Stop Losing Money In Your DTC Business: Drew Fallon's Path To Ecommerce Profit transcript

and like I think the biggest mistake that people make is like once you dip into the red is not identifying it immediately and making changes so like we'll see people you know and this is you know Iris or not but like and you know we unfortunately made these mistakes in Mad rabbit where it's like no just give the ad set a little bit more time or like we're launching this creative like just let it you know let it learn it's in the learning f like whatever like all that [ __ ] so like if you don't have the ability to understand the hour that your brand starts to lose money you are doing it wrong the technology exists today for you to be able to know that and so once you know that then you need to go and make changes and the answer a lot of times is just to stop spending right so like there's a ton of pressure you know back for the last 12 years or whatever just to continue to grow month over month year over year you got to grow you got to grow you know people like there's so you don't have to grow every single month month over month right like you obviously want to grow your business in a steady you know sustainable manner um but once you start like kind of operating at like that marginal return that's like too expensive to continue to grow you're just literally burning money and like the capital markets like to our earlier Point around Enterprise Value no longer reward that behavior and like yeah like look like 2021 like yeah [ __ ] spend as much as you want and grow as much as you want I don't care how much money you lose like you can sell for 5x sales and you're all good like these days it's like you're not going to attract Capital you're not going to sustain yourself you're just literally like torpedoing the business and so the number one thing I think is like people being too willing to be in the red contribution margin or income basis like certainly you know you should not be in the red on the net income basis um if like you want to basically understand like when am I when am I starting to lose money and as soon as I understand that how do I change course to actually go and make money and a lot of times the answer is just [ __ ] stop spending honestly like you know you don't have like as long as you have some element of recurring Revenue like you're going to experience margin expansion in that sense and like you don't really have to like force the growth is kind of like you know the first thing that comes to mind as far as like day-to-day operational mistakes and I think just to drill drill it home a little bit more is like that is where finance and marketing that happens the most often when finance and marketing are extremely disconnected inside of the brand so once you connect finance and marketing Finance can basically be like hey you're being stupid and then marketing can be like okay let's you know change course so I think that's that's like the biggest thing and and candidly like I'm saying it in a little biased sense because that's you know the biggest value prop for Iris as well but like I truly believe that's like the the number one thing that people get wrong is like just spending at the wrong level it's interesting I mean the answer then is overwhelmingly for people ad dollars it's their ad dollars is where the waste is and it's funny though because the well I mean you look like you're gonna maybe correct that well so no I think add dollars is is one variable and a multivariable equation right so like the the problem is that like you know the existing Technologies within the ecosystem are not marrying the mult the multiple VAR variables right so like if you have a discount going on for Memorial Day uh okay well that changes our me you know in order as like you know break even or or profitability or whatever people people make this mistake all the time they don't change their targets despite that they're selling the product for less money and taking a thinner margin I watch this happen constantly yes exactly so like you have uh you have discounts you have refunds you have uh you know brand spend if you know how to include that in like contribution margin which is like silly um you have like all these different inputs and people will just be like okay like 2.4x is my break even row as uh and you know anything above that is profits and it's like okay well then you strap on like a huge discount you're looking at like a gross me and it's like well no like you're losing money and now you're doing that stupid [ __ ] that I just said not to do which is like you're going into the red and you're continuing to go into the red and then you're not going to realize it until three weeks later when your accountant comes to you with the closed books for April and be like dude like you just completely Miss on this entire p&l goal like you just botch this and then you can only do that so many times before you die that's so right I think I think the Baseline mentality you're expressing here which is just like hunt it's what I hear you saying is hunt down wasted dollars in your business I I remember reading The Outsiders have you read that book uh like the pony boy one no no no no the other one uh yeah there's oh that's the greasers um no I don't know The Outsiders uh no The Outsiders is a Pony by one but there's an Outsiders uh it's like a profile of like overperforming CEOs it's like who are the CEOs who over the longest term created like if you had given them a dollar uh or $100 let's say over the longest term who would have maximized your return on $100 most consistently as measured by public market public by performance against public markets so basically they took like long CEOs who over a long time created really valuable companies over and over over again and one of the things that comes up and it's like 10 profiles great book recommended um one of the things that that comes up over and over and over again is that a lot of these uh CEOs and uh I was gonna say guys that's all in that book it's it's all guys and one female CEO because over a longer time period so so so be it um uh from the past but the um the thing that comes up over and over is uh is they're cheap like they just like they hated wasting wasting money on like they they were not flying around in PJs they were not uh they were not like you know yeah creating super fancy offices and all this kind you know at least in those days like a lot of them just ended up like and and it's basically that mentality which is just like stop losing money and I I'm in the I mean I can speak from my experience especially on the media buying side which is like it is so tempting every time your ads are not getting the return you want to go just leave them on we'll fix it will like