Opening The Books: Mixed By Nasrin transcript

[music] Hello and welcome to the Andrew Ferrris podcast, a bonus episode [music] and this is the episode of my show, the single episode that I have worked the hardest and longest on to bring you because I am the most excited about it. This is going to be unlike any episode I've ever done before because what it basically is is a recorded real actual coaching call that I did with a business called Mixed by Nazarin. I'm going to tell you more about Mix in a second, but first I want to tell you more about what you're about to experience in this show.

I took almost two hours with Nazarin Jafari, the founder of Mixed by Nazarin, and we looked at the actual [music] numbers in her business, which is why I'm calling this series opening the books, because we looked at her actual numbers, her actual revenue. Nazarin shared her actual revenue, [music] her actual Facebook rorowass, her actual margins, her actual LTV, all of those things. She was very generous about this and [music] we talked through exactly what I would do in her business in real time without, you know, like so much podcast interview material is backwards looks at what happened before and why something worked or whatever.

And that's [music] great. That's really useful. I do plenty of that myself. But in this episode, we're actually looking at real time, honest, actual next steps. You can hear exactly what I am telling a business that [music] is in the low seven figures about how they can get to ultimately a 9 figure goal in the long run as Nazarin will explain in this episode. So, I think this is going to be really good. Now, there are a ton of links that I referenced in this show.

There's all kinds of content like Google Sheets that are pre-filled out that I tell Nazarin in this episode, hey, you're going to want all of this stuff to go forward. [music] Here's what you need to make sure you get to where you're trying to go. forecasting tools, unit economic tools, LTV tools, and all kinds of stuff. Instead of trying to link every single one of those in the show notes, what I have done is created a page on my site at ajfgrowth.com/mixed.

And again, that link is in the show notes and you can go there and get all of this stuff sent to you in [music] one place. So, if you want the materials, and I think they will be very useful to you. If you want those materials, go to ajfgrowth.com/mixed [music] and get all of the material that we referenced, literally every link in there sent to you really, really easily all in one place. One last thing about this episode, this episode is definitely best viewed on YouTube because there are a couple of points where I screen share and look together [music] with Nazarin at different things that uh that we do in person.

So go to youtube.com/andrew ferrispodcast. That's youtube.com/andrewferrisodcast. [music] And that link will be in your audio feed show notes as well if you want to watch this episode. A lot of it you can just listen to passively still on YouTube of course. But uh but there are a couple points where there's screen shares where it might be useful to do that. Okay, let me tell you a little bit more about Nazarin so you have some context here.

Nazarin Jafari is the founder of Mixed by Nazarin, an apparel brand where she is the designer based in Brooklyn as she'll explain in this episode. [music] A while back Nazarin sent me an email saying that I had helped her in her business when she was just getting it going. It was a very nice email. One of the nicest emails I've ever gotten. If you want to email me by by the way, it's at podcastfgrowth.com. [music] Nazin emailed me and I said, "Hey, Nazarin, [music] I would love to talk to you more about this business.

Would it be possible?" Um, she she is awesome. She's a great operator, great founder. She's become a friend here. Like, [music] I I just think the world of her. But I asked her, "Would it be possible for you to come on the show and we just actually talk through all the stuff that you email me about?" And and I'll do that for free [music] for you if you will then give me the ability to share honestly exactly what the numbers are that [music] are real in your business and that we're talking about in your business and we can record it and put it in front of my audience.

So that's what she agreed to do. Very [music] generous of her. We recorded this back in April. It's a little bit past that now because it's taken a lot of work to put all this stuff together. But here we are now again. You are going to love this episode. If you have liked my show at all before, it's going to [music] be very useful to you. I will not delay it anymore. I think we give you all the context that we need. Let's jump into this very special bonus episode.

Opening the books with Mixed by Nazarin. Let's jump in. Nazarin, how are you? I'm good. It's so great to be here, Andrew. as you you saw me borderline giggling during the intro because I am so excited about this. So, you have been so gracious to share with me a bunch of information about your business and to take the time to do this and so I just appreciate it. I think it's going to be really cool and really fun and yeah.

So, so how you doing? You're doing good. Yeah, I'm doing great. This feels like a really full circle moment. I was listening to your podcast in the very very early days packing orders by hands which I actually still do but won't be doing in about a week or so. And so, yeah, to be here and to be chatting with you, it's it's really exciting and it's it's an honor. So, thank you for having me. Yeah. Yeah. You sent me I'll just say you sent me one of the nicest emails I've ever gotten just like uh appreciating some of the stuff that I've done when I was on e-commerce playbook and some of that and and expressing gratefulness for that in a way that was really really encouraging.

People don't I think know this and I try to say this anytime I can but like realistically when I started this like yeah like having a podcast is content marketing and now I make some ad dollars from it and all that kind of stuff too but like just realistically it's just not the most lucrative thing I do. I mostly do it because I love it. Like it's really fun to talk about e-commerce and I love the act of teaching as much as I can and talking to entrepreneurs and talking to businesses.

It's just fun. That's the main honestly the main reason I do it. So I because I actually love seeing I always say it's like the the ball of knowledge when I can actually like take the ball of knowledge from me and hand it over and I actually get like I can see somebody else receive the ball of knowledge and get it into their hands and use it and make something out of it. I just that's like an addicting thing to me. I just like love seeing that happen.

So when you sent me that email saying, "Hey, I've been listening carefully. I listened to this episode a few times and took notes and I used it in my business." I was just like, "Yes, that's like the that's the whole point." So anyway, so I appreciated that a thought it was really encouraging to me. Definitely comes across. Okay, so Nazarin, let's let's talk about your business a little bit. So, let's do a couple things here.

First, give people a sense of who you are. Where are you? How old are you? When did you start your business? How did you get interested in starting a business? Give give us the the Nas Jafari story. Yeah. So, my name is Nasar Jafari. I am based in Brooklyn. I have been living in New York for 10 years now, which feels like a really exciting milestone. Uh I started this business in 2021 which is when our first summer collection dropped and it kind of snowballed out of the pandemic.

I had done I had started getting into pattern design and print design posting those pieces on Instagram and there was just really good reaction there. And so I was kind of curious about how can I take this digital artwork and then turn it into a product and a product based business cuz previously I'd only done kind of more service- based business as a designer. But actually previously my full-time job was I was a seventh grade history and English teacher.

Uh which honestly I think a lot of those skills really translate in terms of brand building. So I started to develop the prints onto fabric and then create face masks during the pandemic and that just really took off. I was able to acquire a lot of customers that way and the thesis was you know can I acquire and at at the point I I did a maybe thousands of customers with face masks over the pandemic. Can I build trust with these people if they're buying kind of a lower price point product so that when I do come out with an apparel collection, there'll be some credibility and brand recognition uh for people to then buy apparel, which I think is a really hard category to just kind of start out the bat in.

I had no connections in e-commerce, no connections in fashion. So, this was all kind of like where am I going to take this next? And for me, I decided to go into apparel from face masks because I think that clothing just has such a high touch point with people's identities. And that's really my my jam is like h having a high touch point brand that really impacts the way people think, feel, and do. And those are kind of like my three guiding I don't know principles for my life personally, but also professionally.

So that's yeah, that's really where Mix started. and we came out with our first collection in the summer of 2021. We are now just shy of 2 years and we're coming out with our summer collection in the first week of June. That will be our sixth collection. We are currently on maybe I would say 2.5 million run rate for the year. Uh which is also way up from last year. So the business has scaled dramatically in the past three months of the of 2023.

And yeah, that's kind of where Okay. Where were you? You said you've been in New York for 10 years, which is kind of amazing. Where where did you grow up? I grew up in LA. Oh, in LA. Okay. All right. Well, that's where I am. So, you've Okay. So, you've got LA and New York background. That's awesome. And And you're in Brooklyn, uh, with a really Do you like categorize what kind of apparel it is? Like, you know, some people would be shapewear or, street wear, whatever it is.

What what's what's your Yeah, I would say the the main defining characteristic is the prints. So, I say print wear, which isn't quite Yeah. a category that people say, but that's that's where I think we really saw it in print wear. Yeah. Yeah. You have to realize [clears throat] you're translating this at least to me as like about the least cool person in the universe who's like totally disconnected from anything in the fashion world.

So, I I mean I would just say it's like sort of fashion forward. Is that maybe a way of thinking about it? Yeah. Okay, great. So yeah, as opposed to being a more like pure functional apparel, you know, like or whatever, you know, like shapewear or something. So that's something I've been thinking about a lot is in the e-commerce DTC space like apparel, there's such a wide spectrum of where apparel and fashion where you can land on that spectrum.

And I think what I'm really curious about is really striking the balance of like having the DNA of an e-commerce and you know yeah like an e-commerce kind of operating system but then on the brand side on the visual like forward- facing identity is really fashion forward and I think often times you don't see that split. It's usually that ecom apparel brands are very utilitarian and fashion brands are not as much in the ecom space.

Yeah, I think that's totally right. Yeah, that's that's really interesting. So So for people following along, mixed by nazarin.com, you can go start kind of poking around the collections and see what's going on there to get a sense. And of course, there's a link in the show notes for you to go check that out. And what you should do is go buy some, too. And uh hopefully by the time this is published, Nasar won't have to pack it herself with her own hands because you sell too much stuff for that anymore.

So yeah. Okay. So uh so so $2.5 million run rate right now. And what was your total revenue last year? Total revenue last year was $133,000. So okay, so huge amount of growth. We have we have hit an unlock here. And so that is awesome. It's funny cuz I think I feel like when you emailed me things were just starting to show those kinds of signs and then by the time we actually like started recording it's like whoa you are pumping right now like that your ads account looks incredible and all this kind of stuff.

So it's it's a fun time to think about how to move forward and and how to capitalize on it and and sort of a different set of questions than I actually first thought we would go after when when you first reached out to me because things are going so well which is great. I love that. It is so fun. And I told you uh over email as well, but I hope that you are finding times to stop and celebrate when you have these milestone moments and stuff.

Go high-five somebody or have a drink with a friend or whatever it is you like to do to celebrate, you know, because it's such a it's such hard work, you know, it's such a grind to do your own thing. You know, like you said, packing orders by hand and all those things. So, so it's one of my like most standard pieces of advice like the moment that you hit a new milestone is the moment that you just raise the bar. It's really hard to stay present with the wins that you have because the bar constantly raises.

And so the moment that you're at a $2.5 million run rate, it's really easy to be like, well, I got to get the five. And that's true, right? You got to want you want to push forward, but you also got to stop and celebrate and say like, man, you built a sevenf figureure business. That's incredible. Very few people built seven figure businesses. It's awesome, you know. Yeah. And I think it's also keeping in mind what are the goals of the business and beyond finance, you know.

I was actually so I just came back from a factory onsite in Delhi where you know a lot of we were working closely with production cuz that's scaling as a business is scaling and so I'm thinking about all right we're at 2.5 million runway you know what does three look like what does four look like and as I was doing that I was I kind of stopped myself and I was asking like why why do any of this because you can push that to infinity and keep raising the revenue number but beyond revenue you know what are the goals for the business and how do how do you use that also as a metric trick to guide yourself to count your wins and to be really present with the grow the way the business is growing.

Okay. So, that's exactly where I want to start. So, let's dive into your business a little bit now. And I whenever I'm working with somebody on this kind of thing, there's always a first question. And I actually already asked you this question over email, but I still want to go over it, which is and you you gave me I think one of the best and clearest answers I've ever heard to to to this question. I can hear from you right away that you're a person who has a sense of your own values and what you're trying to accomplish in the world with real clarity, which is really cool.

I think a lot of people actually don't have that. So, but I will ask because this is a really important question. If if the goal of this is to say that there's an X on a treasure map somewhere that we're trying to get to and we want to draw the line from where we are now to the X on the treasure map, well, it's you can't draw that line if you don't know where the X is, right? So, um, so you you have to have an idea of what the what and where the X is and and then we can draw the line and think about where all the, you know, snakes and things like that are along the way that are going to kill us.

So, the X, so let's talk about that. So, what is your goal for the business? You own 100% of the business. So, you don't have any outside investors. You're bootstrapped. I know that. So, those are important pieces of context when you talk about growing a business. Sort of cap table is really important. Finance is really important. And so, that gives you some baseline. But talk to me about what you're what you're trying to do with Mixed.

Yeah, so Mixed is really a long-term brand building play. I envision running this brand for at least a couple decades, growing it to mid is nine figures, correct? So, let me just say that again. Yeah. Yeah. No, no, no, that's fine. Yeah, nine figures is right. Sorry, I was taking a drink of water. But mid nine figures, you're saying right into the hundreds of millions. Yes. So, midnight figures into the hundreds of millions.

And that you know I would have envisioned take about 20 25 years and then with you know thinking then at some point maybe getting a minority or majority stake partner and with the option to potentially stay on as CEO. I think it's hard to say what I'm going to feel 20 25 years from now, but that's, you know, those are my financial goals. And beyond finances, I'm really interested in mixed becoming a brand that you recognize both by name and by print.

So, when you see people walking around on the streets, you know that they're wearing mixed and there's kind of that head-on moment of, oh, you're wearing mixed, that means something about what your values are, what your aesthetics are. and for that to be yeah understood and seen on major streets in the city and I think even beyond that and the idea of the brand is really to have people think feel and do in full color and to embrace their mixedness whatever that means whether that's culturally but also I think we're kind of moving in this era where our identities because the way work is shifting so much our identities have become a lot more fluid in terms of you know creative and professional identity I think there's just less there's less kind of boxing happening within our identities and I really would love like for mixed brand values to then be something that we push long term.

That's awesome. You said that great. Don't be nervous. You're doing awesome. I again like what I what you should hear from me is that you have much more clarity to uh what you're trying to accomplish in a lot of people even a 25 year timeline or whatever is significant and and it's it's different. And it means that we are going to do think about the business really differently than somebody who wants to grow the business as fast as possible and have as big of an exit as possible in as short of a time as possible and then like go live on the beach, you know, like that's a really different goal set than something else.

And and actually one of the things about dealing with any like outside vendor along your journey here uh even you know whether that was like me working on your business or or somebody else right is that like they act you know they exist in your ecosystem to serve your dreams and your goals and and finding partners who can get on board with that and can be excited about it with you and can say like yes I'm I want to do that ends up being really important I think because if they're trying to accomplish something really fundamentally different than you it's going to be a bad partnership.

So, and the other thing there I'll say that you actually hit on is that this is a sneaky question in that it's not really about what's going to happen in 20 years. It's really about who you are today. What what your your vision for that is not really like you're totally right. You're going to change a lot. It's possible that in 3 years you I don't know find a spouse and decide that you want to two of you want to move to I don't know.

I don't even know if you're married or you have a partner or what, but like anyway, whatever something massive happens that makes you decide because of your joint decisions together in life that you want to move to Indonesia and that's going to you know what I mean? Like who knows, right? Who knows what's going to happen? That means your business changes relative to that and your values change and all kinds of things can happen.

But today you have a long timeline. You have a vision for cultural import and impact and then of course there's a financial vision tied to that. So, one of the things I'll say right away is that if you want to create a 9 figureure business over a 20 to 25 year timeline, that's very doable and you don't have to blitzcale your business to do it. So, the first thing that I'll tell you that'll tag in my mind that's happening as an answer to that question is that I hear that and say, okay, our goal is long-term sustainability.

That means that we're going to manage cash with that goal in mind. going to think much less about how do we like debt finance this in a way that's like do everything you can to maximize every moment get every possible piece of inventory so you can rush those sales instead I'm going to say let's be a little safer and more careful with our things like inventory buys which can be a big challenge in apparel in particular because it's so focused on drops and that kind of thing and and collection launches and you have to guess you have to forecast how much of that product you're going to And you can get yourself in real trouble in an apparel business by outlaying a bunch of cash for a collection launch that doesn't go well.

And that trouble only gets worse if you think it's going to go great and you order for that and you push really really hard. So instead, I think one of the one of the one of the points that this will flag for me is longer timeline, more sustainable goals. Okay, that means that we need to immediately think, all right, how do we make sure to manage cash in a way that keeps us safe and steady over a long period of time and make sure that like we don't hit a landmine along the way that blows up the business and then the whole thing goes to zero or whatever, you know, which can totally happen.

So, the other thing I'll say is if you want cultural impact, you have to do that via people who make cultural impact um and publications that make cultural impact and all that. So, that's another thing I'm going to flag that I hear from your answer right away and say that we got to come up with a strategy for growth that includes meaningful engagement with cultural influence basically as part of what we do with all these drops and all those kinds of things.

So, so we'll come back to probably both of those, but those are the first two notes that I that I wanted to flag there. You were going to say something. I was just I had some thoughts in terms of what in response to what you were saying. I want to also add I guess is another kind of goal is to build a great team. I'm really I'm really passionate about everything that goes into building a business and a brand and a big part of that is building a team and working with people to drive towards a shared business vision.

So right now I'm kind of in the process of hiring and thinking about you know what kind of team do we want to build, what kind of culture do we want to build and then also with an eye to that north star of that we just mentioned. So yeah, super helpful comment uh that that's going to matter to you a lot. management culture within the organization, making it a great place to work, having having great when when you think of a great team, in fact, what are you thinking of there?

What do you mean when you say great? Well, yeah. Like I mean, are you thinking about surrounding yourself with the highest performers in the world? That's what some people mean by that. Or are you thinking more about about like like building a certain kind of work culture? When you envision that team, what what are the parts of it that make it great? Yeah, I think it's also within the context of fashion because I think that fashion is kind of notorious for not having a great work culture.

But what I envision yeah about having a great work culture is that the work people feel people learn what they are made of. And that is something as a founder as building this business. I have learned so much about what I what I'm made of. And I think that work feels really rewarding um when you can see your impact on the company in through the product in the you know in the growth of the company. So I think what I would love is to have a culture that where we're doing creative work but it's also processoriented and we are working hard but it's also sustainable.

You know it's always about kind of like balancing this tension which is such a big part of the brand brand ethos and you know my personal one. So, but at the same time, you know, we're building this culture right now. I have one one full-time employee and we're bringing on some part-time and a couple more full-time. So, I imagine that that's going to shift and change and be really co-creative as we build. All right. So, let's talk a little bit about how apparel brands usually grow, the method for that.

Actually, before we do that, I want to hit two other things really fast. Your comments on team are really helpful. what you're trying to do. I love that you have a vision for giving people a good workplace. That's that's good. I'm pro that. The first thing we have to think about anytime we're thinking about how we're going to grow your business DOC is the mechanics of your unit economics and those sorts of things. And so there's going to be two elements of that.

The first one is unit economics. So let's talk about margin. Do you know now what your landed margin is to your customer? And I want to include in that all of the following things. And this is this is really important to have all of these. Cost of goods, shipping cost. So, the actual like cost to ship to the customer. But then there's also if you're using a 3PL, which it sounds like you're not right now, right? You even picking them by hand or doing this by hand.

At some point, if you're using 3PL though, there'd be a there'd be a processing fee, which would be a flat fee for every order. Basically, they'll just charge you no matter if somebody puts 20 things in their order or one thing in their order, they're going to charge you a buck or two. And then there's going to be pick and pack, right? So, uh per item thing that you put in each order as well. So, those will be in there.

Another two things that I want to put into my unit economics would be and by the way cost of goods would include freight to freight to you or freight to your 3PL. So that can be a pretty separate charge a lot of times then or a separate cost really that can be variable depending on things like if the supply chain in the world breaks for example like it did a couple years ago and that ended up making everybody's cost of goods go up a whole lot even if the actual materials weren't any different.

A couple other things I want to include in there would be merchant account fees. So that the 3% or so that a credit card company and Shopify are going to take on every order just off the top and then I think a projected return rate should go in there as well which in apparel can be a really big deal. So basically if 5% of your orders come back you know you get to like swimwear and this number can get to 30 40% where people are like returning huge amounts of stuff.

So having that all into unit economics so net of all of that do you know basically where your landed margin is right now? Yep. So I know my landed margin everything with what you said minus the return rate. I think that that is in flux right now as the business has been growing but yeah well let's let's so let's bookmark that and we'll come back to it. So before we talk about the return rate where where is the margin? 72%.

Oh amazing. And I love that you know that number off the top of your head. That's fantastic. That is a big number. That's really really good. So, if we think about the design of your P&L and where we want to end up at, there's only four ways to generate or there's only, you know, four buckets in your P&L. You've probably heard me talk about this somewhere, right? Do you want to repeat them? You look like you know. Okay, [laughter] go ahead.

Cost of delivery, that would be everything we just talked about. Basically, variable cost associated with selling a product to a customer. CAC, which you know what that is. Uh opex, which is a fixed cost typically. Well, not typically, it is a fixed cost uh and changes as you hire people, etc., but is is there and then profit. And so if we're going to generate profit, the only places where we can generate that from is those three other buckets.

And so understanding where out of those three other buckets, which ones of those you're going to take bytes out of to give you as big of a percentage profit number as possible or maybe not as big of a percentage number as possible in a growth stage. It might actually just be as big of a number as possible, etc. We can think about that a couple different ways because percentages don't pay bills. So you could have 40% profit on $100 is not really very much money, right?

So you wouldn't want 40% profit on $100. You should be more aggressive than a $100 business. So if those are the elements, then setting yourself up with 72 points of cost off cost of delivery is awesome. That's a really good number to start with, including in apparel. It's one of the appealing things about fashion if you can do it, I think, is that you can charge a premium relative to it's not really about the cost of the materials.

It's about the fashion and the brand and and Right. Yeah. Brand value. Exactly. So okay, great. So we're there. So 72 points there. Let's talk about that return rate issue. Do you have any idea now how much customers are returning as a percentage of sales? So it was 12%. And that's reasonable. It's pretty Yeah, it seems all pretty on par again because you know we went from couple hundred orders beginning of the year now to a thousand orders a month.

That is I I can't tell cuz quite frankly I've just been literally just not no time to butt into these numbers. Uh, I can't tell if the volume of returns is if it's the scaled with the number of orders or if it's gone up, but I, you know, last time I looked 12%. Maybe we could say 15% to be conservative. Yeah. Cool. So, you'll have to factor that in particularly once you get towards CAC. Are you able to resell the products that people return?

I assume. Yeah. Okay. So, then it's not a huge deal, right, if those come back because there you go. But you have to factor that in as you are selling product, right? that you're going to at some point give money back on like 12% of those sales. That can take a pretty big bite out of that cost of delivery bucket. And again, I think in apparel that's pretty normal. It's just it's not really about whether or not people like the product.

It's like fit and sizing and all those kinds of things. Uh, you know, the things that you can do there are obvious to try to solve that, right? Which is sort of like show different different size models and tell people, you know, have it make sure that in your review section that people can say here's how here's my size and here's how this fit me and so people can get a sense of true to size, etc. Those things can all help, but the reality is people are going to try stuff on and send it back and that's pretty normal.

So, it sounds like you're expecting that. So, your unit economics, I think, are actually relatively clear. Are there any areas where you feel like you could feasibly take a big bite out of those going forward? Like, if you get a bunch more scale, are you going to be able to to have serious economies of scale on your cost of goods or anything? Yeah, our cost of goods have actually already started to go down as our volumes have gone up.

I don't know how meaningful it will be long term, but I think that COGS can go down a couple percentage points. I think our our CA is really good, but I think there's definitely still room. I our ads run really well with pretty low effort, I think, on our end. So, I think when we really dial into that, bringing that pack down could also be another bite. But other than that, I mean, I I think things are looking pretty lean.

Our opex has also Yeah, I mean, you're super lean right now, right? It's basically like you and one other person. And and so we'll we'll definitely talk about how you think about scaling that, but at least on the cost of delivery side, it sounds like basically the one place where you're going to see value over time in the design of your P&L is going to be is just going to be scale as as you order in larger quantities that you're going to be able to get some savings there.

What is your plan for for like packing orders and those kinds of things going forward? Like uh you said in a week that's going to change. Great. Yeah. So hiring a customer service rep who will take care of emails and packing shipping of orders. Yeah. So I think that's going to be an area we're going to need to think a little bit out in front of where you're going because if you get this to a5$10 million business that is going to get more and more challenging.

Storing all that stuff is going to get more and more challenging and it becomes Yeah. And it becomes I mean you live in New York, right? So, this is probably not cheap warehouse space around you anywhere, which can be its own challenge. So, thinking about how you manage all that, I'll just tell you from the outset, my my take here would be to move to 3PL at some point. And that's simply because of all of the capacities that you're going to have to develop as a business owner, as a first-time person scaling the business own business.

It's just going to be I don't think you want to learn how to generate and run a warehouse. I think what you probably want to do is pay someone to do that for you. [laughter] Yeah. Yeah. Yeah. Probably Yeah. maybe not the highest leverage place to put the a lot of time and attention because it's a big part of the business. I've talked to 3PL's before and uh my hesitation was their hesitation with the amount of SKUs that apparel brands are involved with and so and I also there's a element of not seeing the product and not having that kind of handhand access with it that makes me nervous at this point but definitely I mean hearing you say that moving to 3PL is something to consider definitely encourages me.

Yeah, you may be able to find 3PL's that like specialize in in apparel or that like are are particularly strong in this area. I don't have a recommendation off the top of my head for this kind of thing or maybe even worth just like apparel is like a known commodity in terms of people have solved this problem before you, right? So, this is one of those areas in the business where what I would probably do actually is pay to get some good and thoughtful help. somebody who has scaled an apparel brand before knows what challenges are in front of you and just can bring somebody in on sort of like supply chain and operations side of the business to consult with you and can talk about like how to do that well and I'm sure we could find you a good recommendation for somebody to do that and has relationships and those kinds of things to to solve that problem is probably the way I would think about that is it is a it is a particular challenge like the skew set in apparel is a real problem but there's a lot of apparel brands people have solved this problem and so it's definitely doable so okay so from the P&L design perspect perspective, we're going to have a pretty good performance on the cost of delivery side.

Your CAC is what is going to scale effectively here potentially. And now and and opex, you've probably heard me say in e-commerce is needs to stay pretty lean. It's one of the advantages in e-commerce, as I the way I always say it, right, is sending an email to a thousand people is the same amount of work as sending an email to a million people. So, there's real economy of scale um on your OPEX side as you grow. And keeping an eye on that number as a percentage with a with like a target around your forecast is really important.

But before we actually do that, what I want to do is sort of talk a little bit about how e apparel brands make money, the shape of their growth and of their business. And to do that, I'm going to share my screen here with you. Um, I'm going to I'm going to illustrate this. Still deciding whether this episode's going to end up on YouTube or not. So, uh, so we'll see. But this is an actual revenue chart from an apparel brand.

And the thing that you will notice about this over the course of a year is that the revenue is really spiky. So whereas perhaps some brands would have some longer term peaks and some some longerterm valleys depending on seasonality. Maybe, you know, you could imagine sort of a CPG brand, a skincare brand or something like that, right? where it just sort of like steadily grows and maybe there's some bigger spikes for some sales here and there or a new product release or whatever.

But in general like the sort of evergreen revenue is going to kind of scale along the way. But this is something you've already talked about as which is that like you've talked about collection drops in apparel. What I think is usually the case is that the way you are primarily especially going to make money is by having great performance in your collection drops. So this chart, if you're not looking at it, shows revenue kind of steady and then a big spike and then back down.

So it's like a three 4 day spike and then back down and then a 3 4 day spike and then back down and a three before spike. So the revenue chart does that throughout the year with the biggest spikes, you know, around Black Friday and that sort of thing, just like you would normally expect for anything else. Another way of thinking about this same thing would be, especially in DOC, a simple three-step process that you're kind of constantly moving through.

If it's the case that your revenue is going to spike uh sort of with Oh, let me make sure I got my screen share right here. Hold on. Okay. So, so if your revenue is going to spike at these key moments, then the way that you're going to grow the business is with a couple of basic steps, right? So, number one would be acquiring customers with high performing evergreen ads all the time. You find your best products, the stuff that's rising to the top at any given time, and you run ads against them, and you just keep running ads against them, right?

So those products are going right now you are currently doing that. I've looked at your ad account and you are moving that way. Okay. But then as you do that some people naturally are going to come back and you're going to retain those customers over time. But the real way that you're going to retain them is with more product releases and potentially sales. Now I want to also leave the sale conversation over to the side for a second.

We'll come back to that because I don't know how you're thinking about that in your business. But every time you drop a new product, you're going to take those customers who bought from you kind of along the way. And when you drop that new product, that product is now ammo, so to speak, to retain customers, people who love mixed, who feel like this is the way they think, feel, and do is supported by mixed as you said, right?

And it feels like something that they relate to and bam, new mixed products come via email, SMS, those usual mechanisms for driving that value in DTOC. they come and they buy a bunch and that retention revenue in those moments is the number one source of profit in your business because you have already paid to acquire that customer and so when you don't have to pay to acquire them again when you drop new product that comes and then of course now you have new product to put back into your ad account and use as ads and in fact I would say that in apparel every product you have even if the ad is exactly the same in all of the ads like it's the same photo but with just a different just a different piece, right?

Or the same video but with a different piece. I've seen uh Nasarin that you are in the early early stage of your business where uh you are the star of all of your ads pretty much. Not all of them but most of them. I love that. That's being smart about using your money and all that kind of stuff. It's great. But it would just be the same video of you. Here's another piece, here's another jumpsuit, here's another whatever it is that you're wearing.

And so now as you drop new product, of course, now that's fodder for a bunch of new ads. And if some of those work, it can increase the value of your spend because now you've got new creative to put into the ad account and keep scaling. So not that ads, not that ads are the only mechanism for growth, but that that is ends up being the way you do it. And if you kind of rinse and repeat that cycle with as many collections as possible and as many products as possible, as much as your cash will support, as much as you can do without stretching yourself too thin, that ends up being the mechanism for at least using Facebook ads in particular and maybe Tik Tok ads and some other channels to grow your business as effectively as possible on the paid side.

If you can rinse and repeat that, that ends up generating a bunch of business for you. the more retention revenue you have, of course, the more aggressive you can be about that or the or the better your rorowass is, the more aggressive you can be about that. But that tends to be the cycle of that. So, let me pause there. I just talked for a long time, but that's that's the way that I see this kind of growing and building operational plans around executing that that playbook ends up being a really useful sort of way to think about where you're putting your your time and energy.

So, let me pause there. Any thoughts? Yeah, no, that's exactly what we're doing right now. And so I can do you want me to speak to a little bit about how Yeah, please you know managing that. So basically what I'm doing right now is we have a collection drop which is very limited in quantity. Every skew is or every product is limited in quantity for our collection drop and that's partially to create scarcity but it's also to protect against you know over buying inventory.

And then we our our factory partner thankfully we work together very closely and I'm a really different kind of client for them. So they work with a lot of bigger corporations who order 90 days out whereas for me I they need to be a little bit more agile and so they're willing to do that which is fantastic. And so awesome drop this seasonal this limited collection we see what does well and then we scale those products as as it makes sense to scale them and then we take those products.

So we right how fast is the turnaround time on that on in terms of production? Yeah. Like so, so let's say you you have your drop, you see which products do best, and then you place your reorder. That's what you're saying, right? Yeah. Yeah. Place the reorder within a couple of days because I find that our customer base and what they're drawn to is a really, really good sample and test size for what ends up scaling when we run ads.

Okay. So, you place the order within a couple of days and then when do you get new product? When do you actually stock the product off? Yeah. So if we have fabric on hand or we have plain fabric on hand that we can then print on. So this is another piece of this business that makes lead times a little bit longer is that every fabric is custom made and custom printed with our own you know proprietary designs. And so if we have that fabric on hand it can be as soon as you know 3 weeks 4 weeks and if we have to order the fabric then that's 6 to 8 weeks out.

But what we've been doing is we run ads against these high performing products and we run it on a 6 to 8 week pre-order. And even at a 6 to 8 week pre-order, people buy them and they buy them at a really, you know, for us it's it's profitable on first order. And so what I've the only downside to the 6 to 8 week pre-order is that it then creates some kind of operational weight on customer service because there are some emails, where's my order?

Update on the order. But that is like a totally fine cost to incur for getting a 68 week pre-order. We get the cash up front and then uh you know we're able to also then have a better idea of how much to order and how much to buy. So that's that's what we've been doing and it's it's been working quite well. That is awesome. It sounds like you have a a partner in your factory. This is one of those crucial things with the manufacturing partner where they if they can see the vision for your business and if you can show them growth the way that you have so far where you've gone from 100,000 $130,000 last year to a couple you know couple million dollar run rate where you did your first $100,000 a month.

They're going to see that presumably get some eyes for okay we want to partner with this person their business is growing and and like let's let's make sure we do it. So okay that is awesome. So because the whole game here is about the ability to generate design that resonates and it really is an aesthetic preference issue in that respect and your ability as a brand to actually command interest in your aesthetics, right?

So there's so part of it is that like people respond with aesthetic preference, but also you create the aesthetic preference by making your brand more and more resonant with people. And therefore, if you can actually do that and see which stuff is selling and you've got a partner who can get you stuff that fast and you can realize the cash up front, now you have the elements of being able to to do this repeatedly really, really, really well without the cash risk and all of those kinds of things because especially in apparel, outlaying all the cash to hold a bunch of stuff in stock is a big big challenge.

You were going to say something about that earlier too, I think about that about that challenge of of cash outlays. Maybe maybe it was what you just told me. I think just maybe getting more clarity about what it looks like to, you know, now that we're because right now our production is kind of catching up to where we're at. But I feel like we're kind of always playing this catch-up game. By the next time we get our next lot of inventory, we might be at a different run rate.

And so I'm curious about how how c how to manage cash flow when we're thinking about when we're currently at a 2.5 million run rate, but do we then project for something higher so that in 3 months we can be where we need to be? Because right now we're constantly waiting on new inventory to arrive. A lot of things are on pre-order. So, it's not the best experience for the customer. I would really like to have pieces on hand to be able to ship right away.

Of course, there's the downside of then you might have, you know, dead inventory you hold on to for too long, but yeah, just kind of figuring out how to strike that. Great question. So, let me let me ask you a question response to that. So, do how do you currently manage cash in your business? What do you what do you do to make sure that your cash is in a good spot and to forecast like when you're going to need more cash and when you're going to lose cash and all and gain cash and all those things, you know, how do you currently manage that?

I don't have any specific tools to excuse me. Great. It's great. Yeah. Yeah. You sound you sound sheepish with that answer, Nazarin, but don't worry about it. You you are not alone in that, right? So, let's ask another question. What are your payment terms with your with your manufacturer? So I paid them when they ship the goods and this is another way that 100%. 100%. So this is another way that they've are like they've helped me out.

They are really invested in our growth and kind of you know in support of us wanting us to grow and so they're great. Great. Yeah, I would say those terms are are okay. I've heard different things in apparel and of course the larger you get the more that you're going to be able to work those terms in different ways. Okay, so let's talk about the first thing and this is this is like a this is homework for you now that you must do and I will put a link to this elsewhere as well.

But it is time to start managing the cash flow of your business on a 13week cash flow statement. So you could actually start projecting your cash movement over a longer period of time like forecast over the course of a year etc. But the place that you want to be absolutely dialed in is a rolling 13we cash flow. So, as every week passes, you add a week to the next to the end of it, and you just always know 13 weeks out, basically three months out, right, where your cash is going to do going to go.

Just again, don't feel sheepish about this. I have another client, financially sophisticated, really intelligent, but hadn't managed an e-commerce business quite like this before. And I talked to them about um implementing a 13-we cash flow, and they came back to me and they said like like that changed my life essentially, right? It's it's remarkable like a lot of people just don't do this. But what you will begin to see is the cash scenarios that happen as you order more and less aggressively and you'll know all the time.

It will become sort of the bible of your business in a lot of ways because because you you're generating profit. There's no question about that. The question now is like how do you make sure that as you generate profit you don't move cash. I talked to another entrepreneur recently who you know sold inventory from two years ago in an apparel business that the or the inventory was ordered two years ago. And so that means that for the entire two years that has been an asset on their books theoretically, right? because that's the way that's going to be seen.

That means that cash is tied up for 2 years and then when they sold it 2 years later, they sold it at quote unquote a loss. Now, is it really a loss? What they actually did was took 2-year-old product that cash was tied up in and turned it back into dollars and into actual cash. And they also technically had a loss on it because of the rate at which they sold it, but that inventory was not going anywhere. And now they can actually mark and harvest the loss on their taxes instead of paying 40% of their profit off of that to the government for their taxes.

They could instead mark it as a loss on their books while getting cash. It ends up being a big win. Now, you can't do that forever. You have to actually make money over time. But with old product in particular, that can really that can really be an important element of how you how you manage cash in your business. So, so 13we cash flow that is something I would say as a CEO that I want you to like be really tied to and as much as possible be as close know exactly where that is alongside your balance sheet alongside your P&L just to have those all the time and if you need help with somebody generating that for you get it get the help you need pay for it do whatever you need to make sure that you're as clear as possible on that I have a couple of great resources to help you think about the financial management of your business let me just uh name them this is one of them actually um is a sponsor that I've had but talk with settle they are developing a bunch of tools that are really interesting for for cash management in your business, including inventory financing.

And they actually do inventory financing at a clear APR, which I really really appreciate. And it's not an egregious rate. So, um, one possibility here is to to push those payments out at a pretty low like 1.4% per month. So, it ends up being, you know, roughly a 18% interest rate or something like that. And you can pay it back whenever. So, yeah. Actually, I don't want to over quote what exactly they're going to tell you, but they're going to look at your inventory and they're going to lend you lend to you against that inventory and and then pay the inventory for you.

So, you can actually use that for cash management if you need to. And the other thing about Settle is they actually are developing like a larger suite of of sort of like financial guidance tools that are probably worth a look for you. Uh the other one I would say is my friend Bill Alessandro has talked about this. He's been on my show and you might have listened to his episode. Um, but he'll actually do like consulting with you directly on this issue to where, you know, he'll come and coach you and sort of through, hey, let's get you the right credit card stack.

Let's get you the right finance stack. Let's really do a deep dive analysis on this. And you're probably getting to the point of sophistication here where it would be good to get like careful stuff, but it all starts with that 13-whee cash flow. I'll link in the show notes here a 13we cash flow guide doc. It's like a it even comes like I can get you like a pre-filled out template basically. So, you just fill in your stuff.

It shouldn't take a crazy long time. your business isn't that complex to to to fill it out and you can start to know. So then you'll know, okay, if I order this much stuff and if I project this much revenue over time, I'll know exactly how cash is moving through my business along those different elements. If you're paying for your ads on a credit card, then you pay the credit card 30 days after the month closes. So that's when the cash is going to leave, right?

All of those kinds of questions come up in a in a cash flow statement like that. Yeah. So right now I'm doing all of this in my head and I have some of it also in like an Excel sheet. But I think this is so endemic of the of everything that's going on right now is up to this point everything has been in my head and everything has kind of worked and now it's time to take everything out of my head and turn it into a process and make it really clear um so that somebody can help me.

You'll reduce the latent anxiety in your life by having a 13we cash flow. Like you'll sleep better at night. I promise you. So this will be like a helpful life. It'll be like therapy for your business. It'll be great. So that's awesome. Okay. As far as the actual strategy goes, now there's there's a strategic question. So how much did you order? So you have a great setup and one of the things I want to commend you for is like having a manufacturing partner who's doing this because test and grow is the actual like best thing you can do.

And the most you can shorten that lead time between testing and then getting enough inventory at more scale like that can be a superpower in DTOC. So there's an example of this that I always site which is I talked to I think it was ColourPop a long time ago giant makeup company that they're you know you know ColourPop I don't know the brand but I were you talking about it on your on one of your Yeah. Yeah. So I'll repeat the story because it's really helpful.

They had actually figured out how to make it so they could go from testing a product to like having full production in stock in like 7 to 10 days basically. So they were just incessantly testing stuff seeing what was hitting with their customers and then bam scale production and get it in front of people which is incredible. And so, you know, look, you're not going to be there today and tomorrow and that's fine, but it's kind of a goal to shoot for is like how much can I shorten that lead time with these folks and what do I need to do to accomplish that?

Because if you can test product and then scale winners, uh you can you can be really really effective really really well because that stuff works. The other thing is at the actual creative level on Facebook um in particular the thing you're selling is a design and therefore your creative fundamentally needs to be focused on the product itself and the design itself. And this is why like design A and design B despite being essentially the same, you know, very similar products from a very similar brand can perform wildly differently on Facebook ads because people are just going to respond to one design differently than the other, right?

And so, so really building an ability to kind of test those at scale ends up being really important for the growth of your business. So, so yeah, so what I would say is you told me you have a 20 to 25 year timeline and you're growing really fast right now. I would say don't order too aggressively. I would say order medium aggressive and take a couple risks along the way, something that's not going to tank your business or anything like that, but see where you're at.

And then if you can't sell through it or or whatever, well, now you know, you know, your cost of goods is not particularly high relative to your revenue. So, you shouldn't get yourself in too big of a of a pickle here by by over orderering. And if you're always undering under orderering right now, then we probably need to think about your forecasting and some of those things. But yeah, that's what I would say is like push a little, but don't push in a way that's going to really create super like giant problems for you.

And you're right, like the urgency in a fashion brand is probably a good thing. The ability to limit the the scarcity is probably a good thing. So, so yeah, that's that's probably a baseline way I would think about this relative to your forecast at a given time. So, let's actually do talk about two other things there. One of them is let's go back to the sale conversation. Do you currently run any sales? We do sales a couple times a year.

So we have like our brand birthday which is in July and then we'll do you know the Black Friday Cyber Monday deal and maybe we'll do an you know end of season but I would say two sales a year and then maybe a third okay in half of the year. So for us our peak our peak seasons um are mainly summer but you could say spring spring summer. And so it's kind of nice to be able to have those sales later in the year so that all that peak in that inventory that we have probably higher quantities of can then be sold through.

Awesome. So is is there any hesitation for you around So you're going to be much more connected to your category than I am. Is there any hesitation for you around running sales around brand value or brand devaluing or any of those kinds of things? There's not a huge hesitation. I think that sales are normal within any brand, fashion brands included. I just think right now we don't need to do it. And so we don't that's that's really how simple the thinking goes right now.

I think that's that's a great way to do it because the more you hold off on it, the more that you make the next one bigger. This is the other thing about inventory ordering though is that if you have slowmoving inventory, it's perfect fodder for a flash sale or something like that. And so I would think about kind of two buckets of sales in apparel. One of them would be something like Black Friday or whatever where you're just going to give people 20% off your products because it's just part of what you do and that can be really effective.

You do a couple of those per year like you said brand birthday could be another one etc. And then between those I would think about something like you know warehouse sale type stuff or even having a sales section of your site if you wanted where it's just slower moving stuff that you need to turn into cash so you discount to move it. And like exactly like you said if you don't need to do it then you don't do it right for those ones.

If you have stuff that's like it'll trickle out and it'll be fine then great. But but yeah, that's the way I would think about that. As long as you're willing to do that, I think having those kinds of things is a is a good way to move inventory along the way. And the more of it you need to move, the more you can put that stuff into like actual ads and those kinds of things and really try to pump the volume on those. The the only thing to track there is if those customers end up being less valuable to you long term than others and to think about your targeting differently than then elsewhere.

But yeah. Okay, great. There was something else I was going to say about that and I don't remember. So that's okay. So there's the foundation of what we're trying to do. So now what we have to do is figure out operationally how you have these collection launches, sales in between that. I would build Do you have like a longerterm marketing calendar built where that stuff is filled in? I I don't have it's in my head. I don't have one right now.

Great. Okay, cool. So I would start working on that as well. Get yourself get yourself some some kind of marketing calendar on hand to where you have some idea of when those collection launches are going to be. Start planning them. Uh because this leads to the other thing. This is what I was going to say. Uh is a forecast. So, how are you forecasting right now? [laughter] forecasting very poorly and my m my factory is also getting on me to do this better.

Inventory planning, inventory forecasting. Is that what you're talking about? Yeah. Well, just revenue forecasting in general and that's going to have to go down at the operational level by inventory because at some point you're going to need to know how many pieces you're getting to. And again, you you sound sheepish about this, but just so you know, this is like a classic problem at this stage of business. You're growing fast. you didn't really lived in your head was fine at $135,000.

It barely matters when you're talking about this kind of run rate you're at now. Now you actually have to start planning and building these kinds of efficiencies into your business. Yeah. So I'm I'm using some historical data to figure out, you know, and and also thinking about summer being our peak seasons and then thinking about when new collections come in and also some gut feeling about what silhouettes, what products I think are going to do really well.

And so those are all that's all I'm taking into consideration to figure out month by month. what is our revenue forecast and also looking at like ad fatigue and and as like you know we scaled ads up from March March to April and they didn't see really any kind of any kind of fatigue on the same ads just pumped more money into it and so using that as also an indicator of like how much more space do we have to spend on ads with it staying in the same range or you know remaining profitable I know some brands go to to like the break even point which I'm I'm curious to talk to you about it is it's not, you know, it's not necessarily where I lean first, but interested to get your thoughts.

Um, so yeah, based on that, I I've been planning out month by month what the forecasted revenue will be and then like you said, against that the inventory that needs to be forecasted as well. Okay, great. So, let's talk about another thing. So, uh, let me actually let's talk about you for a second and who you are as a as a leader and as a and as a business person. So, you are a designer among other things, right? You're the one designing the clothes.

If I give you two potential jobs, one of them is to build a 13week cash flow forecast with the help of a spreadsheet that I'm going to give you that's partly filled in. And the other one is to go design design product, which one of those, if you get to choose which one of those you are going to do, which one are you going to do? Gosh, it's really hard to say. I really enjoy both the design product but also running the business side of things.

I think you gave me what would I want or what would I be best leveraged? Well, the the reason let me tell you why I'm asking because for some people when I say I'm going to give you a a worksheet for a 13-inute cash flow forecast or for an LTV based revenue forecast, both of which I am going to give you in this conversation. So, for some people that is a herculean task. They just it's not why they got into business. They're product people or whatever it is.

And there's actually not a right or wrong answer to this part of it. It's just a matter of like how you're going to have to think about how you plan your workday and your engagement with it, etc. It's what I'm reading from you right now is that you're if I give you those things, you're going to go, "Great, let's do it. Let's go figure it out. It may or may not be hard or easy, but like uh and you may or may not get stuck along the way.

That's normal." But but it's not the kind of thing that is going to bog you down and you're going to avoid it and put it off or anything like that. No. No. I I really enjoy both like the operating side and the product design side. And I think that is why initially the business has been able to be so lean and profitable early on is that I'm doing product and design and I'm doing marketing and you know all pretty everything up until a certain point.

And so I understand that cannot be the way it continues to grow but I do like to generally have a touch point. I feel very I feel nervous to completely turn a blind eye to a certain part of the business. And so I think like the finances and getting deep into that it's exciting for me and I it's not something I would shy with. Yep. Yeah. And I mean I think part of the part of the deal here is the leverage question about like you know the more design that you guys are doing to where you're you know if we if we talk about the plan we just rolled out where there's like a lot of product design happening and these collection launches get bigger and they get more frequent and all those things right so I've talked to one apparel brand where they had figured out that like this same thing right that exact same chart that I showed you where it's like spiky revenue peaks around drops and regular collection launchers.

So they figured out, okay, we're going to launch a collection every two weeks. Some of them bigger, some of them smaller, but every two weeks we're launching a collection, and we're going to put it on payday. Put it on most people's payday on Fridays, etc. Right? If that happens, then you as a if you're designing, and I think the brand is mixed by Nazarin. So like, you know, you are this is this is a designer brand and you're the designer, right? then you are going to probably have to put a ton of time into into product design and at some point you may have to to get some help on some of the revenue on the financial side of things. cuz now you could be in that conversation, don't get me wrong, but yeah, it may be the thing that you have to spend as much time as possible doing that.

And when you think about scaling your business about adding help on these other things now, you're not again, you're talking about $2 half million run rate, not a $50 million run rate. So like the volume of this stuff is probably manageable now. And I think you'll be better suited to manage and work with folks along the way if you're actually if your hands are in this. So um the next thing I would say we need to do is build an LTVbased forecast.

Yeah. So this ends up being really important in a couple of ways. So the one of the great beauties of DTOC is that you can see the exact value of your customers over time and you can actually forecast the exact values of your customers over time. So there are basically three elements of of an LTV based forecast. The first is how much you are going how much customer new customer revenue you're going to generate via paid channels.

Right? So what's your Facebook spend going to be? What's your Facebook revenue going to be? How many orders is that? Okay, so before you get to the inventory side of this, just just just do the numbers. Just dollars, orders, customers, right? That kind of thing. So, we'll do that. And again, I'm gonna include a link here to an the great people at the venture firm Lightseed have put together a pre-filled out template for using for for their model for an LTV based cohort, excuse me, a cohort-based LTV forecast for your business where you fill in these exact pieces of information.

It will spit out a forecast for you. So, it's giant spreadsheet. It's really helpful. So, if you you start there, paid customer acquisition. The second would be organic customer acquisition. Sort of like, are you getting word of mouth on this? One of the beauties of apparel here, right, is that people are going to wear that jumpsuit and they're they are going to see with their friends, oh man, that is awesome. That is beautiful.

Where did you get it? And they're going to say, oh, it's this really cool up andcoming Brooklynbased brand called Mixed by NASA. You got to go get some. And people will go do that. Okay? So, you'll get some organic off of that, etc. And then the third would be returning customer revenue. So you should be able to forecast over time how many of those customers come back. So I will link to the light speeded model and uh again that's in the show notes.

You then can fill that in to basically give those three things. Now the thing that is going to be almost impossible for you today is to figure out exactly how much money you can spend relative to or at the performance that you want because you're just still so early. So let's actually talk about some really specific numbers here. Okay. So in January on Facebook ads. So, do you know what your spend was last year total?

Oh gosh, it was I want to say maybe 20,000. Not much. Yeah. Right. Not not huge, right? Across across the year. I could pull up the number, but we we won't right now. Something like that. Okay. So, in January, you spent 2,200. Okay. In February, you spent 21,000. In March, you spent 25,000. And this month, we're recording this on April 25th. You've already spent 36,000. Okay? So, we are in a phase of growth here where you have no idea what the ceiling of your Facebook ads spend.

It's totally possible you could spend $200,000 a month right now and that your business could be a lot bigger. Now, your return would definitely decline some, but that's the case. So, so how you project that on your LTV based forecast is going to be really tough, but it's going to be the crucial element of this alongside with the returning customer projection. So, let me pause there. What questions do you have? No questions.

I think what I'm doing right now is I understand that there's a lot of room to be able to up the ad spend. I just want right now I'm trying to make sure that we have the correct systems in place, the right people in place to be able to then pump up the ads because my fear is that we then increase ad spend a ton and then everything breaks and people have customers have a poor experience shopping and bad word of mouth spreads and that's really what I want to avoid.

I just want to make sure that we are ready to take on a higher uh degree of ad spend. Great. Okay. So, so we haven't so there's two things that we haven't really talked about in that forecast, right? The first is what kind of return you should be pursuing. So, you you mentioned this earlier. Should you spend to break even? Like should you spend at a loss? Like like should you spend at a should you be profitable in first purchase?

How should you approach this? Okay. And the second thing is how much your customers are going to come back. So, let me show you a report that I love as a baseline thing to see about customers coming back. It's one of the first things I look at when I look at a business, which is, let me pull this up here. Here we go. First-time returning customer revenue report in Shopify. So, this report is really, really helpful. I'll show people how to get to it right now.

If you go to analytics and then reports and what I always do is I just go to the search bar here and search first and it's this pre-built first-time versus returning customer sales report in Shopify and people who are looking at this can see that the uh number has grown significantly here. This comes preset with orders. So if you look if I mouse over here I've got 359 first-time orders in February and 23 returning customer orders in February.

In March the returning customer orders go up which is great. So, the first time orders, etc. Um, but I actually like looking at this at revenue more than orders just because that's that's the thing that ends up mattering more. So, uh, if you go to this filter here, you can filter out orders, etc. I've already done that. So, there you go. So, what you can see happening here is that as your revenue is growing month over month, your first time and returning customer revenue are both growing.

In March, did you have a collection drop? Yeah. Okay. So, that's why there's a spike on returning customer revenue. And let's take a look if we make this daily. Yep. So, here's your spiky revenue chart, right? You had a collection drop right here, right? And that would be the date on March 19th, you did 25 grand. The day before you did six grand. How happy were you? What was it like at at Mix by Nazarin HQ on that day when you did 25 grand in revenue?

It was great. It was great. It was I was curious to see what would what was going to happen given that we grown, you know, some bit more up until then. So, I'm really I'm really to see what happens in our summer launch, though. Yeah. Awesome. So yeah, we'll see. We'll we'll start watching those spikes for each of those launches. Okay. And by the way, like part of the logic of the of the sort of like launch and grow launch and grow strategy I was talking about earlier in apparel is like when you look at this chart, it's very easy.

You just look at the highest number here, the big this big spike on March 19th, and you go, "Wait a minute. What if we could do more of that? What if we could do more spike spiky days like that?" It's like, "Okay, great. So how do you build to do more of that?" So, so you have some returning customer revenue that's coming, which is awesome. And so that's good. You're definitely It's so early in your business that who knows what the returning customer revenue will ultimately get to.

But what I would want to do is think about how can we take this data from so far, which is going to be so far a pretty small set of data, right? Like you said, not very big last year, growing really fast, etc., and project out the future. My favorite tool for this would be Lifetimely. Lifetimely is as a as a basic way to look at your lifetime customer value and project off of that. That can give you a lot of help really really fast.

So uh I'm going actually pull that up as well. I have it here. Let me do that. So in lifetimely there is this cohort tab. And actually I should say now that CTC and Status Status is Common Thread Collectives tool for this has a lot of this LTV information and very soon I believe we'll be rolling out an automated LTVbased forecast that can actually take all this information and put it into the spreadsheet for you. And that will be an incredible tool for for entrepreneurs.

You'll be able to adjust it, but it will bas basically take all of your past historical data around customers and say here's how much they're worth over the long term. So what we got to figure out is essentially like in some way or another how do we know what a customer is worth to you over the longer period of time. So what this cohort analysis does in in lifetimely is looks at your historic orders and says, okay, if in month zero they spent 100% of their AOV, which is just to say on their first order, if they spent $100, okay, their first order is always 100% because there you go.

How much percentage increase in value are those customers worth over the next month, 3 months, 6 months, year, etc. and how do we project the value of those customers over that time? So, so this is going to give you some charts to look at what those customers have been worth to you and then you can roll it all together into averages, etc. So, so we'll actually shorten this up a little bit. We'll say since 2022. So, I think um Sorry, what?

No, please. Yeah. So because the sins were just shy of two years 20 and before this we've never had a full year of all four collections. In the past, we've only done two collections a year. And so I think that like by the end of this year, we'll have a lot more data around LTV and then understand around how often people come back. And also to note that our collections tend, they're not huge. And so if someone's coming and buying one to three pieces, sometimes people buy four or six pieces, the likelihood of then someone coming back within the same collection to then buy more, it's it's just lower.

And so that's why I think that having more of the collections uh and more yeah drop opportunities. Yeah. So then so then what you would do is you would adjust your LTV projection up and that would be a really reasonable thing to do. But basically we need to come up with some number that we believe over the course of a bunch of months end up like telling us how much our customers are going to come back. And so these percentage increases are like again if I spent $100 in o on as my first order in October 2022.

Then what else what lifetime is telling you here is that I spent another $22.60 by total on average over the course of the six months since October happened. And so that's that's the basic idea and we got to get some average to that to project. So maybe over the course of a year, you know, monthly over the course of the year. Right now we project 40 50% increase. And maybe we we we tick that up if we think we're going to have more collections, more sales, etc.

Um, and we try to beat that number. Right? So now you have the two foundations, which is you've got your current Facebook performance, which you spent 35,000 so far. Let's call it 40,000 in April. That's that's about what we're going to do. We're going to have a return on that projection which is going to be something like I mean for you it's going to be like 120 $160,000 because your ads are printing money right now.

You got like a four to one end of month. Yeah. Right. It would be something like that off your ads. So you so you're smashing on your ads. Okay. So now you have to figure out like how much more should I spend and then you're returning customers off of the back of that then are going to be worth money to you over the course of at least a year. And what the light speeded model will do is allow you to kind of fill in those numbers and build a projection.

And then from there as you manage moving forward, you will just basically look at that every week and say, "Okay, if I project 20 grand in spend this week at 60 grand in return, that's 60 grand in new customer revenue." And in returning customer revenue, I have my LTVbased model telling me over the course of the month. Let's say the month projects for $100,000 return customer revenue. Well, that means I need $25,000 this week, etc.

And then you just track that as you go. Every week, every week, spend, new customer revenue, returning customer revenue. And I'm at a point now where I basically don't look at total revenue charts anymore. I only look at new and returning. I just like I'm always thinking of them totally separately because as you manage your business going forward, those are the two key things to be looking at all the time. How much revenue am I getting from new customers?

How much revenue am I getting from returning customers? And then of course, like how how's my spend against that? And there's a million other metrics out there. A million. And there's so many things everybody's going to tell you. You have to do this, you have to do that, you have to do this, you have to do that. But Nasarin, please hear me. The most important thing you do is that you know where your new customer revenue and your returning customer revenue are at and your ad spend are at.

If you get those things right and as long as you don't go spend some crazy amount of money on opex that or whatever, you know, go blow that number out of the water. As long as you do those things, if doesn't matter what your attribution tool says, it doesn't matter what all these things say. At this stage of business especially, all you need to do is is keep an eye on those things and you'll and you'll be safe. You'll be safe because you'll be able to project new customer revenue, returning customer revenue, spend, and then of course put that into a cash flow dock as well, and you'll know how cash is moving through the business along those ways.

Now, you'll have to project some spikes and some lower parts, and it'll be a little bit trickier on a week- toeek basis than just like again a business that is less spiky in in its revenue, but that's the way I would do this. And so I'll also include a link here to a sheet that I've used to just like track that week overweek. It's a really simple little dashboard sheet where it's just like a projection and how am I doing against it and and I would if I was you manage weekly team meetings with key stakeholders against that KPI sheet, right?

So you build your so so now what we've got in your business is as you're starting to scale an LTV based cohort projection, a cash flow model and then a way of course you've got your P&L and your balance sheet as well. I'm assuming those are on hand somewhere. Somebody's helping you build those, whatever. And then and then from there you have a marketing calendar ideally as well. And now uh and a and a weekly dashboard against which to measure those things.

And you can see all along the way how am I doing? How am I tracking etc. So, so right now when I look at this LTV sheet, I'd probably say, you know, your monthly cohorts are going to be, I don't know, somewhere along the September, October, November cohorts where it looks like you're getting about 25 30% maybe actually maybe a little bit better than that over the course of 6 months and then maybe you've got like a 50 to 60% increase over 12 months in customer value.

Uh, and if you can fill that into your sheet, then you have an idea. And now that means that we have the basis for setting targets. So, let me pause there again. And do you have any questions about that? No questions. I I think I'm just still fuzzy on what like how reliable this LTV number is going to be at this point. Not that reliable. Yeah. But it doesn't matter that much. And the reason why is so all you need to do here is the LTV number is not that reliable yet for the exact reasons you've said.

If you're going to drop a bunch more collections, you're going to you're going to you're going to definitely affect that number in meaningful ways. And I'm sure there's ways we can execute those collection launches better. Your email and SMS plan can get better. Your capture can get better. And we don't have time to get to every single detail of that all along the way, right? But if you have some basic projections, you'll know if you're beating them consistently or not.

And the thing is, if you track this weekly, your returning customer actual revenue versus what you projected, you'll know pretty quickly whether or not your projections are wrong. Right? So, so I've got one I've got one client, for example, that has been beating their return of customer revenue by 50% every week. And so, at some point, that's great. You you high five about that, right? That's great. But also, at some point, you got to adjust your your forecast up.

Uh because it's actually a problem if you beat your forecast by too much because then you're not going to plan inventory accordingly, all those kinds of things. Got it. And is there like a specific breakdown that you would recommend returning versus new customers, percentage, like how many you want? Yeah. like what does that what's a good percentage look like or does it does it change whether you're in a growth stage or mature I think in apparel you want it to be relatively high returning customer-wise I'd say anything over 50% in a year is pretty solid but actually it just really depends on the category so there's not really such a thing as good I mean I it you know you I think have the beginnings here of what is a very good business and the reason I think that is that You've got high margin and you've got you've got good LTV even though we're still so early on it and we can do more collections and again probably execute collections and sales better along the way and you have ads that are printing money.

That's pretty much the magical mix of things to do. And now if you can actually generate more return in customer revenue over time if you can get that number up to like 80 to 100% value increase in a year you can be putting up a very big ad spend acquiring a lot of customers really profitably and start growing a very large business very fast. Now this comes back to your goals which is like the aggressiveness with which you pursue that is going to be really fundamentally related to what you're trying to build.

And so if I was you, you asked the question earlier about like should I be profitable on first purchase or not? Especially in the earlier stages of your business. So, so the first way you answer that question is based on LTV, right? So if I have I've looked at a brand that had basically 150% increase of customer value over the course of a year, almost 200%, right? So if I spend $100 on day one on my first purchase, that means by the end of a year, I'm worth $300 to the brand and it's high margin.

That brand should be bending over backwards to build a customer acquisition machine and should spend as much money as humanly possible acquiring customers and should finance that growth. If they are profitable on first purchase, they're doing it wrong because they're just the customer's so valuable, right? When I ran FC Goods, and I've talked about this a lot of times, the customer was worth no money almost after the first purchase and therefore I had to be highly profitable on first purchase.

So for you, you're kind of sitting in the middle, but you're also high margin. And and we think we can affect that number. I I think we can probably get you to an 80 to 100% kind of increase over time. So, what I would say is like you you could be reasonably aggressive here, but I would also say you're in an earlier growth stage. The complexities are real. Your concern about the operational challenges, building a team really fast, building out all your financial forecasting stack really fast, all of those kinds of elements.

Give yourself some wiggle room here. Like, don't do take advantage of the moment. Don't scale yourself in such a way that you risk making a massive mistake and dying. Do do you see what I'm saying? 100%. It's really about walking this this fine line. Yeah. Right. That's exactly right. So, there's always it's always challenging for me to answer that because I want to be opportunistic in the sense that like you do have this ad spend that's like again printing a 4 to one return and and just like everybody listening to me right now is like their heads are exploding if you're not spending more money because they're you're going they're just like they're so mad at you and Azarin.

They're just like how does how is so easy? And the answer is it's not that easy. Actually, Nasin's probably a great designer who's worked a lot of hours to try to figure out her design and all those kind of things, right? So, it isn't actually easy. But where you've landed now is in this incredible place where everybody else would love to be where you're sitting. And so, you do definitely have more room in your spend uh if you can support it with the inventory.

But that's the kind of way I would think about that. So, I'd start by building that forecast and then and then you kind of look it over and say, "Okay, well, where can I beat it? How's my cash going to move through this, etc. Am I going to be any places where if I miss this forecast is a big risk in the business? Uh particularly on the cash side of things, uh etc. That's that's the kind of stuff I'd be thinking about.

You'll be able to answer that question much more clearly when you have those two documents in hand. An LTV based forecast and I get 13 week cash flow. Yes. Right. If you do this and you're like, I'm sitting on $500,000 in cash and my payroll is $100,000 a month. Like Yeah. Then, you know, I don't know, and you have plenty of inventory, then it's like a a really different challenge. It's like you might have some more room to push, etc.

Or maybe a million dollar in cash is probably a better way of saying that with $100,000 in payroll, then then yeah, you you could be more aggressive. Let me pause again. Any other questions there? No, no other questions. Okay, cool. We'll keep going here. And so, we've got the basics now of of your growth plan figured out. Now, the one of the things about all this is that it works because the brand works. It's like you've done all the hard work already of like creating products that people love, designs that people love at a high margin.

You've got a factory that is like working with you as a great partner like we talked about. You you're doing all of these things that are sort of like actually core and fundamental to making brands work. And my job in this conversation is really just to figure out how to help you, you know, scale it. Basically, this thing that kind of already works. Let's just think intelligently about how to keep moving it forward. In some ways, I'm just the bump in the set here, but you already you're the person who spikes it. like you you've you've done all of the important work which is really important.

I'm just trying to set you up to keep bringing it home. So that comes via intelligent financial management and thinking carefully about how to like, you know, get a really clear head around what's going on in your business, how to forecast as well as possible. That's going to reduce chaos in your business. That's also going to tell you, by the way, how much cash uh not just cash, but how profitable your business is and how how much cash you'll have on hand to think about hiring jobs out, which you've mentioned before as well.

Um, which is definitely really important. So, one way I'd think about that is now that you've got an LTV based forecast in hand and and you're managing cash along the way, now you can actually roll that straight into your P&L because you'll know you you've actually solved if you think back to our P&L design. If you're if you're building an LTV based co forecast, you've got revenue, you've got cost of goods and everything associated with that, right?

Cost of delivery, you've got CAC because we just talked about forecasting your ad spend to some degree off of this. And then the only thing left is OPEX. And so if you just try to keep your OPEX at a pretty low number as you scale and and try to run relatively lean, which I think is probably wise for you, I think OPEX around 15% of your business is probably a good target to be aiming at. And that's more than just payroll.

So there's there's some software costs and some of those things in there. Um, you know, you can get it up to 20 potentially if you if you need to, but but I would try to be in that range basically and you're you're in a pretty good spot then especially with your CAC where it is and that then that can keep you in a healthy spot. I would say probably 20 would be a pretty aggressive opex for you right now. And that's because yeah, you just don't need it for to do what you're doing.

And and also that would reflect only that would be only something you could do if your CAC stayed incredibly low as a percentage of revenue because with your cost of delivery where it is, yeah, you have to find profit somewhere and opex is going to be part of where that comes. Hey, I'm going to interrupt this part of the show to tell you about more staffing. my sponsor for this episode of the show, More Staffing. You've heard me reference before, you may have even heard my interviews with their founders and their CEO.

I love this sponsor. And the reason that I'm interrupting at this point in the episode, talk about more staffing, is because I am talking with Nazarin at this point in the episode about how well the opex in an e-commerce business scales. I mentioned to Nazarin, as you just heard, that you can keep opex low as a percentage of your total revenue and create profit in your business. in e-commerce in uniquely powerful ways.

It's part of what makes e-commerce businesses work. Part of the way you can do that is by adding incredible talent to your team at a much lower cost than if you added that talent in the US by hiring great e-commerce talent in the Philippines. E-commerce businesses in the US can pay competitive rates, actually great rates in local standards in the Philippines, which attracts great Filipino talent, and it will be much less than if you hired those same employees in the US.

So, it is a win-win across the board. And that process can be tricky, but more staffing can help. These are great people who have run their own e-commerce businesses, built up Filipino teams. They know where all the friction points are, all the challenges are, and they can help you do the same thing. So, if you are looking to grow your team, you want to do it at less cost with incredibly highly talented people who are great English speakers, who are hard workers, all of the things that maybe you would be concerned about with hiring overseas talent.

Those are not concerns. when you're working with more staffing because they will smooth the whole thing out. They even have a one-year guarantee if their employee that they place with you, if the talent they they place with your business does not work out in your business, if you uh separate from them within a year, they will actually replace that person for free. So, they stand behind the people they're placing. They're finding high quality people.

They are going to smooth out the whole process for you. Go to more staffing. There's a link in the show notes. Go to more staffing at more.co. Tell them I sent you and add incredible e-commerce talent for all across your business, supply chain, operations, design, like marketing, all of it by going to moreow.co and add those members to your team now. So now again, part of the thing to think about here is that Jack as a percentage of revenue is going to shrink over time, especially as you generate more and more returning customer revenue, right?

So that's going to be a huge part where profit's going to come in your business. Now, it may it may take some time to get there. And this also depends on where we set our CAC target relative to all of these other elements of what's going on, but if we keep that opex 15% low, 15% or lower, then you know how much room you have for hiring. And I would be really disciplined about that as you grow as much as possible. Try to stay lean.

Um, and the way to do that, the mechanism for that is just not taking on too much. Again, you're trying to build for the long long term here. So, really only adding help where you really need it. So again, as this gets more financially sophisticated, one of the places I would look to add some help probably would be some kind of even if it's at a contractor level, uh somebody who can come and help you take some of the that work off of your hands in a way of just staying really close, providing really good financial reporting so monthly, weekly, you just know exactly where the money is in your business.

That can that is something that can almost never be overstated. Like having that clarity to what's going on so that you just are are in your numbers is really valuable. Then, you know, think about things like design. You're just going to need like graphic design, those sorts of things as as you grow. You're going to do collection launches. Email is going to be really important to you because uh you're launching collections to an existing list.

And so, having good email help, I think, is really uh an important thing as well. Those kinds of things are going to be are going to be helpful, but but I don't think that you are going to need to get any kind of crazy opex number and if you can stay lean on those things, it's going to be uh really good. So, that leaves us ad spend question. So, how do we think about your ad approach as this core driver? Actually, I want to do one more thing before we talk about ad approach, which is your cultural impact and the longer term goal of creating value at the same time synonymously with making it so that you're like a known recognizable brand.

So, um how do you currently think about that uh issue? How if you think that's one of your goals, what are you going to do to accomplish that? Yeah. So, part of it is, you know, working with influencers, but, you know, now I'm starting to see that some of our customers are people with millions of followers and they buy and they don't reach out or ask for any product. They just buy as a customer and they share it on their stories and we definitely see a lift from that.

They share a photo of them in a post, in a story, and people are like, "Where's that jumpsuit from?" And so, I think like just just even scaling the ads has put our product in front of the eyes of people who are influencing culture. they are becoming customers because they feel aligned with the brand value-wise and aesthetically. So that's one piece that's been really cool to see lift off and then you know working with influencers to create content.

And then on the other end is PR. Uh I don't PR chase I have spent very very little of my time. In fact I had way back when maybe a year ago spoke with someone who said you know when you raise a million dollars then come back and maybe there's the story there about your brand. And so my thought is to to come back and say, "Hey, we haven't raised a million dollars, but we've now done a million dollars. This is what our, you know, this is what our run rate is looking like now.

Maybe there's a meaningful story for this brand here with this economic landscape that we're in." And try to kind of start seeding some some PR there. But yeah, that those are kind of the main approaches. I think that's that's right that essentially like if and if that's going to cost you the time of like sending an email, then it's probably worth sending an email. But if that's going to be like a big chase, I wouldn't do it.

I think like PR will kind of come as it comes and it would be a better easier time to think about influencers. So like who do you think influences culture in a way that is relevant to your pursuit with your brand? Like what when you say influencers, what kind of people are they and where do you find them? I think that there are multiple levels. I think on I don't know different levels. I think just a customer like someone who has no necessarily social following, but they wear this piece and they speak about the brand with such high word of mouth and such excitement and they tell the brand story and they go and I think that actually has really real I guess though more impact in terms of revenue as opposed to then like cultural impact.

But if you're talking about more cultural impact, I mean I there's so many people on Instagram I think who are fashion influencers, style influencers, but then also people, you know, who are in the like more traditional celebrities, film and TV. One thing I was actually I've been interested in is getting our clothes on in on characters on specific, you know, TV shows or movies where that character cares about, you know, like you'd think about like a Sex in the City or I guess Emily in Paris.

I don't know. People might hate them. Yeah. Yeah. Sure. Sure. Where like part of the character's personality is around what they wear and how they style and color and pattern. And so I think seeing the product there on film and TV is also something I've been talking to some costume designers about. You've actually talked to costume designers about this? Yeah, I've had I have some friends kind of in the acting scene and connecting Yeah. that way.

Yeah. that feels like being in New York, being from LA, like there's got to be some connections to those kinds of those kinds of spaces where you could get into. And I think that's totally right. And so, this is another one of those things where I'd say like if that's the long-term vision while maintaining a lean opex, like how do you kind of pursue that with real seriousness? Cuz I also think you're right in fashion that there's a way in which that kind of person, especially with how much your clothes are I don't know if in your face is the right word, like that feels that sounds that sounds almost aggressive.

It's for you or it's Yeah. Yeah. Right. In a good way, right? Like the fact that your clothes are not for some people, so to speak, right, is good. That means that there's there's a way in which it's like recognizable, noticeable, and so yeah, if somebody was wearing this on camera, I think it would be like, whoa, what was that jumpsuit? You know, like that that kind of thing. Makes and I think that's why it performs well in ads is the value proposition. 100%.

Yeah. Okay. So, I so I would think about that. I would think about how do you find who those influencers are? And I might even think about a longer term play around that where you just set aside some budget that you're constantly using to kind of build that up. So I would seriously consider working with somebody like Kinship here where um where they're just going to do an ongoing seeding process at scale. Reach out friendly.

They're not going to ask for a post in response. They're not going to do any of those things, but they're just going to say for the right person and they'll work with you. I think you know kinship I think seeds 500 influencers or reaches out to 500 influencers a month or something like that and and you get approval of those so it can be the right people which I think is really important for you but then they'll do all the dirty work leg work of of this kind of thing.

So, full disclosure, I have a referral fee on that, but I would wave it for you, Nasin. Um, because I think like I think like I just want to make sure you know this this is a totally authentic read on the way I would uh on sort of an endorsement there that like essentially if it's important for you to be on important like important, this is terrible word for this. Everybody's important, but on influential people, then I think I would think about how you actually start scaling that kind of thing.

And especially if you can do it, part of the thing I like about kinship here is especially if you can do it in a way that actually sees the ad account with content as well. So you can actually get revenue value out of it instead of just like relying on the posts or whatever. Then those two things can happen along the same time. One of them would be you'd be getting posts collecting over a long period of time and that will have a sort of slow snowball effect build in value.

People will see it over and over etc. And again I think your clothes are so eye-catching that you actually might be able to get real value from that kind of right away where people would see it and just want to go buy it off of the posts. But you have the point is you need a I think a clear dedicated measurable influencer strategy because it's just so important to who you are. This is not just like a way to boost your sales.

This is like central to thinking about how mixed becomes culturally relevant. And so I would be thinking about that kind of thing and I would consider somebody like kinship for that. So the other thing I would do now let's talk about the ad account. Let's start talk about target setting first. So the first thing I would think about here is again that kind of cash issue and growth issue. I would be if I was you looking to make money on first purchase.

Your LTV so far is not bankably awesome. Now, I think it I actually do believe it will get there over time to where that's the case, but I one of the dangers is to overexpect LTV. And so, I would be thinking about trying to make some money on first purchase. And the way I would probably think about this is in relation to how comfortable you are on the ad buying or on the inventory buying side as well as on the ad spend side kind of together.

And what I mean is if you're going to spend $40,000 in April and we know there's more room because you're getting a 4 and a half 5 to one on your ads. Your ads are great. I'll I'll link a couple of them in the show notes so people can see kind of exactly what kind of ads are are moving the needle here. But they're really really product focused and that's what they should be. This is apparel. What people are fundamentally buying here is a look.

And so that means what the ad content needs to feature is the look. That's the that's the main issue, right? They need to be able to see the product and know what it is and then decide oh I love that or or not and then if they love that click buy etc. So the content itself is really straightforward and apparel. It just needs to be something where people see what the product is. But then the question I think for you is going to be more about this issue of what that target is.

And so I would say if we know there's room, let's think about, okay, if we project from going from a $40,000 spend to an $80,000 spend, what do we expect the rowass to be across that $80,000 in spend? So let's call it let's go from a five down to a three and a half or a three. Let's project it fairly conservatively down to a three. Well, if I get that if I get a 3 to1 on $80,000, that's $240,000 in revenue. Well, now it's $240,000 in revenue.

And then how much actual contribution margin is that going to create, right? Which would be in this case revenue minus everything associated with cost of delivery minus your ad spend. And is that contribution margin on first purchase going to be better than taking a lower spend at a higher rorowass, right? And then we can also factor in an expected 50% return on customer revenue over the next year. Something like that is what we looked at from your LTV cohort.

And that is additional projectable contribution margin for you, right? So you can project your contribution margin on first purchase, but that's not the total value of your customer. There's also the value of the customer over time. So there would be, you know, whatever you make, let's let's call $240,000 on first purchase. But then if we also think that there's going to be another $120,000 of customer value off of that, now what we've actually returned on our $80,000 spend is $320,000 minus the 80 grand minus the cost of goods and all that.

Does that make sense? Okay, great. So, I would start building it that way and then start to play out essentially, okay, over over the over this window, what is my expected return over this time frame on the next 3 to 6 months or whatever and start thinking about that. You might project it out a full year, knowing that you're the farther out you project, the more insane and wrong it's going to be. But, I mean, it's going to be wrong either way.

Let's just be clear. The goal here is not to be right. The goal here is to give yourself a target and then to see how you perform relative to the target and then to dial that in over time a little bit more. It's actually really to beat the target and then go from there. There's one thing I want you to watch out for here, which is that as you project, I want you to think about the incremental rorowass that you create on each dollar you spend.

So, if you're getting a 5:1 today, if you spend another 20 grand and your blended average rorowass at the end is a 4:1, then that means that the actual additional incremental spend from that takes you from 40 grand, let's let's say you spend uh you go from 40 grand to 60 grand and you go from a 5:1 to a 4:1, okay? then that means that the additional 20 grand you spent actually spent at a return that was lower than four to one, right?

It might because it had to drag the average down from five to a four. Does that make sense? Okay, great. So, what you actually want to think about is the incremental return on that next 20 grand, not the total blended average return. And you can just you can build this in a spreadsheet really fast. Just figure out like, okay, if I spend another 20 grand and I now my blended average is 4 to1, it's 240, etc. Like, you know what I'm saying? you just sort of figure out exactly exactly what that the incremental return on that next 20 grand was.

So watch that because whatever that number is is ultimately going to be where profit and loss happen. So you may actually still have a blended average that's good but but the incremental money you spent was not good was not a good use of your money that you actually ate into profits in some way or another. So now in the midst of all this spending 40 grand at a 5 to1 on the ads that you have right now you have way more room to spend.

So, so I would be projecting an aggressive increase in your spend right now and I think everybody who's listening to this would kill me if I didn't tell you that because you are going to be profitable for a long while especially at 72 points of landed margin. 70 yeah 72 points landed margin. Now uh we got to factor in that return rate. So that's that's uh one element of that but but yeah so right now the contribution margin which is you know the leted cons uh cap is 45%.

So even if we, you know, I if I did the math correctly, if we were to triple our cap, then that would be the break even point. Yeah. Okay, great. And now that's just on first purchase, right? That for first purchase. Yeah. So I I'm cur you know what is what should be the target contribution margin on first purchase. So the so almost every what should be question the answer is well it depends depends what you're trying to do.

In your case, I would say let's answer that question in relationship to a forecast uh to to the larger forecast of our business because what you really want to be watching is where profit is going to