EVERY DOLLAR COUNTS

Happy Friday! 

Boy has it been a wild last month or so. Made a big move location wise and now I'm finally settled in there. Hired a CFO for Frost Buddy along with a new National Sales Rep to handle all wholesale. Things are changing but in a good way. BUT I want to make this newsletter for anyone coming up or anyone that starts a business to help fast track the success. It's really hard to find a good mentor that has built an 8 figure or 9 or 10 figure business and mainly because they're so damn busy building. So rather than splitting my time, I'm putting it in written form and in my podcast to help even just one person. 

Today I want to talk about something extremely important for a CEO to know inside and out: NUMBERS

WHY A CEO NEEDS TO KNOW THE NUMBERS - daily

• Make Changes / Fixes To Company

• Understand Margins For Growth

• Set Goals / Push Employees

• Make Sound Future Decisions

MAKING EFFECTIVE CHANGES / FIXES 

For a long time, I didn't know our numbers inside and out. and I was almost operating blind. Let me tell you why that can become an issue. At first it was okay because we were small and the numbers were small. But when I look last month and we lost $90K on grossing $2.2M, then wtf is going on. Yeah...wake up call. Part of it was my fault, part of it was how our profit & loss was coming to me. And the last part was kind of a blind spot that we didn't know was sucking money out. 

If I'm not seeing the numbers except once every month, then we could waste an entire month like we did without making a single change. Here I thought Amazon was killing it, but we were actually losing an extra 15% by fulfilling it by merchant instead of by Amazon. I had no clue and so we were actually losing money every order. 

For a DTC company to be profitable, it's most of the time looking at your breakeven ROAS (return on ad spend). Basically, how much can I spend in advertising to get a sale and still make money by accounting for alllll my other expenses like fulfillment, overhead, product cost, shipping cost, tax, miscellaneous, etc). If you can nail down that, then you know the line at which you can turn profit. 

It's important though to look at daily / weekly / monthly so you can make quick and effective changes. As you look at the numbers, you will start to understand the trends and the %'s. What I mean if you see that every week, ad cost is 35% of gross sales and fulfillment cost is 21% of gross sales, and then one week ad spend is 42% and fulfillment is 26%, you will be like, "woah woah, what's happening?". Because of this, you can analyze the issue quickly, and solve it. If you don't see this until the end of the month, you lost time and more money. 

So with that being said, after this past month, we made some changes.

DAILY PROFIT FORMULA

Our CFO and I kicked it into a new gear to implement a daily profit formula and know every single number flowing in and out of Frost Buddy EVERY SINGLE DAY. The first thing we do in the morning is look at how we did yesterday and see if any decisions need to be made. 

You might be wondering what this looks like or how do we do that? Well it's actually quite simple if you take time to look at your P&L statements. For some of the equation, we had to take our historical averages and use that as a daily expense number. For some such as ad spend, that is a daily number that our teams report back to us at the end of the day. This is the formula that we use on a daily basis. 

Lot of freaking red there. So that means we need a lot of green to be positive. If only people on the outside could see how many expenses are truly in a business, right! 

This bad boy helps me make decisions soooo much faster and more effective than ever before. I wish I had done this from the very beginning. At the end of the day, business is just numbers really. Yeah there's culture and branding and yadayada but let's be real, you gotta make some money! 

Now If Amazon has a bad day, I can go to the team and ask what's up or what changed. If wholesale has a bad day, same thing. Same thing with retail. But in DTC, it's a fast paced world. You can make daily changes that have a serious impact. I can turn a negative profit month into a 20% profit month the very next month. Watch me! 

SETTING GOALS / PUSHING EMPLOYEES

The job as a CEO is to manage 3 things: Culture, Numbers, & People. If I don't know the numbers, I can't manage my people correctly. Now that we know the numbers to an almost exact amount, I am able to push my employees towards goals that are realistic. BUT a big lesson I learned that you should take note of...DON'T SET REVENUE GOALS

DON'T SET REVENUE GOALS???? WHAT? Yeah, you heard me! SET PROFIT GOALS

Let me explain. Let's take my Amazon team okay. For September and October, I have 2 options. Give them revenue goals of $1M each month and tell them to stay at a 3.5x ROAS. Well what happens is they get so focused on hitting that top line that the bottom line may get washed out. So what I've done now is taken a revenue goal of $1.5M in which I want a 15% margin...So I tell them, your profit goal for September and October is $225K. I don't care if you have a 5% margin, a 15% margin, or a 35% margin. This is what the company needs. 

Now if they hit a 5% margin then I'm going to reevaluate next month lol but more than likely, they will fall in that 20-30% range. Now, if we profit $225K on Amazon in 1 month, we are making some serious freaking gains. 

I'm watching that number every day to see if it's possible, where it's trending, etc. 

But because I know what our daily Amazon profit looks like, it's much easier for me to push the team in the right direction. If they are behind pace, and I see we have room on the bottom line, then I can make the adjustment and have them push! 

Now at the end of the month, it's way less stressful because you don't have a bomb dropped on you.

MAKING SOUND FUTURE DECISIONS / EXPANSION

If your business isn't moving forward, you're moving backwards. I'm a firm believer in this especially in the fast paced world. So how does knowing your numbers help with future decisions for the company?? 

It's everything! 

Frost Buddy is inventory heavy. Therefore, you will need a line of credit from a bank or lender to be able to finance a ton of inventory. Yes we pay interest on that line, but it's a pretty small amount. The more we sell, the more profit we have, the faster we sell, then the more we can pay off of the line of credit and put more money in our account. 

Now if we sell a bunch of Frost Buddies, but only breakeven, well now we pay down our line of credit, and have no money towards future products. We have no money towards research and development. So that's why profit is so so so important. 

Because we know our numbers now, we can project in future months how much money we will make, how much money we can pay down our line of credit with, and how much money we will have for new products. 

For me, I want to launch new Mugs and Tumblers to help further expand Frost Buddy. In order to do that, I need to profit a certain amount on our Universal Buddy to be able to reinvest money into the new product lines. 

Now picture this, if that launch goes well and we need more mugs or tumblers, then knowing numbers just got more important. Because now instead of 1 product line, we have 3 product lines, and then 5, and then 10, and now we have to track the profit of each one. 

If I don't know which product line is generating a profit and which isn't, then I don't know which product line to expand upon and which needs discontinued. Numbers allow you to take emotion and intuition out of decision making and make decisions based on cold, hard data. GO BACK AND READ THAT LINE! That will help you in business forever. 

LET'S WRAP IT UP ALREADY! 

I'm a creative CEO. I'm a marketer. I love to create content and videos and I am a visionary. I HATE DATA AND NUMBERS. I won't ever be one to put the data together, to put the numbers together, and mess with spreadsheets. BUT I've learned that I need to know the numbers better than anyone else in this company. I need to know how to analyze that spreadsheet like no other. Find a talented person that can put the data together, but learn to analyze it and be consistent with it because every decision you make should be based on those numbers! KNOW EM! 

If you feel this helped you at all or if you know someone this could help, please subscribe or please share this with em! I love doing this and would love to help as many people as I can! 

Have a great weekend! 

Brock