:10,250
that function of thinking about
how would an outside finance

459
00:24:10,250 –> 00:24:14,930
person look at my business,
change the way I ran the business,

460
00:24:15,140 –> 00:24:17,300
not in terms of personality, the way I
care for people or anything like that,

461
00:24:17,300 –> 00:24:20,810
but just the way I look at the numbers
and the way I look at the ratios shifted

462
00:24:20,810 –> 00:24:24,380
when I took that perspective. And
I think really every business,

463
00:24:24,380 –> 00:24:28,100
every e-comm business needs to look at
that. How am I looking at my p and l?

464
00:24:28,280 –> 00:24:32,240
How am I looking at my forecast and can
I get there from here doing what I’m

465
00:24:32,240 –> 00:24:33,140
doing now? So.

466
00:24:34,190 –> 00:24:36,410
Really good stuff when you do
that, Brett, for the agency,

467
00:24:36,650 –> 00:24:39,650
the same exercise for an agency as
it is for an e-commerce business.

468
00:24:39,650 –> 00:24:43,100
It’s just a question of the
ratios are different, right?

469
00:24:44,180 –> 00:24:44,810
Service business,

470
00:24:44,810 –> 00:24:48,440
it’s about marked up time and the cost
of goods is people basically, right?

471
00:24:48,440 –> 00:24:52,520
So do you have a framework through
which you’re trying to view

472
00:24:53,480 –> 00:24:57,710
how at MG Commerce how much

473
00:24:59,210 –> 00:25:03,590
margin you have per client or per head
or something like that, as a percentage?

474
00:25:05,030 –> 00:25:05,863
I’m just curious.

475
00:25:06,020 –> 00:25:09,050
I think you do this if you talk
through how you think about the agency,

476
00:25:09,050 –> 00:25:13,670
then the same principle
applies across to e-commerce.

477
00:25:14,150 –> 00:25:15,500
Yeah, I think it’s going
to be really similar.

478
00:25:16,160 –> 00:25:20,900
So the way we look at a good
agency should be in the 20 to

479
00:25:20,900 –> 00:25:24,200
25% EBITDA margin range,
maybe a little bit higher.

480
00:25:24,200 –> 00:25:26,480
And I think as AI becomes more prevalent,

481
00:25:26,480 –> 00:25:29,120
there are other ways you could
look at making that margin higher,

482
00:25:29,120 –> 00:25:32,900
but that’s a pretty good range. So
to get there, what does that mean?

483
00:25:32,900 –> 00:25:35,960
And I think if you look at
the big buckets in an agency,

484
00:25:36,470 –> 00:25:37,610
delivery is the biggest, right?

485
00:25:37,610 –> 00:25:40,250
So these are the team members
that deliver the service.

486
00:25:40,250 –> 00:25:43,640
So what should that
ratio be? You’ve got ops,

487
00:25:43,640 –> 00:25:47,300
so that’s SG and a basically.
Actually not S, but anyways,

488
00:25:47,300 –> 00:25:50,630
like the general operating opex and stuff
like that. And then you’ve got growth.

489
00:25:50,630 –> 00:25:52,460
And so growth, we put
marketing and sales together.

490
00:25:52,460 –> 00:25:54,110
That’s just the way we
do it to look at growth.

491
00:25:54,530 –> 00:25:59,480
And so those ratios have to
line up in a way that then gets

492
00:25:59,480 –> 00:26:03,410
you to that 20 to 25%, or
maybe it is aggressive,

493
00:26:03,410 –> 00:26:08,300
you’re looking at 30% EBITDA
margins or whatever. So how are

494
00:26:08,300 –> 00:26:11,450
you getting there? And so then
you start forecasting, okay,

495
00:26:11,450 –> 00:26:14,630
these are my team members
in these departments and
this is what we’re investing

496
00:26:15,080 –> 00:26:19,730
and I’m projected to get 8% margin.
So then you begin to look at, okay,

497
00:26:19,730 –> 00:26:22,430
where am I out of whack?
How do we fix this?

498
00:26:22,430 –> 00:26:26,390
Do we grow our way out of this because
maybe we have a lot of bandwidth and we

499
00:26:26,420 –> 00:26:29,720
can grow into it. Do we make
cuts? Do we get more efficient?

500
00:26:30,080 –> 00:26:33,440
There’s a number of things to look
at. So those are the areas we look at.

501
00:26:33,590 –> 00:26:36,530
And then we break it. So we break
it down in big buckets like that.

502
00:26:36,530 –> 00:26:39,650
We look at a p and L on
of course a monthly basis.

503
00:26:39,650 –> 00:26:42,350
We update it all the time,
multiple times a week,

504
00:26:42,650 –> 00:26:47,040
but then we also break down into each
department kind of p and l and look at how

505
00:26:47,040 –> 00:26:47,880
that rolls up,

506
00:26:47,880 –> 00:26:52,350
and then what does each department need
to contribute to then get us to the

507
00:26:52,350 –> 00:26:55,380
overall ratios that we need. And so yeah,

508
00:26:55,380 –> 00:27:00,000
we’re planning things out annually based
on that. We also factor in things like,

509
00:27:00,510 –> 00:27:03,690
okay, what is our pipeline?
What percentage of deals
are we’re going to close?

510
00:27:03,690 –> 00:27:06,150
What’s our average deal
value? So that’s layered in.

511
00:27:06,510 –> 00:27:08,880
We also factor in churn because
even though we think we’re great,

512
00:27:08,880 –> 00:27:11,640
we’ve won awards and people love us
and things like that, churn still.

513
00:27:11,640 –> 00:27:12,473
Happens.

514
00:27:13,320 –> 00:27:18,000
It happens more when tariffs are going
on, stuff like that. So then how do we

515
00:27:19,680 –> 00:27:22,050
factor in churn and look at that because
you’re never going to keep all your

516
00:27:22,050 –> 00:27:26,910
clients. And so we spilled that model and
it’s like you’re constantly adjusting,

517
00:27:26,910 –> 00:27:28,890
you’re constantly tweaking.
We do a weekly flash,

518
00:27:28,890 –> 00:27:32,430
the finance report that looks
at, okay, what changed this week?

519
00:27:32,430 –> 00:27:33,810
How are we looking at
the rest of this month?

520
00:27:35,310 –> 00:27:36,570
So that’s kind of the base of breakdown.

521
00:27:37,140 –> 00:27:41,490
And I think that exercise reflects
there’s a target profit number that you’re

522
00:27:41,490 –> 00:27:43,740
trying to get to. You just said 20 to 25%.

523
00:27:44,310 –> 00:27:45,930
That could change depending
on all kinds of things.

524
00:27:45,930 –> 00:27:48,450
It could have changed depending on the
way that businesses in your sector are

525
00:27:48,450 –> 00:27:50,190
valued. It could change
depending on your goals,

526
00:27:50,520 –> 00:27:54,510
depending on the cash intensivity of
the business, the cost of capital,

527
00:27:54,510 –> 00:27:56,370
there’s all kinds of things
that could affect that.

528
00:27:56,430 –> 00:28:00,090
It could change just because of what you
want in life. And that’s fine. Totally.

529
00:28:01,470 –> 00:28:02,760
When I talk about this, to me,

530
00:28:02,760 –> 00:28:06,870
it’s not about me saying necessarily
what I think good is in this case because

531
00:28:06,870 –> 00:28:08,850
it’s just going to change for
different people depending on goals.

532
00:28:09,510 –> 00:28:13,410
I could tell you what I think how these
brands are valued in the m and a market.

533
00:28:13,410 –> 00:28:14,370
I have thoughts about that,

534
00:28:14,370 –> 00:28:17,640
but then even how much you care about
that is your own question and when you

535
00:28:17,640 –> 00:28:20,640
want to sell and all those things. So
there’s all of these other factors that do

536
00:28:20,640 –> 00:28:22,260
that, but then you just kind
of work back from there.

537
00:28:22,260 –> 00:28:23,940
Here’s the profit number
we’re trying to hit to.

538
00:28:24,300 –> 00:28:27,690
Maybe you have for yourself some kind
of a revenue goal that ladders down to a

539
00:28:27,690 –> 00:28:31,020
profit goal that ladders down to your
take home that you want or a valuation

540
00:28:31,020 –> 00:28:32,880
that you want or something
like that. So you say, okay,

541
00:28:32,880 –> 00:28:34,710
I need to hit this profit number,

542
00:28:34,980 –> 00:28:37,410
which means I need to get to this
revenue number. And then from there,

543
00:28:37,650 –> 00:28:41,190
you just add in your costs. And this
is the thing for e-commerce brands,

544
00:28:42,600 –> 00:28:46,590
you have to play that exact same
game. And I’ll say for most of them,

545
00:28:46,650 –> 00:28:49,980
that EBITDA number probably
ought to be at least 10 to 20%.

546
00:28:52,380 –> 00:28:54,930
Now, again, with the caveat
of everything I just said,

547
00:28:54,930 –> 00:28:58,920
which is in some ways it’s up to
you, but for it to be valued highly,

548
00:28:59,250 –> 00:29:01,410
if that’s what you’re aiming at,
if enterprise value is your goal,

549
00:29:01,710 –> 00:29:03,660
probably somewhere around there
while the business is growing,

550
00:29:05,740 –> 00:29:09,270
and then now you’ve got to think
about how you break down your costs,

551
00:29:09,270 –> 00:29:11,730
very similar to what you just
did, Brett, for the agency.

552
00:29:12,390 –> 00:29:15,270
So I don’t know if you want me to go
sort of section by section and talk about

553
00:29:15,270 –> 00:29:16,980
what I think the costs ought to
be, then we could talk about it.

554
00:29:16,980 –> 00:29:18,600
But this is where it varies a lot in.

555
00:29:18,600 –> 00:29:22,110
Categories. I love that, and I did skip
a very important step. It’s like, okay,

556
00:29:22,380 –> 00:29:25,800
we have very specific goals about what
do we want our total profits to be for

557
00:29:25,800 –> 00:29:28,170
this year, and as we grow and
as we do some acquisitions,

558
00:29:28,170 –> 00:29:31,290
what do we want the overall
OMG platform to look at?

559
00:29:31,290 –> 00:29:32,970
So you do start there and top line goals,

560
00:29:32,970 –> 00:29:36,030
and then you back into all those
get all percentages. But yeah,

561
00:29:36,180 –> 00:29:40,410
let’s break it down. So what should
this look like for an e-commerce brand?

562
00:29:40,530 –> 00:29:41,830
How am I structuring my p and l?

563
00:29:42,520 –> 00:29:47,500
Yeah, so the starting point
for this conversation is if you

564
00:29:47,500 –> 00:29:49,300
think about the notion,

565
00:29:49,360 –> 00:29:52,300
Taylor Holiday four quarter accounting
is a helpful way of framing this.

566
00:29:53,050 –> 00:29:56,830
There are four sections after
revenue on your p and l.

567
00:29:57,010 –> 00:30:01,840
So it’s cost of delivery, CAC and opex,

568
00:30:01,840 –> 00:30:04,150
and then profit. Those are the four
sections of your p and l, okay?

569
00:30:04,300 –> 00:30:06,730
Cost of delivery includes every variable
cost associated with getting your

570
00:30:06,730 –> 00:30:07,660
product to a customer.

571
00:30:07,990 –> 00:30:11,470
CAC is every ad dollar or marketing
dollar that gets deployed.

572
00:30:11,710 –> 00:30:13,450
OPEX is every fixed cost in your business,

573
00:30:13,450 –> 00:30:16,180
which is mostly people and
an e-commerce business.

574
00:30:16,480 –> 00:30:19,990
And then profit is left leftover.
So let’s work backwards. Okay,

575
00:30:19,990 –> 00:30:21,820
so profit obviously the number
you’re trying to aim at.

576
00:30:22,600 –> 00:30:25,810
So one of the things that should be
happening in e-commerce business,

577
00:30:25,810 –> 00:30:27,310
basically no matter your sector,

578
00:30:27,310 –> 00:30:31,540
and I think this is the thing that is
the most true across every category,

579
00:30:32,740 –> 00:30:36,880
is that your opex is a percentage of
your revenue should be pretty low.

580
00:30:36,880 –> 00:30:39,550
And it is amazing to me how
high this number still is.

581
00:30:39,550 –> 00:30:43,960
But one of the fundamental advantages
of e-commerce is that it scales really

582
00:30:43,960 –> 00:30:47,050
well relative the number of heads you
have and even cost of those heads.

583
00:30:47,260 –> 00:30:49,630
Opposite of agencies. But yes,
it’s very true for e-commerce.

584
00:30:49,630 –> 00:30:53,920
Opposite of agencies. So
as a simple heuristic here,

585
00:30:54,100 –> 00:30:57,130
your total fixed costs is the percentage
of your revenue as you grow in

586
00:30:57,130 –> 00:30:59,260
particular ought to be less than 15%.

587
00:31:00,820 –> 00:31:03,790
So essentially that means if you
have a million dollars in revenue,

588
00:31:03,880 –> 00:31:07,510
your total cost of all opex including
salaries ought to be $150,000 or less.

589
00:31:07,510 –> 00:31:08,650
Now at a million dollars,

590
00:31:08,650 –> 00:31:11,170
it’s pretty hard to hit that number
because you have not actually scaled yet.

591
00:31:11,470 –> 00:31:12,520
But the more you scale,

592
00:31:12,520 –> 00:31:14,860
the more you obviously that
percentage come down because,

593
00:31:14,860 –> 00:31:17,950
and the simple reality that happens in
every part of an e-commerce business,

594
00:31:17,980 –> 00:31:21,310
the illustration I use all the time
is that it costs basically, well,

595
00:31:21,310 –> 00:31:25,060
it costs the exact same amount of money
to design an email that you send to a

596
00:31:25,060 –> 00:31:27,520
thousand people versus that
you send to a million people.

597
00:31:27,550 –> 00:31:30,370
The design costs are literally
dollar for dollar the same.

598
00:31:30,550 –> 00:31:33,790
You got to pay Klaviyo a little more
money between those two, but otherwise,

599
00:31:33,790 –> 00:31:35,500
all of the other costs are
pretty much exactly the same.

600
00:31:36,280 –> 00:31:40,600
And so that means that the percentage
of your cost of people goes down a whole

601
00:31:40,600 –> 00:31:45,010
bunch. If you add in the ability
with AI now and with offshoring,

602
00:31:45,010 –> 00:31:47,650
which I’m a huge believer
and proponent in my team,

603
00:31:47,650 –> 00:31:49,420
I mentioned there’s seven or
eight of us in the Philippines,

604
00:31:49,900 –> 00:31:51,490
they’re incredible
contributors to my team.

605
00:31:51,490 –> 00:31:53,410
I don’t think of them as
separate or something like that.

606
00:31:53,740 –> 00:31:55,720
Totally. They’re pure team members.

607
00:31:57,430 –> 00:32:01,300
And they are killers,

608
00:32:01,300 –> 00:32:05,650
and I can get access very high
quality talent in the Philippines

609
00:32:06,190 –> 00:32:09,490
for much less money than I can access
that talent in the US equivalent talent

610
00:32:10,180 –> 00:32:12,520
because of the differences in the
economies and some of those things.

611
00:32:12,790 –> 00:32:16,420
It’s a win-win. So if you add
those two things together,

612
00:32:16,450 –> 00:32:19,000
now you have talked about
shrinking your opex even more,

613
00:32:19,000 –> 00:32:22,570
and you can be really best in class here
and get that number under 10% and maybe

614
00:32:22,570 –> 00:32:23,860
even lower. I’ve heard about,

615
00:32:23,860 –> 00:32:26,110
I think Zach Stocks has talked
about publicly somewhere that,

616
00:32:27,160 –> 00:32:28,240
or maybe that maybe I heard Marketing.

617
00:32:28,240 –> 00:32:29,470
Operators, what brand does he run?

618
00:32:29,560 –> 00:32:34,300
Hollo socks, Zach, some people know him
and he had started Homestead agency,

619
00:32:34,660 –> 00:32:34,930
some other.

620
00:32:34,930 –> 00:32:36,100
Brands as well. Great agency. Yeah.

621
00:32:36,970 –> 00:32:38,980
So Zach was talking,

622
00:32:38,990 –> 00:32:41,720
I think on marketing operators that
his brand is like five or 6 million in

623
00:32:41,720 –> 00:32:46,460
revenue per head, which is crazy.
That’s wild. That is a very,

624
00:32:46,460 –> 00:32:49,430
very lean opex. So that
is the number one thing.

625
00:32:49,430 –> 00:32:51,680
And I think a lot of brands
actually are still sucking.

626
00:32:51,680 –> 00:32:53,750
They’re just paying too
much money for people.

627
00:32:54,530 –> 00:32:57,230
I recently had Ben Perkins on
from Ann Call on my podcast.

628
00:32:57,230 –> 00:33:01,430
He was at $15 million in revenue
and was drowning in debt.

629
00:33:01,430 –> 00:33:03,290
He had taken some inventory based loans,

630
00:33:03,620 –> 00:33:08,600
was paying $65,000 a week in loan
repayments and trying to figure out how

631
00:33:08,600 –> 00:33:09,170
to stay afloat.

632
00:33:09,170 –> 00:33:11,930
He had $3 million in debt against
10 million in revenue at one point,

633
00:33:12,590 –> 00:33:15,380
which is not really workable
in a lot of e-commerce brands.

634
00:33:15,950 –> 00:33:20,810
So he started smashing all of the
costs that he could in his business.

635
00:33:20,810 –> 00:33:24,500
He ended up cutting half of his labor
and discovered something which was that

636
00:33:25,520 –> 00:33:26,720
the business did not change.

637
00:33:27,350 –> 00:33:28,183
Nothing happened, right?

638
00:33:28,940 –> 00:33:30,170
If anything, it got smoother.

639
00:33:30,170 –> 00:33:34,010
And Ben is clear and gracious
to say that’s not necessarily
because those people

640
00:33:34,010 –> 00:33:35,360
were either bad or not working hard.

641
00:33:35,600 –> 00:33:38,660
Part of it’s because managing
people is very hard and he.

642
00:33:38,660 –> 00:33:38,990
Wasn’t.

643
00:33:38,990 –> 00:33:42,620
Great at managing them hundred
percent. And so he had made bad hires,

644
00:33:42,620 –> 00:33:44,360
he had not managed them
well, all those things.

645
00:33:45,890 –> 00:33:46,940
But he found that by being leaner,

646
00:33:46,940 –> 00:33:50,570
and I just think so many brands can be
leaner. So that’s number’s number one’s.

647
00:33:50,930 –> 00:33:54,200
Also software of analogy on
this that I think it hits.

648
00:33:54,200 –> 00:33:58,850
It’s like is meta or YouTube incremental
for your business? Well, it should be,

649
00:33:58,880 –> 00:34:00,950
but you could be screwing it up
and if you’re screwing it up,

650
00:34:00,950 –> 00:34:02,450
it might not be incremental at all.

651
00:34:02,460 –> 00:34:02,720
That’s right. That’s.

652
00:34:02,720 –> 00:34:05,750
Right. I think it’s the same with
people. They’re not bad people.

653
00:34:05,750 –> 00:34:08,330
Maybe they’re working really hard,
maybe they care, maybe all those things,

654
00:34:08,330 –> 00:34:11,060
but maybe you’ve just got the structure
incorrect or you’re managing ’em

655
00:34:11,060 –> 00:34:14,840
incorrectly or you just don’t need ’em.
And so they’re busting their tails,

656
00:34:14,840 –> 00:34:18,860
but actually it’s not writing
incremental value to you. And so yeah,

657
00:34:18,860 –> 00:34:19,693
Ben talked about that.

658
00:34:20,030 –> 00:34:24,770
His solution to the problem was to create
a personal p and l for every one of

659
00:34:24,770 –> 00:34:25,520
his.

660
00:34:25,520 –> 00:34:26,270
Employees.

661
00:34:26,270 –> 00:34:28,100
So basically to answer this question,

662
00:34:28,190 –> 00:34:30,530
is this person generating incremental
value in the business and here’s how we’re

663
00:34:30,530 –> 00:34:31,363
going to measure it.

664
00:34:31,910 –> 00:34:33,980
And he said some of them did not
want to partake in the exercise,

665
00:34:33,980 –> 00:34:37,400
so he offered them a gracious
severance and they left.

666
00:34:38,270 –> 00:34:40,520
And then the other ones who
were willing to participate,

667
00:34:40,520 –> 00:34:42,800
it turns out they were driving a whole
bunch of value as measured on a p and l,

668
00:34:42,800 –> 00:34:44,270
so he did the exact thing he.

669
00:34:44,480 –> 00:34:45,500
Just said. Interesting.

670
00:34:45,560 –> 00:34:47,420
Yeah, I thought it was brilliant.

671
00:34:48,890 –> 00:34:50,990
So we’re driving down our opex.
Can’t underscore that enough,

672
00:34:50,990 –> 00:34:53,600
especially in e-commerce. Drive
down that opex, okay, what’s.

673
00:34:53,600 –> 00:34:53,960
Next?

674
00:34:53,960 –> 00:34:57,470
It’s so fundamental to what makes make
an e-commerce business work and people

675
00:34:57,470 –> 00:34:58,820
need to be really clear about that.

676
00:34:58,820 –> 00:35:00,770
Software bloat is the other
thing to watch out for. There.

677
00:35:01,070 –> 00:35:01,400
Typically.

678
00:35:01,400 –> 00:35:03,200
Not as expensive as people,
but it can get expensive.

679
00:35:03,740 –> 00:35:06,320
People just have too many things to
the chasing shiny object syndrome.

680
00:35:06,710 –> 00:35:08,330
You don’t need to do that for a while.

681
00:35:08,330 –> 00:35:11,360
So opex should be shrinking as
a percentage of revenue. Again,

682
00:35:11,390 –> 00:35:14,930
in a forecast you should
see as my revenue now.

683
00:35:15,140 –> 00:35:19,340
So if you forecast up 1 million to
5 million to 10 million in revenue,

684
00:35:19,340 –> 00:35:20,750
whatever that growth rate is,

685
00:35:21,230 –> 00:35:24,440
you should be seeing that you’re
hiring is not going linearly with that,

686
00:35:24,620 –> 00:35:28,280
but that people are now
able to create, again,

687
00:35:28,460 –> 00:35:30,050
have operating leverage in their people,

688
00:35:30,230 –> 00:35:32,990
which is to say they
generate additional value,

689
00:35:33,020 –> 00:35:35,660
not just the same amount of
value as before. And so you
got to keep hiring them.

690
00:35:36,290 –> 00:35:38,760
Again, very different than an
agency to service the revenue.

691
00:35:38,760 –> 00:35:41,460
You have to keep hiring. Okay, exactly.

692
00:35:43,380 –> 00:35:48,300
So that’s the starting point. Okay. Then
you get into CAC and cost of delivery.

693
00:35:48,300 –> 00:35:51,660
Now this is where you’re going to
have more variation across different

694
00:35:51,660 –> 00:35:52,493
industries.

695
00:35:52,560 –> 00:35:56,370
So apparel businesses are going to
function in both of these regards really

696
00:35:56,370 –> 00:35:58,530
differently than supplement
businesses, than beauty businesses,

697
00:35:58,830 –> 00:36:01,170
than food and Bev.

698
00:36:01,440 –> 00:36:04,890
All of these things are going to
have just home goods, whatever.

699
00:36:05,700 –> 00:36:08,310
And so this is where you get to
all kinds of different setups.

700
00:36:09,300 –> 00:36:13,080
What I will say about this is more that,
so if you want to say best in class,

701
00:36:13,080 –> 00:36:14,730
let you just want a heuristic here.

702
00:36:15,360 –> 00:36:19,350
If you say 15% opex or lower,

703
00:36:19,620 –> 00:36:23,700
30% CAC or lower in your business,
so your total spend is 30%.

704
00:36:23,700 –> 00:36:28,680
So I’m spending a third of my revenue
basically on marketing or on customer

705
00:36:28,770 –> 00:36:29,370
acquisition.

706
00:36:29,370 –> 00:36:29,790
Correct? On.

707
00:36:29,790 –> 00:36:30,270
Marketing.

708
00:36:30,270 –> 00:36:33,810
30% In cost of goods,
okay, cost of delivery,

709
00:36:33,810 –> 00:36:36,900
totally delivered to the
customer. Right? Now you’ve got.

710
00:36:36,900 –> 00:36:39,210
That’s cogs, that’s shipping,
that’s cost of fulfillment.

711
00:36:39,210 –> 00:36:41,370
Costs, merchant account fees.

712
00:36:41,550 –> 00:36:42,510
Refunds, all.

713
00:36:42,510 –> 00:36:45,420
Those things. The 3% you have to pay
Shopify and credit card companies,

714
00:36:46,110 –> 00:36:46,950
everything in there.

715
00:36:48,390 –> 00:36:52,200
The dollar 50 or three PL is going to
charge you for fulfillment costs per

716
00:36:52,200 –> 00:36:56,280
order, plus any pick and pack. There’s
all of these little things that come up.

717
00:36:56,460 –> 00:36:57,900
The cost of ordering the product,

718
00:36:58,260 –> 00:37:01,560
getting it from essentially from
your manufacturer to the customer.

719
00:37:01,590 –> 00:37:05,070
That whole journey
represents all these costs.

720
00:37:05,610 –> 00:37:09,960
If you can get that to 30% as
well, now you’ve got 30% COD,

721
00:37:10,170 –> 00:37:13,920
cost of delivery, 30% cac, that’s
60% of our money is going out there,

722
00:37:14,190 –> 00:37:17,640
15% opex, and now you have 15%
leftover. Did I do that right now?

723
00:37:17,650 –> 00:37:20,670
Now you have 25% leftover,
you did 5% leftover.

724
00:37:20,910 –> 00:37:23,490
That would be super best in
class, be amazing, 25% left.

725
00:37:24,300 –> 00:37:28,560
The reality is most businesses
do not have that much margin at

726
00:37:28,560 –> 00:37:32,520
30% total, and they’re not
running their CAC at 30%,

727
00:37:32,700 –> 00:37:37,080
but if you want to know why there are
so many supplement businesses in because

728
00:37:37,080 –> 00:37:38,340
they can do both of those things,

729
00:37:39,570 –> 00:37:43,410
they uniquely are able to do this.
Their CAC shrinks as a percentage of their

730
00:37:43,410 –> 00:37:46,500
revenue over time because customers come
back so much that returning customers

731
00:37:46,650 –> 00:37:49,890
make up a larger and larger percentage
of their revenue pool. By the way,

732
00:37:49,890 –> 00:37:53,690
there’s some similar dynamics
in skincare. The product beauty,

733
00:37:54,130 –> 00:37:56,040
the cost of creating the
product is very cheap.

734
00:37:56,340 –> 00:37:58,860
The cost of shipping the product is cheap.

735
00:37:59,070 –> 00:38:01,230
All of those things come together and
you can charge a good amount of money and

736
00:38:01,230 –> 00:38:03,120
get AOVs to 70 or a hundred
dollars or whatever it is,

737
00:38:03,120 –> 00:38:04,290
which can be helpful as well.

738
00:38:04,620 –> 00:38:06,750
You put all that together and you can
run a really high margin business.

739
00:38:06,750 –> 00:38:08,040
The truth is for most brands,

740
00:38:08,040 –> 00:38:10,980
they’re going to actually be spending
more somewhere. And the question is where,

741
00:38:12,570 –> 00:38:15,930
so for a lot of brands, if you
can get even two 60 points,

742
00:38:15,960 –> 00:38:20,760
or if you add 10 more points
of cost to your cost of

743
00:38:20,760 –> 00:38:23,340
delivery, 30% to 40%,

744
00:38:23,670 –> 00:38:27,420
that’s probably more realistic for
where a lot of brands end up in a lot of

745
00:38:27,420 –> 00:38:27,810
cases.

746
00:38:27,810 –> 00:38:31,080
And now you’ve got 15% profit margin and
that’s still a really healthy business,

747
00:38:31,300 –> 00:38:31,570
something like that.

748
00:38:31,570 –> 00:38:32,403
Still a great business.

749
00:38:32,430 –> 00:38:36,220
Or you have someone like Sean from the
Ridge who I think he said he spends about

750
00:38:36,220 –> 00:38:38,360
40% on cac, right? So then this.

751
00:38:38,360 –> 00:38:38,930
I going to points.

752
00:38:38,930 –> 00:38:39,010
To.

753
00:38:39,010 –> 00:38:40,240
That side. This is another way to do it,

754
00:38:40,240 –> 00:38:42,400
which is I have a brand that
does something very similar,

755
00:38:42,400 –> 00:38:45,310
which is they have extremely high
margin and they want to grow.

756
00:38:45,310 –> 00:38:45,880
So what do they do?

757
00:38:45,880 –> 00:38:49,870
They turn around and they plow money
into ads and they’re like, We are just

758
00:38:49,870 –> 00:38:54,310
going to push our growth really
hard on ads, and by doing that,

759
00:38:54,310 –> 00:38:56,950
we’re going to be really profitable and
by staying lean at the same time with

760
00:38:56,950 –> 00:38:59,920
our team, we’re going to be really,
really profitable. So now, yeah,

761
00:38:59,980 –> 00:39:04,300
they run like 40% cac, 30% or
less cost of delivery and yeah,

762
00:39:04,300 –> 00:39:07,900
15% or less opex, and they’re
running it like a 15% margin as well.

763
00:39:07,900 –> 00:39:11,860
If everything goes awesome, still a
great business. If everything is awesome,

764
00:39:12,130 –> 00:39:14,680
then there’s some places where they
can find some help on all of those.

765
00:39:14,680 –> 00:39:16,630
They’re hammering away out their
cost of delivery all the time.

766
00:39:17,260 –> 00:39:19,450
In any of those cases, you
can have a strategy. Now,

767
00:39:19,450 –> 00:39:23,320
there’s exceptions to those
rules too. We mentioned simple,

768
00:39:23,320 –> 00:39:27,700
modern earlier as an
example of this, and simple,

769
00:39:27,700 –> 00:39:29,710
modern did not start off
first of all to DTC brand.

770
00:39:29,710 –> 00:39:30,970
They started off as an Amazon brand.

771
00:39:30,970 –> 00:39:34,180
Amazon brand, and that’s important.
We’ve seen so many of those, by the way,

772
00:39:34,180 –> 00:39:38,920
so many born on Amazon brands, and when
they try to make that transition to DTC,

773
00:39:39,220 –> 00:39:42,040
it’s so hard because the
math is all different.

774
00:39:42,700 –> 00:39:47,170
Amazon is a demand capture platform
and it’s razor thin margins,

775
00:39:47,170 –> 00:39:49,930
but all the traffic is there and that
sets what you’re capitalizing on.

776
00:39:50,350 –> 00:39:53,830
It’s not really demand gen proposition
there. And so it makes it very.

777
00:39:53,830 –> 00:39:56,410
Difficult and in competitive
categories on Amazon,

778
00:39:56,410 –> 00:40:00,490
being able to be priced cheaper
is a really big advantage.

779
00:40:01,360 –> 00:40:03,250
That’s basically a marketing
play, right? There is usually.

780
00:40:03,250 –> 00:40:03,970
Price.

781
00:40:03,970 –> 00:40:06,670
So the simple modern guys tested five
different products when they launched on

782
00:40:06,670 –> 00:40:09,100
Amazon, all within trends that
they thought were taking off.

783
00:40:09,310 –> 00:40:11,770
It is super genius when you
listen to what they started with.

784
00:40:12,490 –> 00:40:17,020
They’re brilliant dudes. Brian Porter
alongside Mike Beckham. Brian is there.

785
00:40:17,920 –> 00:40:20,140
I know Brian well, and you
admire Mike. Yeah, he’s great.

786
00:40:20,200 –> 00:40:20,830
Yeah,

787
00:40:20,830 –> 00:40:25,750
both fantastic people and
just killers and the softest,

788
00:40:26,770 –> 00:40:31,240
gentlest, kindest killers met.
Yes, gentle killers. But Brian,

789
00:40:31,510 –> 00:40:34,090
he talks about the early days and it’s
really helpful to think about this

790
00:40:34,090 –> 00:40:37,060
through a p and l lens because what
they did was they said like, okay,

791
00:40:37,060 –> 00:40:39,280
we’re going to price
cheaper with drinkware,

792
00:40:39,580 –> 00:40:42,190
with stainless insulated
drinkware than other people are,

793
00:40:42,340 –> 00:40:45,400
and we’re going to create more variant
options than what is currently available.

794
00:40:45,400 –> 00:40:48,100
Because if you think about the
legacy players in that space,

795
00:40:48,100 –> 00:40:50,770
the Yeti Hydro flask, they
built for mass retail,

796
00:40:51,070 –> 00:40:54,160
and so their business was
tuned for mass retail first,

797
00:40:54,250 –> 00:40:58,480
and that meant pricing
strategy, product skew strategy.

798
00:40:58,480 –> 00:40:59,650
All these things were built for that.

799
00:40:59,710 –> 00:41:02,920
Black, white and blue and maybe
red. That’s all I can afford to do.

800
00:41:03,040 –> 00:41:04,660
I got to send that everywhere in retail.

801
00:41:05,020 –> 00:41:07,750
Right? And so they said,
we can create more options.

802
00:41:10,670 –> 00:41:12,880
People like to accessorize
with their water bottles,

803
00:41:12,880 –> 00:41:15,250
and so I can create more options at a
lower price and a really great product.

804
00:41:15,460 –> 00:41:16,360
The net result of that,

805
00:41:16,360 –> 00:41:19,690
and this is the p and l implication that
I think is helpful to think about is

806
00:41:19,690 –> 00:41:21,730
that they have, and they’ve
been public about this,

807
00:41:21,730 –> 00:41:26,200
but I don’t mind saying it like
30% margin. So at a DTC level,

808
00:41:26,200 –> 00:41:27,970
it’s like 60 to 70%,

809
00:41:28,120 –> 00:41:32,380
I think closer to 70% of their
revenue immediately goes out the door.

810
00:41:32,380 –> 00:41:36,290
Maybe 65% of their revenue immediately
goes out the door to product costs and

811
00:41:36,290 –> 00:41:37,730
cost of delivery, getting
it to the customer.

812
00:41:37,940 –> 00:41:39,890
So they only have 35
points of margin leftover,

813
00:41:39,890 –> 00:41:42,570
which blows up the entire paradigm
I just told you about, right?

814
00:41:42,830 –> 00:41:43,220
Right.

815
00:41:43,220 –> 00:41:46,280
Yeah. But it’s because it
was a channel strategy,

816
00:41:47,610 –> 00:41:51,020
which was to start Amazon first
and then DTC came in after that.

817
00:41:51,020 –> 00:41:53,810
And this is why, like you
said, some brands really
struggle to go the other way,

818
00:41:53,960 –> 00:41:58,460
and this is where sometimes there is
an issue here with product channel or

819
00:41:58,460 –> 00:42:01,940
product business model fit,
Where you have the right idea,

820
00:42:01,940 –> 00:42:04,520
but you’re just in the
wrong channel for it,

821
00:42:04,520 –> 00:42:08,270
and you need to change the whole business
model to match the channel that you

822
00:42:08,270 –> 00:42:09,770
are in. And I think this
is actually a problem.

823
00:42:09,770 –> 00:42:13,940
I operated a business like the SE four
400 where we just needed to be a mass

824
00:42:13,940 –> 00:42:17,420
retail business because the math didn’t
work very well for us. We had low LTV,

825
00:42:17,900 –> 00:42:19,070
it was very expensive to ship,

826
00:42:19,400 –> 00:42:22,940
and it was just really hard for us to
make the math work as a DTC brand. Now,

827
00:42:22,970 –> 00:42:23,803
eventually,

828
00:42:23,840 –> 00:42:26,420
simple modern of course now has a
really good DTC business as well because

829
00:42:26,420 –> 00:42:27,080
they’re really big.

830
00:42:27,080 –> 00:42:29,660
And so they’ve been able to generate so
much awareness and all those things that

831
00:42:29,660 –> 00:42:31,550
they can make it work, but
it wasn’t their lead channel.

832
00:42:32,090 –> 00:42:36,470
And I just think it’s
helpful to understand that
there’s reasons for that. And

833
00:42:36,470 –> 00:42:39,290
when they went and launched
a hydration pack brand,

834
00:42:39,890 –> 00:42:44,540
they’re doing that DTC first with a
potential mass retail output eventually

835
00:42:44,780 –> 00:42:49,760
because that product makes way
more sense on the channel in

836
00:42:49,760 –> 00:42:51,500
all of the things that
I just laid out before.

837
00:42:51,740 –> 00:42:53,990
And so brands need to get really
serious about, wait a minute,

838
00:42:53,990 –> 00:42:55,340
if I have low margin,

839
00:42:56,000 –> 00:43:00,950
let’s say I end up with 50%
margin leftover after my cost

840
00:43:00,950 –> 00:43:04,250
of delivery or 45% my
cost of delivery, gosh,

841
00:43:04,250 –> 00:43:06,320
DTC is going to be an uphill slog.

842
00:43:06,380 –> 00:43:10,670
There better be a reason that I
think I can do it. And there may be,

843
00:43:10,880 –> 00:43:14,510
may be because you have some pricing
strategy that gives you some unique

844
00:43:14,510 –> 00:43:18,170
advantage of, I don’t know. But there
would be ways to do it. But yeah,

845
00:43:18,170 –> 00:43:22,130
I think that’s the thing that people
need to get really clear about is how is

846
00:43:22,130 –> 00:43:26,900
their approach to their margin profile
fitting with the channel? And if so,

847
00:43:27,500 –> 00:43:30,260
because my friend Kelsey Lyric
and I have debated about this,

848
00:43:30,260 –> 00:43:33,470
but I think it changes the whole model
of the business. The business model,

849
00:43:33,650 –> 00:43:37,580
if you don’t have product channel fit in
quite that way and you have to think it

850
00:43:37,580 –> 00:43:40,160
very differently about nearly all of
it. The moment you go to mass retail,

851
00:43:40,730 –> 00:43:43,190
the amount of heads you have and
the amount your shipping works,

852
00:43:43,190 –> 00:43:44,090
all that stuff changes.

853
00:43:44,390 –> 00:43:46,520
So sales commissions and all
these different kinds of things.

854
00:43:47,240 –> 00:43:51,020
Your margin profile has to fit
your core channel or channels.

855
00:43:51,200 –> 00:43:52,400
That’s really important.

856
00:43:52,400 –> 00:43:56,270
I think that’s something that not a lot
of people think about in the early days

857
00:43:56,900 –> 00:43:58,910
especially, but it’s something you
need to think about as you’re grown,

858
00:43:58,910 –> 00:44:01,280
as you scale. So let’s do this, Andrew.

859
00:44:01,700 –> 00:44:05,540
Let’s talk about how are we projecting,

860
00:44:05,540 –> 00:44:08,570
how are we predicting, how are we
pivoting along the way as we go?

861
00:44:08,570 –> 00:44:12,650
So we’ve kind of talked about these
numbers. Obviously if we’re out of whack,

862
00:44:12,950 –> 00:44:14,090
there better be a reason for it.

863
00:44:14,330 –> 00:44:16,640
We’ll be able to make that
work on our channels. If not,

864
00:44:16,640 –> 00:44:18,440
we’re going to need to start
making some adjustments, some cuts,

865
00:44:18,440 –> 00:44:19,100
things like that.

866
00:44:19,100 –> 00:44:23,300
And you may have another note there
before we talk about projections. Yeah.

867
00:44:23,300 –> 00:44:28,010
Okay, cool. So then how are
we looking at projections?

868
00:44:28,250 –> 00:44:31,920
And again, to use the Moneyball
example, how are we taking data,

869
00:44:31,920 –> 00:44:36,480
this p and l that we’re looking at
and using it to make decisions and

870
00:44:36,540 –> 00:44:40,050
operate our business so that we
actually hit those profit targets?

871
00:44:40,560 –> 00:44:42,480
So what ends up happening,
if you do this exercise,

872
00:44:42,480 –> 00:44:46,080
if you forecast all of the parts of the
p and l that I just said over a period

873
00:44:46,080 –> 00:44:49,350
of months or years or whatever
it is, something will happen,

874
00:44:49,350 –> 00:44:52,860
which is that the numbers will be thrown
in your face in a way that will tell

875
00:44:52,860 –> 00:44:54,120
you if you are somewhere or not.

876
00:44:54,780 –> 00:44:58,500
And then their question is if you
are close or if you’re somewhere,

877
00:44:58,500 –> 00:45:00,570
let’s say you get that and
you’re like, Ooh, we’re at 5%,

878
00:45:00,720 –> 00:45:03,660
and if things go wrong, 5%
profit, and if that goes wrong,

879
00:45:03,930 –> 00:45:05,670
that takes us down to zero,
that takes us down to whatever.

880
00:45:08,550 –> 00:45:11,220
Then you have to start thinking about
what is the solution to this problem?

881
00:45:12,120 –> 00:45:15,480
Do I need to just grow faster so that
my opex becomes lower as percentage of

882
00:45:15,480 –> 00:45:19,680
revenue? Do I need to fire people? Do I
need to go negotiate my manufacturing?

883
00:45:19,680 –> 00:45:20,850
I have a little theory right now,

884
00:45:21,000 –> 00:45:23,940
which is the supply chains are the
most underoptimized part of e-commerce

885
00:45:23,940 –> 00:45:24,210
businesses.

886
00:45:24,210 –> 00:45:26,520
Totally agree. Nobody got to
in the past, didn’t need to,

887
00:45:27,540 –> 00:45:28,470
didn’t feel like we needed.

888
00:45:28,470 –> 00:45:31,500
To. And it’s a lot to do. It’s hard.

889
00:45:31,770 –> 00:45:32,603
There’s a lot to do.

890
00:45:32,670 –> 00:45:33,503
Exactly.

891
00:45:33,660 –> 00:45:36,360
Somebody like me gets on a podcast like
this and tells you another thing to

892
00:45:36,360 –> 00:45:40,260
think about and listen, there’s 70
podcasts like this that are new.

893
00:45:40,320 –> 00:45:42,690
There’s probably way more than that.
There’s probably 500 podcasts like this,

894
00:45:42,690 –> 00:45:43,980
all of ’em with people
telling you what to do,

895
00:45:44,820 –> 00:45:47,400
it becomes really challenging
to stay on top of all of it.

896
00:45:48,360 –> 00:45:50,280
And so anyway,

897
00:45:50,880 –> 00:45:54,060
we went through I think the marketing
revolution in e-commerce where people got

898
00:45:54,060 –> 00:45:56,400
really early on, that was
a big part of the thing.

899
00:45:56,670 –> 00:45:58,230
Finance revolution has been happening.

900
00:45:58,230 –> 00:46:00,150
More and more brands recognize
they need to be profitable.

901
00:46:00,150 –> 00:46:02,370
They can’t just try to blitz scale. They
recognize their business is worthless,

902
00:46:02,460 –> 00:46:03,390
it’s not profitable.

903
00:46:03,660 –> 00:46:06,990
They’re listening to the finance operators
and following mates have and Drew and

904
00:46:06,990 –> 00:46:08,310
Taylor Holiday and people like that on X,

905
00:46:08,310 –> 00:46:11,520
and they’re getting their feet wet with
how to think about forecasting their

906
00:46:11,520 –> 00:46:13,740
business and some of the things I’m
talking about. But there’s another step

907
00:46:13,740 –> 00:46:15,690
next, which is like now, okay,

908
00:46:15,690 –> 00:46:18,540
how do you actually go negotiate a supply
chain and build your supply chain out

909
00:46:19,440 –> 00:46:21,870
and do those things in a way that
is actually good for the business?

910
00:46:21,870 –> 00:46:26,040
And I do think there’s a lot of bigger
wins there than people realize just by

911
00:46:26,040 –> 00:46:29,910
talking to more manufacturers,
negotiating with your three pl,

912
00:46:31,530 –> 00:46:34,950
there’s just a lot there. I
have brands who’ve done this,

913
00:46:35,460 –> 00:46:37,920
shout out to my friends at Move
Supply Chain, who they’ve worked with

914
00:46:39,420 –> 00:46:41,430
on this where it was like, wait a minute.

915
00:46:41,430 –> 00:46:44,490
We had this product that was
costing us $5 per unit to make.

916
00:46:44,550 –> 00:46:46,020
Now we got it down to two.

917
00:46:46,320 –> 00:46:48,810
And no customer has ever said a
word about it being different.

918
00:46:51,150 –> 00:46:52,350
It’s still good product.

919
00:46:52,350 –> 00:46:55,350
They just did a bunch of stuff to go
work somewhere else in the world and.

920
00:46:55,350 –> 00:46:58,080
Make 60% reduction in cogs. Huge.

921
00:46:58,500 –> 00:47:00,750
Gigantic impact on the business. Massive.

922
00:47:02,250 –> 00:47:04,350
And so there’s a bunch
of stories like that.

923
00:47:06,810 –> 00:47:10,470
So yeah, I just think that could be
where it is, where you go like, oh,

924
00:47:10,470 –> 00:47:12,660
we have to go manufacture something
different. I’ll tell you from my brand,

925
00:47:13,620 –> 00:47:18,000
my brand is in a category where the

926
00:47:18,390 –> 00:47:21,270
packaging is more expensive than
the product, than the actual.

927
00:47:21,270 –> 00:47:22,500
Product. Interesting, interesting.

928
00:47:22,500 –> 00:47:26,520
And so we are going to launch with prices
that we think are pretty decent at the

929
00:47:26,520 –> 00:47:30,520
level of cost of delivery, but right
away, I’m right away thinking, shopping.

930
00:47:30,520 –> 00:47:33,460
Additional manufacturers that actually
worked with that same company might move

931
00:47:33,460 –> 00:47:35,080
supply chain. They started with 60, so

932
00:47:36,910 –> 00:47:39,520
a 60 on product and 20 on packaging. So

933
00:47:41,530 –> 00:47:46,060
we already are somewhere on that.
We looked at a lot of manufacturers.

934
00:47:46,390 –> 00:47:48,040
But immediately I’m thinking about, okay,

935
00:47:50,500 –> 00:47:53,320
at what level do I get a price
break by ordering more of these?

936
00:47:53,320 –> 00:47:56,800
Do I need to go actually redesign the
packaging, the most expensive part of it?

937
00:47:56,800 –> 00:47:59,980
If I could shave two bucks off of
this, it’s probably worth doing.

938
00:48:00,430 –> 00:48:04,450
There’s a lot of questions like that that
come in because I know that everything

939
00:48:05,350 –> 00:48:07,450
in the business will get
smoother if I have more Martian.

940
00:48:08,050 –> 00:48:09,880
It’s just a superpower.
Totally. And so anyway,

941
00:48:09,910 –> 00:48:13,810
so you can play that out in your business
wherever it is. What are those giant

942
00:48:13,810 –> 00:48:17,710
costs that are just killing you? They’re
somewhere in your business probably.

943
00:48:17,980 –> 00:48:22,750
And you just start by saying, okay, what
is the place that I try to go to next?

944
00:48:22,750 –> 00:48:25,720
Look at it with somebody smart, got
a coach. If you need some input,

945
00:48:26,080 –> 00:48:28,120
somebody can probably look
at that with you and say,

946
00:48:29,110 –> 00:48:30,910
if you’ve been in your business
for four years and you’re like,

947
00:48:30,970 –> 00:48:34,660
I have had ideas, then
you can do those things.

948
00:48:34,660 –> 00:48:37,990
But people will have ways to go and
say, Hey, have you looked into this?

949
00:48:37,990 –> 00:48:40,690
Have you considered that?
Have you thought about, Hey,

950
00:48:40,690 –> 00:48:42,040
your air shipping stuff all the time?

951
00:48:42,040 –> 00:48:44,860
Stop doing that because your
forecasting is bad. You’re behind.

952
00:48:44,860 –> 00:48:47,860
You need to get back to ocean freight.
That’s a big whatever, whatever.

953
00:48:47,860 –> 00:48:50,920
There’s all kinds of things like that
in every business because it’s hard.

954
00:48:51,040 –> 00:48:55,210
And so you could start kind of hammering
away doing that forecasting exercise.

955
00:48:55,450 –> 00:48:57,130
We’ll start to surface
those things for you.

956
00:48:58,090 –> 00:48:58,480
I love it.

957
00:48:58,480 –> 00:49:00,880
And it’s one of those things too that
with all the tariff madness that’s going

958
00:49:00,880 –> 00:49:02,560
on right now at the time of recording,

959
00:49:02,890 –> 00:49:06,130
it’s forcing people to look at
different locations for manufacturing,

960
00:49:06,130 –> 00:49:08,860
different factories, different
ways of getting the product here.

961
00:49:09,190 –> 00:49:10,540
And I think in that process,

962
00:49:10,540 –> 00:49:13,690
even though that’s painful and not
something any of us want to be doing,

963
00:49:14,110 –> 00:49:16,720
you’re going to find opportunities in
there and you maybe going to shave off,

964
00:49:16,720 –> 00:49:19,210
you’re going to find five or 10 points
or 20 points or something like that.

965
00:49:19,240 –> 00:49:19,480
That would.

966
00:49:19,480 –> 00:49:22,000
Be, it could be a game changer for
your business or maybe you’re not.

967
00:49:22,000 –> 00:49:23,410
Maybe it’s going to be
a terrible experience,

968
00:49:23,410 –> 00:49:26,290
but you work towards that for sure.

969
00:49:27,310 –> 00:49:28,510
I have a theory really fast, Brett,

970
00:49:28,510 –> 00:49:32,020
that the upside of this whole thing is
that tariffs will be a forcing function

971
00:49:32,020 –> 00:49:34,690
for better supply chain creation for
people because they’re just going to have

972
00:49:34,690 –> 00:49:38,010
to, and that it’ll be, and that win for
some brands, not all brands. Totally.

973
00:49:38,150 –> 00:49:38,983
For some way.

974
00:49:39,700 –> 00:49:41,590
Yeah, it sort of relates.

975
00:49:41,590 –> 00:49:44,920
But if you look at the iOS 14 and just
all the madness that happened there,

976
00:49:44,920 –> 00:49:47,560
it forced us to be better
markers. We had to.

977
00:49:47,560 –> 00:49:50,200
And so I think it’s going to do
something similar here with supply chain.

978
00:49:51,820 –> 00:49:54,040
And I want to be mindful of time, so
you lemme know if we need to wrap up,

979
00:49:54,040 –> 00:49:58,870
but I want to look at cohorts and LTV and

980
00:49:59,230 –> 00:50:03,160
composition of new customers and returning
customers and how you forecast that

981
00:50:03,490 –> 00:50:07,180
and how that informs this process. So do
I have time to get into that or do we.

982
00:50:07,180 –> 00:50:11,500
Wrap up? Yeah, this is good. This’s
going to be the last question.

983
00:50:13,270 –> 00:50:18,130
So that’s, there’s a lot there. Best,
best, yeah. I’ll tell you what to do,

984
00:50:18,580 –> 00:50:21,340
honestly, go to my website,

985
00:50:21,580 –> 00:50:24,970
put your email address in the
email popup or in the footer.

986
00:50:25,000 –> 00:50:28,790
Either one will work. You get my four
free essential e-commerce resources.

987
00:50:28,790 –> 00:50:31,010
It’s going to sign you up for my
newsletter as well. I don’t spam you,

988
00:50:31,010 –> 00:50:35,000
I promise. AJF growth.com. Go
there, sign up for my newsletter.

989
00:50:35,030 –> 00:50:39,320
One of the things I will send you is
from some lovely venture capitalists at

990
00:50:39,590 –> 00:50:44,300
Lightspeed Venture Partners put
together a whole prebuilt like

991
00:50:44,360 –> 00:50:49,190
custom spreadsheet that helps
you and walks you through how to

992
00:50:49,970 –> 00:50:54,740
forecast returning customer cohorts
off customer data. It’s hard work.

993
00:50:54,770 –> 00:50:58,490
Another recommendation I say to
people is Dave Ook, CXL class.

994
00:50:59,180 –> 00:51:00,170
So the CXL course,

995
00:51:00,170 –> 00:51:02,420
he talks you through how heat forecast
businesses. He’s a really smart guy.

996
00:51:02,420 –> 00:51:04,550
I worked with him really closely
for a long time. At four 400,

997
00:51:05,120 –> 00:51:08,600
he still runs Bamboo
Earth, but if you do that,

998
00:51:08,600 –> 00:51:12,200
it will give you a whole prebuilt
spreadsheet for how to do it.

999
00:51:12,770 –> 00:51:17,120
And I basically had at one point
common thread collective took the

1000
00:51:18,140 –> 00:51:20,660
Lightspeed model and built it
a little bit for themselves.

1001
00:51:20,660 –> 00:51:23,900
I’ve since tweaked it a little bit for
myself and I will send you mine for free

1002
00:51:23,990 –> 00:51:27,950
so you can do that. And that’s
probably I think the way to do it.

1003
00:51:27,950 –> 00:51:31,910
But if you can just see
historical returning customer
behavior over months after

1004
00:51:31,910 –> 00:51:34,910
purchasing and then put that into a
spreadsheet that will tell you, okay,

1005
00:51:34,910 –> 00:51:37,340
what does that mean for the customers
that acquired today in six months?

1006
00:51:37,910 –> 00:51:40,700
How much are they worth? You can pile
all those cores on top of each other.

1007
00:51:40,730 –> 00:51:43,700
You can get a really good revenue
forecast. That’s surprisingly reliable.

1008
00:51:44,420 –> 00:51:45,620
They’re more reliable than people think.

1009
00:51:46,430 –> 00:51:47,750
And then you can look at, okay,

1010
00:51:47,750 –> 00:51:51,020
my new customer acquisition activities
are underperforming or overperforming,

1011
00:51:51,020 –> 00:51:53,300
and what does that do to my
projections? That’s right.

1012
00:51:53,960 –> 00:51:55,280
And then you can understand, okay,

1013
00:51:55,550 –> 00:51:58,970
I need to make some pivots now because
this is going to have a real material

1014
00:51:58,970 –> 00:52:02,180
impact to my business in 2, 3,
4, 5 months, things like that.

1015
00:52:02,180 –> 00:52:03,410
So awesome resource, a big job.

1016
00:52:03,950 –> 00:52:08,750
But if you commit to it, it’s a
big job. You can do it in a day.

1017
00:52:08,840 –> 00:52:11,600
It’s not that of a job, but
if you commit to it, then

1018
00:52:13,190 –> 00:52:15,710
I always say my best clients
live and die by that spreadsheet.

1019
00:52:16,490 –> 00:52:20,900
Yep. And it’s one of those things
that once you start down this path,

1020
00:52:21,230 –> 00:52:23,660
it will transform the way you run your
business and things will never be the

1021
00:52:23,660 –> 00:52:24,020
same.

1022
00:52:24,020 –> 00:52:27,230
And you can unlock a different level of
performance and profitability that will

1023
00:52:27,230 –> 00:52:30,350
never happen for you if you’re not
looking at your business this way.

1024
00:52:30,350 –> 00:52:33,650
So I agree. Andrew, this is
fantastic. I know you got a jet.

1025
00:52:34,940 –> 00:52:37,010
What’s your website one more
time? So we want to check.

1026
00:52:37,010 –> 00:52:40,370
Out that resource. Yeah, AJF,
like my initials, AJF growth.com.

1027
00:52:41,300 –> 00:52:42,560
And if people can find you on.

1028
00:52:42,560 –> 00:52:45,800
Everything there, podcast there,
everything. Yep. X at Andrew j Faris.

1029
00:52:45,950 –> 00:52:50,240
Yep. And Andrew Faris
podcast. Check it out. Andrew,

1030
00:52:50,240 –> 00:52:52,400
this has been fantastic,
man. Super, super fun.

1031
00:52:52,400 –> 00:52:56,480
Look forward to the next go round
and thanks for taking the time, man.

1032
00:52:56,840 –> 00:52:57,500
Thanks Brett.

1033
00:52:57,500 –> 00:52:59,990
And thank you for tuning in.
So we’d love to hear from you.

1034
00:52:59,990 –> 00:53:03,950
What would you like to hear more of on
the podcast? Let us know. And with that,

1035
00:53:03,950 –> 00:53:05,780
until next time, thank you for listening.