Your 7-Figure Brand Is Spending In All The Wrong Places – Sarah Carusona Explains transcript

Sarah Kerasona has been in e-commerce for 10 years and like me is in the long line of CTC, Comic Collective alumni, who has gone out to go start her own thing and is now building one of the cooler agency concepts I've seen in a while, which is that her business, her agency, BA Commerce, helps brands at the sort of seven and eight figure stages, and she'll talk more about who the exact right person is, but seven and eight figure stages grow their businesses with sort outsourced head of growth operating systems that she can come in and plug into your business.

Really, really cool concept that has seen really good fruit in the business that she's worked with in the last couple of years. And that's because Sarah really knows what she's doing. She comes from a whole bunch of really cool opportunities and a really cool background, including, like I said, Comic Thread Collective. She worked at Olokai for a long time and has just done a lot of stuff in the e-commerce space. Really knows her stuff.

If you're in that sort of seven figure, early eight figure stage of business trying to grow your business. This episode is going to be all about how she does that with brands. Like what is she looking for in those businesses? What are the common pitfalls? What are the problems that are being solved? And how does she come in and help solve them with her operating system? [music] She really knows her stuff. Going to get really practical here.

You're going to like this episode a lot with Sarah Carona from BA Commerce. Let's get into it. Hello Sarah. How you doing? >> Hi. I'm good. I'm good. It's so good to be here. Thanks for having me. >> I am so glad to be doing this. This stemmed from a call we had a couple weeks ago around the Christmas break time where you and I caught up on some things and I was I was so interested in your model of what you are doing with brands.

I think it's really cool. Uh and it's it's interesting because in some ways it almost looks like I'm bringing competitor onto our space because it's a very similar client profile that we serve, but you serve them in some different ways than we do. And I and I I really like it because there's definitely clients who come to me or people who who kind of give me an intake form and I say you're not quite right for the services that we offer even though some of our stuff is good for you.

Um and so and so you sort of represent a really interesting compliment to to that or sort of a different set of needs because different brands just have different capabilities in house and all that kind of thing. So just like tell people what you do for brands. I said it in the intro, but I pro you probably heard something I said and you thought like that's not exactly right or something. I probably blew it. So, so tell correct correct whatever I said that was wrong and tell people what Via Commerce does. >> Yeah.

Yeah. Well, but before I do that, I also just have to give kudos to you because uh you know, listening to your podcast and the amount of times you bring people who seem like competitors on is just really cool. I just listened to the one where you had uh oh my god, I'm blinking his name from Fire Team where he just thank you was like basically uh breaking down all the things that you're doing wrong and it's just it's really incredible.

So, just kudos to you and you're uh >> that's like the that's the main theme of my episodes with Jess is him telling me I've done like three or four episodes with him now and it's it's always just him being like this is why you guys suck at this and it's fun. It's fun. He's he's a great dude. Yeah, >> I love it. I love it. But yeah, I and the impetus for our call was I was just reaching out to other agency owners to kind of uh you know get a lay of the land and and uh you know ask some questions and get some advice and and the call with you really stuck with me.

So just again kudos to you and thank you for that. >> Uh my pleasure. Yeah. So, BA Commerce was kind of born from my experience on the brand side and the agency side. Like you said, I worked at Common Thread Collective and then I also worked at Olicai. Uh, fun story, my second week at OAI. I was in a conference room with Taylor Holiday and my new C um M O boss and debating the or not debating but negotiating the contract for CTC for Olkai which was super fun.

[gasps] So I really like as soon as I went to the brand side I just started realizing this interesting relationship between agencies and brands and uh and so had a couple years at Kai and then when I left started doing you know like professional CMO type work and all of that and I just kept seeing the same issues over and over again where it was if you know agencies are trying to offer specific services to grow your brand but at the end of the day in order for the agency to be successful they have to create kind of boundaries around what they do and what they don't do and they also you know in order for them to be profitable.

There's a need to spread their people across multiple clients in order for their margin to be high. There's also the need for agencies to sign contracts that are 6 to 12 months long so they can make payroll. And then there's the brand side of things where I'm seeing these brands get sold to agencies that are promising growth, but they can't provide it. And then there's especially in this um I call it like high seven, low eight figures is really where I feel like is our niche.

It's usually around 10 million or above is where there's the founder has usually done a good amount of work to get there and now they need to get it to the next step and they don't quite know what that next step is and they are busy. they are very busy and they're doing a lot and so what uh what BA commerce does is or sorry before I go there the other thing that I realized is there's a lot of people in the industry in the DTOC space who are hungry and they want to learn and they want to be ahead of growth but nobody's going to hire them because they don't have all of the experience quite yet but they completely could do it with just a little bit of training and oversight and so I basically hire those people and I call them growth operators and and then deploy them into brands.

And so what we do is our scope of work is very different. It's basically grow your brand. Um I can I should screenshot one day and put it in on Twitter or whatnot. It's it's basically like we help grow your brand and we're we focus on acquisition, retention, um and conversion and we'll flex or you know in whatever way particular brand needs. So for some brands we media buy, for some brands we oversee their email and SMS strategy and are really hands-on with that.

For some brands, we are really deep in their CRO, but for all brands, we basically build out a financial model of what do you want to achieve top line, what do you want to achieve bottom line, what are those KPIs between top and bottom line, and then overseeing the team both internal and external in order to execute on it. >> Um, you mentioned something in there that is that is why we can't why we don't do the service that you were suggesting, right? which and maybe one day we'll do something more like it.

But we really have a narrower scope where we're saying like we are awesome at growth thinking that's financially driven, profit driven including forecasting. We do that and but we want to deploy that through meta ads and then to some degree and with some brands app ads as well but you know it's it's like you know so much of our time and effort has been built on has been built on building a creative machine to do that and I think to do a great job with meta ads that's that's part of it.

So, so the ideal brand who comes to us needs the financial thinking, the growth thinking, but they also need the creative like and and we actually are increasingly saying no to brands that only want like an unbundled version of that service because we think like uh we we really want to control this one lever especially and we think this is the area where we are best where we are as good or better than anybody else in our space.

So that that's what you're describing I think is a different set of needs for a lot of people and I think that's great. A lot of those founders you're talking about actually part of the way they got to 10 million in my experience is that they're actually really good at creative already or something, you know, but that they but and that's how they got there. So now their business is growing and there's a bunch of like but they're not awesome thinking financially.

They've never looked at retention at all. They've never run a AB test on their website. They don't have intelligence going, you know, whatever. So >> So yeah, I think there's a lot of that that kind of stuff. >> You let's let's talk about this. You immediately hit on something that I kind of thought you would say that is a problem for brands in that size. Um, so whether you're a little before it or you're after it, you probably know this, which is this busyiness problem. >> Yeah. >> Um, and I just had Curtis Mats go on the podcast from Portland Lehoods and he was just talking about how, you know, one of the really big challenges of growing, especially if you're growing at a pretty fast pace, you know, growing 50 to 100% a year or whatever, >> is that the thing that got you to where you are is not the thing that's going to get you to the next stage.

And the one of the classic visions of that in that in the stages of business that you're talking about is the sort of overworked founder who does not know how to actually delegate anything yet and and actually doesn't even know what the road map is going to look like to get to the next stage. They've just kind of muscled their way through because they have a great product or they have a good brand or they're really good at creative or whatever. >> Um but but yeah, they don't they don't know how to get there.

So when you see that founder who is overworked or whatever, like are there like you just mentioned a few things, but are there really particular metrics you're looking for? Are there are there is there like a really most common thing that you think like this is the first thing we do every time or is it just varying too much to generalize that much? >> I Yeah, there's some there's some generalization that I can definitely do.

Like I think before even starting with a brand, one of the first things that I do once we get to the point where I think that they want to hire us is I do a little bit of due diligence on my end and there's like three to four key metrics that I want to look at. I want to look at their P&L so I can just see like, okay, are we losing are we leaving money from a high level perspective? But then, >> how often does that happen?

Before you go any further, how often when somebody brings you in, is there just like a bunch of waste that you just have to clean up? Uh, I would say only probably once right now because the the clients that I work with typically are uh >> if I got to that point and there was a bunch of ways to clean up before I would even start to sign with them, I'd be like, "Hey, are you okay with this?" Because I can't get into a business where they're they're not going to be on the same page of me of where they need to invest.

So, it doesn't happen a whole lot. There's definitely some where I'm like, "Yeah, we probably shouldn't be spending so much over there, and this is, you know, taking away from other things, but it's I would say so far, not a ton." Well, >> yeah. Okay, >> let me let me rephrase that. There's always places for optimization, but I'm thinking of like we're losing, you know, >> a ton of money. >> Yeah. Okay. So, sorry. So, I cut you off.

So, so you you were saying the other key metrics you're looking for besides that? >> Yep. So, the other key metrics I'm looking for besides that is their AME and their first purchase contribution. So I want to get a good understanding like what's their and that tells me a lot because I'm looking at you know that tells me their CAC that tells me their new AOV that tells me their uh their gross margin that tells me how much they're discounting and depending on if they're subscription or not or consumable or not uh I can then also look at that on an LTV basis and see okay are they losing money on that first purchase how quickly are they making that money back and how much money are they making it back.

So it's really like it's like an LTV to CAC calculator basically, but I look at it more on a margin basis. So the first purchase contribution and then what does it look like in three, six, and nine months on a on a profit basis. So all costs included except for offex. That tells me a ton about the business because it quickly tells me, okay, how pe how quickly are people coming back and repeat purchasing? How effective is your media right now?

And um and what's your product mix and gross margin look like? Uh, and so that's really one of the biggest things that I look at because I can typically quickly point out that, oh, hey, you're actually making a good amount of money on that first purchase and your LTV is really good in that first three to six months. We should just scale. And it's a very like easy quick thing that we can do. And then obviously you're optimizing on top of that to get better content and all that good stuff, media mix and everything.

Or it's like, oo, you are losing a lot of money and what's going on with your media and what's going on with your content and you know, where where are people dropping off in the funnel? where are you sending traffic to and all that good stuff. Uh so yeah, those are probably the biggest things and then I understand this is not really a metric but I understand what their team looks like is the next thing. So understand the numbers and then understand the team.

Where are we spending our money from an opex perspective and who's in charge of the different levels of growth and I always think of growth as like three buckets of acquisition or media organic influencers all that stuff. conversion, your website, your marketplaces, your Amazon LTK, Tik Tok shops, and then retention, your own channels, your uh like unboxing experience, loyalty programs, all of that. And so I try to understand like who do you have that is resourced against those three priorities, which typically for most of these founders, it's the founder plus like somebody's helping them and then maybe a couple agencies that are barely getting any attention.

And so I get a good understanding of that and then that's pretty easy for us to then step into. >> Which is more common that when you come into a new brand they're overspending or they're underspending. >> The first thing that came to my head was they're spending in the wrong places is what I t >> like where where are they spending where they shouldn't be? >> Well, okay. So, one example, one of the first brands I >> worked with was a brand new brand and when I came in, they were spending probably 70% of their budget on influencers, but it was a brand new brand.

And so, and the the founder, you know, adequately understands the value of community and the value of getting in front of the right community. And so I think his his impetus was correct, but it was the it was the the the old influencer playbook where we're paying 1,500 to $5,000 for one post and then you never get access to it and you know that. So uh >> was that working? Was that working like at all? >> Nope. Not really.

[laughter] Not really. >> So that was one of the first things I did is I was like, "Hey, okay, so we're spending like 70 30. can we we're gonna switch that and then we're also going to use the money that we're paying influencers specifically for influencers that will help us that are willing to do this from a paid perspective. So we basically switched it all and we were like okay let's find influencers who we can work with and really more like content creators and we switched it to paying a percentage of ad spend.

So because we're going to control that based on the performance of their content and uh and then that helped dramatically or you know another example is like somebody was spending a ton of money on uh affiliates and this is and it was like more like coupon codey affiliates or you go into the ad account and it's like okay we're spending half of our budget on remarketing and we are a small company and don't need to be doing that.

So it's it's a lot of times it's like just spending in the wrong areas. I will say though, there's a good amount of especially on the subscription side of things, not understanding that CC CAC LTV model that once I explain it and I'm like, "Hey guys, if we're okay losing, I don't know, 10 bucks on that first purchase and we make 30 bucks by month two, you cool if I start scaling." And once I'm able to work with the CFO or the CEO or whatnot and understand that from a cash flow perspective, typically people are like, "Okay, yeah, let's go." If you are growing your e-commerce business and you are into that seven and eight figure stage and you need help in your business, you know that what Sarah says in this episode is true, which is that a lot of times a lot of the reason you got to where you got to because you have too many jobs to do and your business is getting too big for you to do [music] all of it.

And so more staffing is an incredible solution to that problem. More staffing, you've heard me talk about for a long time, is a way to connect you to incredible talent in the Philippines. [music] And that's just an amazing opportunity because your money goes really far in the Filipino job market to get like really great, really high-quality talent uh plugged into your business. Moore is also founded by people who ran US-based e-commerce businesses so they specifically understand the dynamics of e-commerce businesses.

They're going to connect you with Filipino talent across every part of your business that's going to help you with that. The problem is even that alone is not always enough to set up success because what happens is that management is really [music] hard and most of us did not get into e-commerce because we're great managers. We got into it because we love product, we love creative or something like that. And actually setting people up in your organization to succeed is really, really hard work.

And so Moore has now added a whole other layer of their service [music] that is really awesome, which is that they will work alongside you to help you develop the SOPs you need, the actual 90-day outcomes you're pursuing, the management layers and systems that will allow people to be set up to succeed in your business. So that you're not just going like, okay, I got a new person, but now that gives me more work because I have to stand over their shoulder and figure out how to set them up for success and write all kinds of new things.

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Go check it out now. I really love what more staffing is doing. They're adding additional help to making sure that talent is set up for [music] success in your business. It's really really cool to see more staffing.co more staffing.co to get started with it today. It's so interesting. So, so brands are spending in the wrong places. Um I mean how does a brand Yeah, that's interesting. On the LTV DACA thing, is it basically the case would you say then that brands that are sort of subscription extreme LTV are the ones who are underspending and that other brands are are spending in the wrong places or overspending?

Because that that's sort of my take right now. And so this is a very leading question, but I >> when I look around, what I see is like a bunch of brands who are overspending on meta because of their growth goals or whatever >> and they're overspending because they haven't thought carefully about the actual return on their dollars. >> Um, and then except for subscription brands which are usually in some ways unless they Yeah. a lot of them are still really underpending because if all you do is basically the calculation that you described, right, LTV to CAC where the LTV is at the level of profit and you just sort of think about that as an annualized return on your investment the same way you'd think about investing in the S&P where it's like, okay, if I'm going to get 8% per year, 10% per year, whatever, whatever you you know, whatever your guess is is what you're going to get, right?

Like if you run that same calculation for the investment you make into ad dollars and the actual COGS like of your product basically, right? If you think of those as cash outlays, um, and you know, shipping the product and credit card fees and all all the things that normally go into contribution margin calculation, >> if you think about that, a lot of these subscription brands are running like >> 100% annualized returns and they're still not spending more money.

And you're like, yeah, no, take that to 60 and spend a bunch more. Like they'll get a whole bunch more volume doing that. And a lot of them will also last over more time. But basically everybody else especially net of opex is like >> is like in my view is like usually >> sort of needs to needs to think a little bit more carefully about certain aspects of their ad spend and sort of reallocate. That's that's like my current view of the lay of the land.

But I'm but I don't know. I mean maybe that's informed my my selection bias of some recent clients who have come to me >> uh with some bad overspends. So I I don't know if you'd agree with that. >> No, I would agree with that. I would agree with that. I think yeah in general subscription brands need to understand the that math and the return and once they do typically they do say to scale. I think the constraint that I've run into a lot with recent brands is that we can scale so much that inventory can't keep up and so that becomes the constraint of which we are uh of which we're holding back or or there's like a cash flow consideration uh is another one that we've had to consider but yeah and then I would say >> what do you do what do you do in that case let's say the annualized return looks great but on a cash or inventory basis it's just really hard to do what do you tell people then >> well I actually had this situation come up just within the first week of the year.

So, I've got a supplement brand in the health and wellness space. We knew January was probably going to be really good. Uh, we also, it was our first real January. This is that same new brand that I was talking about before. They So, our AME was the highest it had ever been and we were spending pretty well and we were already spending above our targets and then we doubled and we were still at a really high am I was like, "Guys, let's go. this is this is the moment you cannot manufacture this demand. uh CFO comes to me and he's like, "Whoa, whoa, whoa, slow down.

Inventory, cash. We're gonna run out of cash." And when I then sat down with him and we just basically looked at it because I was like, I was able to math out and show like, hey, look at how much higher we're how much more money we're making on that first purchase now. And this is going to be a long tail because now we are acquiring more subscriptions and their intention is high. And sure, you might say that maybe this cohort is a little bit lower LTV because they've got the new year, new me, I don't know, thing.

But yeah, it's basically just kind of sitting down and understanding the constraints. With this particular situation, what we're now doing is we're actually building out a cash flow calculator that I can use because the the hardest thing that I've had to learn with growth is that and I posted this yesterday. I was like, growth really touches everything. It doesn't just >> That's right. >> It really does. and and you have to understand everything.

And the the hardest thing that I have is when somebody comes to me and we like they're like, "We don't have enough cash." And I'm like, "I need to math that. If you can tell me what how to math this, then I can tell you how much I can spend and I can back out from it and I can back out what my ANR needs to be and all of that good stuff." Uh, and so now we're going to build that calculator so I can make more informed decisions because I can manage against like a contribution goal or an IBIDA goal on a monthly basis, but cash becomes like this whole other thing.

And so really like what we try to do is I just try to get to the root of what is it that is constraining us and then how can I work with you know whoever's managing inventory or whoever's managing cash to math that so I can be a part it's it's it's crazy how far that goes. I I've I've worked with one supplement brand for a long time and what we did we ended up doing was that brand was working with Billandro. Shout out to Bill because he's awesome.

Um and he he does like a pure financial coaching for some brands. and he takes a few clients at a time and that's it. So, he was working with them on that side and he's got a whole cash flow forecast, >> you know, sheet and system that he uses >> and then I have my co-work that I adopted uh adapted from the combination of Lightseed Adventures and then comic thread collective and then kind of have put my own spins on it as well.

And what we did is we just put those together. And so what we what we're able to do is sort of say like, okay, here's the cohort forecast based on the LTV. And then now that ties directly into the cash forecast. So like as we make those adjustments, it immediately kicks down into your cash. >> And you there have been times where exactly the thing you described happened. At one point in that business, they launched a new product that just smashed and so it was like two and a halfx spend, but they're spending at a loss, >> right?

So um and and for sure it was a good use of money if you could fund the growth. it was for sure that um like there's no question that it was it was quote unquote profitable ad spend just wasn't profitable for like 90 days. Um >> and so if you suddenly have this spike where you've got a whole bunch more spend and every dollar you spend loses you money today >> then you have to figure out how to fund that. And you can do all kinds of things to solve that problem.

You can get on the phone with your manufacturer and show them your forecast and say I need you to help me finance this. You can uh that still doesn't solve the whole problem because we're literally losing money dollar for dollar on Facebook at that point. like it was a sub one am but like but anyway there's these situations that come up like that and what you said is exactly right and increasingly it's what what I'm like thinking a lot about and where I see the brilliance of what Taylor's built at CTC and some of that is just like >> get as much clarity to a plan as possible >> so that as you start to build that up and then align all your actions because what you said is totally right all of these things are going to affect every part of the organization yeah in some way or another and so So try to figure out how to build a plan and this is where like your service I think makes so much sense and and where we're trying to build into our service as well like is like try to build a plan so that when you go do this exactly what you said right math it like just like you can then say I know exactly what's going to happen and then what I would say to people in the midst of that my own take here is that >> the speed at which you pursue that growth is directly relevant is directly connected to your risk tolerance because the problem happens s when something else you mentioned happens which is like oh what happens if those cohorts actually aren't as good as your old cohorts which I've seen you know >> um >> in that case then you're in trouble and so now now if you've like run it to the red line you can you might have to figure out how to like fund some really dark times you know like and totally anyway there's there's uh and and if you if you think like I have a little less risk tolerance or I don't want to fund this with outside capital or whatever okay then just grow a little slower etc because there's going to be some constraint on and now you've created some wiggle room in your forecast and said, "Hey, look, if we miss this LTV by 15% or something like that, >> we're actually still okay." You know, it's not it's not going to put us out of business or whatever.

But that combo of like a plan with some sense of risk tolerance, >> it just goes like really really far, I think. >> Yeah. No, it's so true. And that's why I try to focus on the LTV to CAP within the usually the first three sometimes six months, but I'm really hyperfocused on those first three months because that's the that's the area of time that you can affect the most from a marketing perspective. That's the time where people are still subscribed to your email and SMS.

That's the time where your product is still top of mind for consumers. And then that also helps you and it's also a time that you can then track more regularly. Like if I'm relying on making all my money back between 6 to 12 months, it's going to take me six months before I even know if that happened. >> That's a great point. >> Yeah. >> Yeah. So if you set up a test to say like, "Oh, I think I can move this up." You're not going to know the answer for so long. >> Yeah.

Yeah. Exactly. And most of that's going to come from product at that point. Like beyond I think beyond three months, like people are continue to subscribe because they really like the product. And then apparel is a whole other thing which obviously you're trying to make you want to make money on that first purchase for apparel. But cohort modeling that you mentioned is I've gone down rabbit holes on rabbit holes of cohort modeling.

I spent like half the year at Olicai trying to figure out better ways to forecast our repeat revenue because we could never get it right. And it's it is so hard in apparel because so affected by seasonality and new products. >> Yeah, this is a this is a thing I've been running into a lot is also like the seasonality component of a forecast. So like trying to make an adjustment for like okay let's say you have an apparel company that has 100% LTV in a year which is a lot but not out of the question because some some apparel brands >> just drop a lot of product and have a lot of sales and they they able to generate that right so let's just say that you double the value of a customer in a year so let just to be clear what I mean customer spends $100 on day one by 12 months out from there they spend another $100 okay that's what I mean um 200 total the problem is like they're going they're not going to spend that money like 20% of it in one month and then 15% of it the next month and what's what they're going to do is like two months later when you have a drop that they like they're going to spend a big chunk of it and then three months after that they're going to spend because they have you have a sale they're going to spend it and trying to build cohort forecastbased adjustments for these seasonal moments is so freaking hard.

It is so hard. It is like requires all its guess work. The future's off and not like the past because you change your marketing plan. Like it's just it's just insane. >> You add Amazon and it's like it's a whole different >> right. Do you have a solution? I mean what did you what did you land on at Olkai? Like, and what do you do for brands when that happens? How did you >> You just look so >> You just look so sad when I ask that question. >> I know.

It's like I was like six months of my life like trying to answer the question of like, well, why can't we forecast it, right? I'm like because I don't know. Do you know what tomorrow is going to look like? But, uh, it was so high we did the we did the whole like cohort model, the light speeded model, whatnot. Uh then we did a really deep analysis and we basically switched it from that to an average dollar amount per customer that came in the door.

So like we would know for example, you know, they spent like $100 on that first shoe or whatnot. And then if that cohort was uh I don't know like a thousand people or whatever, then we would see okay, how much did they typically spend in month two, three, four, five, six, seven, etc. And it would get down to like a dollar per cohort within that month. And we basically like mathed out that and then we would add variables like or discount or increase based on specific cohorts.

So we did Olkai did their first sale in the history of the brand while I was there and so we basically would discount that cohort because they were sale cohort versus like other cohorts maybe would increase. >> I'd say we did like I said we spent about six months on it. Um I can't say that forecast was much better to be honest. >> Yeah. So, I've really landed on the the the co like cohort model. The only thing that I was actually going to ask you for subscription brands, what I started doing is I do a mixture of an LTV for subscribers versus an LTV versus of non-subscribers and then you basically add those two together.

Um, >> I kind of like that, but it it also has challenges to it. >> The kind of person who is listening to and watching this episode is the kind of person Intelligjam loves to work with. And the reason I know that is because this episode is all about operational excellence as you grow. And that is the thing that my friends at Intelliggeems care about making happen in your business. Intelligence on its surface [music] is split testing software for an e-commerce store, CRO software, quote unquote, but it is way beyond that.

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Go to intelliggeems.io and use the code ferris 20 f a r i s20 to get 20% off your first three months. That's intelligence.io or follow the link in [music] the show notes. Ferris 20 to get 20% off your first three months. I have a theory right now that's starting to bubble up which is that ar that maybe it doesn't matter that the subscriber versus not. And and the reason why I'm I'm really influenced by this one brand that I've worked with for a while, but we have had we have changed offers a lot in that brand and have played with a lot of different ideas >> and we've had one offer that had you know a vastly lower subscription rate than others like you know got a subscription rate of 2x at one point uh the subscription rate of other ones by strongly incentivizing you know subscriptions and >> yeah all this we've just played with it and then we've also had some offers that were like multiple products but a middle subscription.

We've we've done a lot of different stuff. >> Yeah. And I am uh amazed at how little it seems to me that the subscription rate has impacted LTV, which is really unintuitive because when you look at the actual data, like the subscribers are always worth a bunch more than the non-subscribers, you know, so so far as you can tell. So it's like, well, then shouldn't it be the case? But what we've seen >> is that over a certain period of time, the retention rates tend to converge on each other.

And what I think is happening in some of that is first of all, it depends on how much product you get into their hand on first purchase. So sometimes lower subscription rates have correlated with like larger bundling upfront. So essentially instead of getting somebody to pay 50 bucks a month or 100 bucks a month or whatever the cost of the product is or the retail price of the product is for a while, you get a bunch of money up front for three months worth of product. >> Y >> which makes your retention rate look lower because now they don't need to reby because they have three months of product already >> and yet at the same time they actually are willing to come back and then at that point maybe they subscribe because they, you know, they use three months of product, they like it, it makes them feel good so whatever.

So, it's been one of the most counterintuitive. I like at some point I'll put out some content on this when I become more confident in the opinion. Right now, that's just like a because what you're saying like I've definitely tried that a lot of times and that was actually got us in trouble at one point because like six months into one cohort it was like wait a minute why is this cohort it looked so good for three months.

Why is it tailing off? And it was because it was a combo. It was a combo that when we strongly incentivized subscription the subscribers got worse over time. >> Yep. first of all, and at the same time, the nonsubscribers in some other cohorts actually maintained like the ones who lasted lasted for so long. They were really sticky and by the time you got six months out, they ended up being closer to each other than you would have thought.

Now, there's all kinds of X factors and this is where this becomes in some ways an impossible task because yeah, and it's also where I think like Taylor's comment about this is also very helpful, which is that forecasting is really an exercise in execution. um not not really an exercise in guessing the future correctly. I think that's helpful as a reminder because it's like okay just you have to go get the money once you put it on the once you put it on the forecast you know so I don't know totally that's that's my answer right now it's it's like maybe maybe everything we believe about subscription is wrong I don't know >> I do think the LTV is one of the most misunderstood metrics I think especially in a subscription brand because people throw out churn rate and retention rate and LTV and it's none of it matters unless you're making actual money within three to six months or whatever it is that you need.

And the other thing is to your point like I had this aha moment where we were looking at subscription brand and the founder was talking to other founders and those founders were talking about oh our churn rate is really low or whatever it is and we looked at our churn rate and he's like oh my gosh our churn rate is so high and I was like well that's the churn specifically for subscriptions and we are incentivizing subscriptions and we have over 50% of people who come to our site choose subscriptions that is a strategy that we deployed which is then going to inherently have lower or a higher churn rate But higher level, our overall LTV is in a really good spot.

Now, you could argue back and forth like, should you be incentivizing subscriptions that much? Should you not? Now, we're starting to test, you know, against that, but really like at the end of the day, we're all fighting towards LTV and LTV increases and really LTD margin increases. And then this like subscription, non-subscription, churn rate, retention rate, all of that other stuff is just a means to that end. >> Yeah, that's right.

I that's that's exactly right. All of those things are just trying to get you towards some number at the end and figure out where the value is the best. And and then you have to have considerations for the CAC against those because different different offers and different subscription incentives and stuff like that um drive potentially better or worse CAC. And then also the volume sometimes sometimes it's easier to get more volume on some of these offers than others.

And so yeah, it's it's a it's a it's a tricky it's a tricky math puzzle. Let's go away from the subscription brands a little bit and talk more about sort of some of the other brands. any other places you said bad influencer spend potentially too much remarketing spend was another thing you mentioned where else are people wasting money in their businesses that you look at whether it's at the P&L level or the ad spend level anything else like what what other things you're looking for where you're like let's >> as we're trying to help you grow we don't just want to cut bad dollars and we want to reallocate towards good dollars so we'll get there in a second but what other bad dollars do you want to cut because this is another hobby horse of mine recently that maybe you can jump on >> yeah I would say I mean A lot of times it's agencies.

[laughter] We're spending too much on agencies that aren't providing the right value. Uh that's it's not a huge one that I've come up on. I mean I haven't come up on it very recently, but it is one that comes up where it's just like you know and and there's a lot of bad agencies out there. There's a lot of really great agencies and I am definitely one. It's so interesting that I have had this experience of being in house and not in house and now I'm like sort of in house.

So I'm evaluating an agency as I am an agency in a sense. Um, but I think that that's one where, you know, sometimes they'll just get sold something that is just like I think SEO is one that comes up a lot. I will see us spending like5 to $10,000 on an SEO agency that is like using chatbt to write blogs. I'm like, nope, we can just do that. Like we we got that. Um, I think that but really like >> that's that's still something brands are doing. >> Yeah.

It gets I just I just ran across it the other day and my growth operator was like got on a call with them and they were like, I could do this. I was like, "Okay, let's just do it." And he just did it instead. [laughter] It was great. But >> was it actually I mean, was it even worth doing? >> Like, was it producing money? >> I mean, we just started doing it, so it's hard to say. I mean, I think a lot of things with SEO, I feel like it's just the hardest thing is to measure it is is you know, like and and so it's it's kind of like a one of those things that I want to like cross my eyes and dot my tees and make sure that we are set up correctly.

But it's it's extremely hard to measure. But I would say the the bigger thing that I see is it's not necessarily a waste of money, but it's a waste of time, which is money. It's a lack of focused on the right thing. So, and I know you talk with founders as well and and work with them and they they have ideas everywhere. So, they're like, "Oh, we should be doing this new product and then we should be doing this new landing page and oh, have you heard about Apploving?

We should probably get on that." And when Tik Tok shops is super big and Amazon and this and this and it's like, "Okay, let's narrow this down." And then and you'll see that uh you'll see that trickle through their team and you'll see their team is starting to focus on things that aren't necessarily driving the biggest uh or aren't focused on the biggest levers for the business. So I would say like that's honestly one of the biggest things that we do is we're like okay what's your financial plan now?

What are the strategies and the things that we're doing to affect those numbers and then who are the people who are focused on them. So, not just us as the growth operators, but we're we basically will take their team be like, "Hey, you know that person that's like focused on, >> I don't know, affiliate or whatnot or like whatever it is, not that it's not important, but maybe it's not the most important thing." And can we get them to also work on this or to focus on this?

And that refocusing is really where I would say, you know, there's a there's a lot of waste and and places that we can redirect. >> So, good especially at that revenue stage. The problem is me in this case. The problem is is me and people like me who are putting out, you know, I I do two podcasts a week telling you how to grow your business. And I I I've talked about this a lot. I think about it a lot. Like it just creates an incessant shiny object syndrome for people.

I'll have somebody on who's crushing Tik Tok shops and is like >> telling you to go do this or I'll have somebody on who's just like, you know, their app loss, you know, whatever. And what that does is somebody goes, that's the thing I have to go do and that, you know, but the truth is all of them are hard. Every one of those strategies is difficult, which means the solution to the problem is focus. You have to have organizational focus, especially when you're at the organizational stage that you're describing, right?

Like high seven, low eight figures. >> Those brands just need a bunch of focus and every extra agency. And that's that's also one of the problems with like why agencies are bad spends is because you bring on an agency, but then you don't know how to manage them or direct them or get them to do the right thing. So again, if you could just align your whole organization towards the most important problems in your business, then you could you don't need to add anything.

You don't need to do anything. And then once you get to 15 and 20 and you can afford a little more team or you can put some more resources against it, great. Now add the next channel. Now add the next, you know, whatever. But it's just amazing how far you can get with like meta ads and and you know, creators and and >> totally some discipline and focus, you know, you go really far doing that stuff and and you know, Google or whatever.

So I um >> you I really see that >> oh sorry you just you hit on something that I want to touch on though that I think is important is is the other thing that I see a lot is how to work with the agency and that's honestly one of the big things that I identify a lot is you know as I come in you know we're coming in as a head of growth so of course we're getting asked like hey can you evaluate our agencies and our partners and there have been several times where the founders like oh they're not doing this and they're not doing this and they're not really growing my brand and then I go in and I'm like well you're not giving them anything, right? >> You're asking your media buyer to grow your brand.

You haven't given them any content. You haven't given them any offers. Like, they can't do that. You need to to fuel them. And so, there the there have been times where I've come in and I've said, "No, no, no. I think we just need to work with this agency in a better way." And then it it has worked really really well. Um, so I think that's the other thing is like brands don't always understand like where those lines are of like the handoff of how the agency needs to be a member of the team, not like the entire team. >> It's so interesting.

I I uh first of all, I think you're totally right about agency relationships that it's very easy to point fingers at agencies. People also have a weird idea that like agency operators are just like >> just like moneyhungry monsters who are just leeching your all the operators dollars and >> it's like no like I just I I sure those guys are out there but like I've never met them. They all of the ones that I know literally all of the ones that I've known are really trying to provide a good service.

So first of all like that's that's that. Secondly, like like yeah, there's a it is it is actually requires you to put in effort. Like most agencies have a skill set, but but just like with anything like directing that towards the most important problems that you know your business better than the agency does like you have to figure out how those two things go together, you know. >> Um so yeah, I think that's a very valuable thing that you're describing.

I've been thinking a lot actually just even at AJF Growth recently about you know Patrick and I when I brought him on as my as COO and business partner and we got together last year we're looking at sort of like the long term of what we think about the business >> and it's like >> okay over the next three years we want to get to X dollars in topline Y dollars in bottom line >> and um you know that requires you know Z number of new employees or whatever and we sort of built a plan >> and the other day somebody came to me and was like hey I want to send you some business.

It's outside of your normal scope a little bit, but like I think it would be really good. Do you want to do that? And my first response of course is to go like yeah, how can I bend the organization to go >> accomplish that thing because because there's money there to be made. >> But then I realized, wait a minute, I have a plan and the plan does not require me to add that service to reach the plan. >> So I'm gonna I'm going to use the plan as the mechanism by which I say no.

The plan is the way to say no. Um, and and I it's so interesting like what you're describing having that operator with a playbook and a plan who helps math all the math, you know, and all that stuff to say like, yeah, maybe Tik Tok shop would work, but you actually don't need to do that to grow 100% this year, whatever the number is, you know, grow 50%, you know, this year. You actually just need to do these things really, really well.

And if we can actually hold that plan, it's the thing that will allow us to to then say no. And because it's so hard to say no to things that look like they're going to give you money that uh like that. Yeah. It's it's just it's just a very difficult skill set especially in the early stage of a business. >> Yeah. I mean it's also like like you said like these businesses are small. There's just there's so much it's like you've got a very small team that is I don't know trying to uh like push a car up a hill or something.

Like every single person needs to be hyperfocused on pushing that car up the hill because as soon as one person goes over here and everybody else is like trying to like carry more weight. So like every moment and every every part of your focus needs to be on that goal. And then once you get that car up the hill then maybe yeah it is time for Tik Tok shots and then it's time for this and then it's time for that. But like it's like there are stages that you've kind of got to get through and really keeping your team hyperfocused on that I think is a is is just key to it. >> Okay let's let's we got a few minutes left.

Let's do some stories. Let's do story time with Sarah where you tell >> do you just let just chalk up some fun wins. >> I didn't prep you with this ahead of time. So if you think about it, it's [laughter] okay. >> Uh uh I'll fill a buster for a second here with this question. So you can think of you can think of some. Okay. Uh the uh think of some fun wins >> that you've had. Obviously, you probably can't say the brand names and you probably can't say some of those, but just like thing you found that you fixed or thing you put into place for a brand that your growth operator or you identified as like let's try this and you did it and it worked or whatever.

Get specific with the channel, specific with the position you told them to hire, the agency, you know, whatever. Can can you give me a couple of those that you've seen? I just I just uh >> I want to translate those. Did I give you enough time? >> Yeah. Yeah. No, you're good. You're good. >> Okay, good. >> Yeah. I think um I mean one of the biggest ones was was our first couple clients and and I'll be honest too that I by at the beginning of last year I was pretty burnt out from e-commerce and DTOC in general.

I think like there was just a lot of uh I I had some failures. I had some you know just not setting up things in the right way. I had some tough you know work environment things that were happening and >> not me never never had failures or anything. >> Oh good good. No that's great. I love that. I know nobody likes to talk about it. Um, yeah. >> And so I was like, okay, I I believe in my brain. Like I always will default back to I can I believe in my logic.

And so there were several times where throughout my career in the more recent past um not the last year but before that where I was like this is where I think the right path is but for whatever reason uh it it wasn't getting the budget or agreement or whatnot. Uh, and so there was a lot of times where I felt very handcuffed in being able to drive the growth in the way that I wanted to drive the growth. And um, and then it felt like a failure.

And so this when I started with this brand last year, I it was the first time where they were like, hey Sarah, we trust you. What do you need? What do we need to do? Let's go. And I very quickly identified, hey, we are it's the same brand that I was talking about before, like we're spending too much on influencer. We need to spend more on Meta. The other thing was we need to fuel the ad account with an actual offer and and creative that is around our top products.

We tested, you know, some specific messaging across uh, you know, different ways to sell this supplement. And there was one message that really hit from an image perspective. I was like, "Okay, founder, I need you to go create some content around this key message. This seems to be hitting." He went and created content around that. We got into the account. We paired it with a landing page that had the same uh the same type of memes, the same type of offer.

We started to get influencers who were talking about that. And that brand went from like $30,000 in January to $600,000 a month in June. And it was just incredible to be able to like put that strategy into place and see it work. And and then what I did with them as well, it's hard to like nail on one specific thing because it was a lot of things that happened at once. It was switch shifting to influencers. It was how we worked with the agency.

It was then bringing in somebody to help with the website and the CRO and adding upsells and um and like I said landing pages. Uh and then it was bringing in somebody to help on the retention end. And we created more educational series around the product and why it um how it's effective and how you need to keep taking it and that helped improve our churn rate. So it was just kind of like step by step by step continuing to improve upon that. and they actually have a second brand.

And so it was nice because we got to do all of these things on one brand, see the success, and then they're like, "Oh, let's do this on the other brand." I was like, "Okay, let's do it on the other brand." >> Um, so that I would say was probably like the the thing that I think gave me confidence back too of I know what I'm doing. I know how to do this. >> Uh, and then it was really nice, you know, as we as we added more clients.

And, you know, every client has been a little bit different, but every single one of them we've had a a good like you can see BA started and something big happened. One of them is apparel company. they were losing money on the first purchase. They their ad account was a bit of a mess there. It was kind of somewhere where there's a little bit of a lack of organization on kind of key focuses. You know, we got somebody in who was a growth operator as well as a media buyer.

We identified, hey, founder content works really well. They like to hear from you. Worked with the founder on some concepts. Um made sure it was worked with the inventory and merchandiser to make sure it was around the right product. Uh, and then again, same thing like we were able to get AMER high and scale spend and new customer ROI, which I always say is the golden goose. Whenever I see it, I'm like, that's right.

Yeah. Yeah. Yeah. [laughter] Up. This is good. >> Yeah. Yeah. Yeah. That's awesome. >> Yeah. I mean, it's interesting because it's like there's a messaging win in there and uh and like a a focus. And then there's like a Yeah. In some ways, another another one on on the apparel story as well where it's like, oh, look, founder ads and you know, you sort of lock in on what those things are. that that work. Sometimes it's so helpful to have a second set of eyes who just, you know, like you who can come in with just a bunch of experience and like know what to look for in an ad account or whatever.

You know, it does it does feel and that's the same thing with the growth plan. It feels sometimes just like >> you're just sort of swimming in an endless ocean if you're an operator. You have no idea, >> you know, what ought to be >> Yeah. >> Uh what ought to be done next or whatever it is, you know. Um, I had a fun one recently where I have a brand who completely who completely like cut out their Google ad spend and it and it's and it was, you know, 30 to 50 grand a month or something like that, maybe more at times. >> And it had has had zero impact on their their revenue so far as I can tell.

Like like I mean it probably isn't I'm not actually going to say they had a zero% return on it. It was not that that's wasn't quite that, but it was >> it was like it was a very fun one where it's like there's >> it's and and actually I think they should bring Google back at some point. It's just that like the way they were doing it was such a mess of wasted money and there's so much hidden bad spend in there where it was like gosh >> how many brands are out there like this just like not not able to see what's really happening there at the level of the metrics that you mentioned am >> you know actual actual revenue volume scaling all that kind of stuff.

Yeah, it is. It's part of the thing that I love about this job is you just get to see so many different experiments and see and and what's really nice and I'm probably a little bit different than a lot of people in the space where I will come in and I will tell you like here's what your numbers need to be and here are the themes that we need to focus on. I typically don't tell you exactly how to do it. I will work with the founder and understand the or whoever the team member is and understand the brand and understand like the opportunities and work together on that because I think that I've seen uh I've seen loyalty programs go really well.

I've seen loyalty programs >> Yeah. Right. Yeah. >> I'm not I'm not a fan of loyalty programs. I'm not saying they don't work for everybody. Like there's so many things that there are Okay, that could be a really good strategy for one brand. It could be a terrible strategy for the the three um product like a subscription. That's one that I'm actually I'm super interested if you share about that because it's something we've tested a little bit and uh and Neutrifull uh does this a lot and I would be I would love to see the background of their data because I'm sure in some ways it works really well in some ways maybe it doesn't.

Neutrifll also sells like I was subscribed to Neutrifol for freaking like six months and I didn't get anything but you know what they got six months of my money so because they sold me on the promise of it. Uh but that doesn't work for every grand so yeah I love that part of it too. >> All right. Uh, if you want Sarah to come help you and her growth operators to come help you grow your business, you can go do that at ba-commerce.com.

You can also follow Sarah on X and on LinkedIn. The link to BA Commerce uh as well as uh to her social profiles and to all the content she's putting out, which her content is very good. You should go follow her, is all in the show notes for this episode. So, go check that out uh in the description or the episode show notes or whatever uh wherever you're watching or listening to this. You should also subscribe to this show, of course, while you are while you're in those things because uh because uh you know it's good.

If you got this far, you're going to like future episodes, too. Um so, yes, Sarah, thank you so much for taking the time. I appreciate it so much. Um >> thank you, Andrew. I really appreciate it. [music] >> Big thanks to Sarah for being with me on this episode. Do go check out working with her in BA Commerce. The links for that, as I said, are in the show notes, so you can go do that right now. And of course, if you want to work with me and AJF Growth, you should do that by going to afgrowth.com, filling out the intake form there and telling me a little bit about your business to see if we are a fit to work together.

We're still pretty selective about the clients we take on. Really want to make sure we have the right fit for our agency for what we do and all those things. So, go tell me a little bit about your business on the website and I'll let you know if I think it's a good fit. And if I'm if I don't think that is a good fit, I may still have some ideas for you about what would be a good fit at some point down the line so I can refer you out or something [music] like that.

Email me podcastfgrowth.com. Would love to hear from you about this episode or any uh anything else that's on your mind. I'd always love questions that you have uh you want me to answer on an episode. Love to hear that. And big thanks to my sponsors as usual. Today it's more staffing and intelliggeems. Two companies I've been working with for a long time and I'm a big believer in. Go to morstaffing.co/jf to work with them. can go to intelliggeems.io and use the code bears 20 for 20% off your first 3 months with Intelligjee.

Both links for those are also in the show notes. I think that's it. All kinds of great episodes coming up. As usual, don't forget to subscribe. I'll see you next time.