Stop Wasting So Much Money In Your DTC Brand transcript

you are costing your business money needlessly and I know it because I see it all the time in the eight figure brands that I deal with in my client load and that come to me and talk to me and ask me questions and want to work with me and those things I've got seven ways that you are costing yourself money in your business right now I can almost guarantee you that you are doing one of these at least and you're probably doing two across the entirety of your business we're going to go through different aspects of your p&l over the next few minutes and talk about ways you're costing your money in your Opex ways you're costing yourself money in your cash ways you're costing yourself money in your cost of delivery I'm sure I can help you let's get into it number one you are fat you're fat that is problem number one I see this so often it is crazy but I watch brands over and over spend too much money on things that don't make a difference in their business especially their opcs and this is the thing about e-commerce e-commerce Brands thrive on the fact that they can have a very high Revenue per head okay very high Revenue per head and what e-commerce Brands very often do a mistake that they make is they start spending on um employees or agencies or even software sometimes expensive they just don't need they just don't need they're not really doing anything for them and so as a whole they are fat and this is like rule number one for me about starting an e-commerce brand if you think about a software business as a business that has fundamentally an advantage around cogs right like software margins that's the thing that makes software business work you got to think about your e-commerce business that way around Opex that it just requires very few people to run a really good business and you just don't need many of the things that people think especially like sub20 million in Revenue you should be laser focused on a few opportunities do those things exceptionally well and if you can do that you can be really really effective and extremely profitable it makes everything else about your business easier okay so that's number one in general you are fat and let me give you a simple number about that if you are spending more than 15% of your revenue on salaries and Opex and everything else it's a fixed cost in your business you're spending more than 15% of your revenue on that and you are over uh let's call it $3 million something like that right sometimes when you're under that you have to just invest early on if you know you and a partner are both in it you're taking salary I don't know like there's there's ways in which it's difficult but once you get past that very low middle point of seven figures you should be thinking about how do you stay lean to keep your margin really really strong that's number one okay number two related to that you're not offshoring I have come to think I really have come to think that there is no argument that I see besides something about an office culture or something like that there's no argument that I see maybe you have a particular commitment to your country um and that that I think is respectable people sometimes see themselves as part of a local community so sort of on an ethical level they might do this but um but beyond something like that uh which I you know I wouldn't approach it necessarily that way but beyond something like that if you are not actively exploring offshoring talent I just think you're making a tremendous mistake it's part of the way you take the lean OPC strategy and go even leaner okay um and it's not really necessarily by having less people it's just by um saving costs and and very simply matab Bogle has said this on my podcast a few times even if you just are a us-based company and you hire in Canada that's going to be like 20 to 30% less costly of in labor for you than it would be to hire that same person in the US so that would be a you know native English speaker in a very similar culture to the one that you're in that's before you talk about Latin America it's before you talk about the place that I've hired a huge amount of my team out of um the Philippines where I found incredible talent and you know I was having this conversation the other day with a team lead of mine in the Philippines I I had an hourlong call with one of my team leads there I hung up the call and immediately thought to myself I am an idiot this woman is so smart so talented she's already involved in my business in meaningful ways right and yet I am so underutilizing how much value she has because I'm still overlooking just like I I don't know I don't know why I just I just wasn't thinking enough about it and maybe it's because she's not actually like on my team full-time she's like a team lead that's sort of connected to me from folks in the Philippines so so she's like a halfstep remov for my core team but it just occurred to me like like what am I doing the and when I look at some of the process she's building that is affecting my team directly in the Philippines like through the through the staffing agency like I just I'm just blown away at at how good she is how talented she is and I I mean this like not sort of adjusting for cost differences I just mean human to human and this is actually the real fundamental mistake people make about offshoring they think that um price signals value right so because price signals value to people the moment you are paying less for a human to work in your team you probably have it in your mind that that person is less good you're like ah they might be good enough but they're not as good as hiring that same person in the US I think that calculation is wrong I think it is wrong there are talented people everywhere you go in the world the Philippines like I mentioned is a c is a country of I think like 180 million people it's something like that that might might be a little bit wrong but it's a huge population okay we can look at them really fast Philippines Philippines population let's see let's see right now okay 117 million so it's way off but still it's lot of people all right 117 million people are you telling me there aren't talented people there yes of course there are like there there's many many talented people who can do all kinds of things in your business and if you just have it in your mind these 117 million people aren't good enough or something like that by the way most of whom speak excellent English okay like you're just you're just making a mistake this woman I was talking to uh I am actively pursuing how do I get more of your time and more of your mind on my business what do I have to do to make that happen because she is so good and she's as good good and I mean that compared to any us employee I've ever had you've got to stop thinking about it that way as if as if offshoring Talent just means taking less like you need to go find incredible talent in places like that again you know my I have a lot of connections in the Philippines and that's where I've built my team it doesn't have to be there um but like I I just think you you've got to make that decision and you've got to go in on it because uh as I have said in my ad reads for my Filipino staffing agency in the past there's a a a simple Market Dynamic here which is that your dollar goes further in those places for hiring because you hire at the top of the market with less money than it would cost to hire that same equivalent um resume in the US you can just get incredible talent in in your business um and it really makes a tremendous difference both in the impact that highly talented people have you know highly talented people are always leverage are always um create creating leverage in your business you also um should know that having less Opex also creates leverage in your business you do both those things at once I don't understand why you wouldn't offshore next time you have an instinct to hire somebody in your business go through it in your mind think about it ask yourself what is the thing stopping me from looking over sees for this what is it what is my concern and is it solvable yeah I get there's some challenges in a few different ways in a few different places but ask yourself that question are those challenges solvable and how much would I pay to uh to not solve them okay because uh you're it's a really expensive thing to just let that friction exists in your mind and not explore it all right that's number two I build my offshoring teams in the Philippines with my friends at more Staffing more Staffing are amazing they've been a sponsor of mine for a long time and I love them they help me uh locate incredible Talent including the people I just mentioned in the Philippines I've built my team in the Philippines I will build my future brand e-commerce team primarily in the Philippines I've already got people from more Staffing in one of the sister companies working on my brand like it it's just a no-brainer and the reason why is is very simple more Staffing connects you to incredible talent in the Philippines with deep eCommerce resumes you get to hire top of the Filipino market great English speakers who are hard workers who understand e-commerce really well even at manager director executive levels in your business uh and you can do that while paying much less money than it would cost for the same talent in the US go to more now.co that's more now.co uh if you can go there get get a conversation started tell them that I sent you uh and see if it's possible there's somebody great in the Philippines for your business I think there probably is and you should be exploring it uh more staing will also not only handle recruiting of course but they will uh onboard train provide ongoing professional coaching so people are leveling up in their careers and they'll even give you a one-year guarantee on that Talent so if um somebody uh is added to your team doesn't work out for a whole year because you know hiring is hard no matter where you do it uh if that happens they'll replace that person for free no additional recruiting fees go to more now.co to get started today that's in the OPC side of your business those first two on the OPC side of your business let's move on to the marketing side of your business to the CAC side of your business okay and number three is you are still running creative testing campaigns creative testing campaigns I looked at another brand just recently that spent like hundreds and hundreds of thousands of dollars on Creative testing campaigns in their business in any year they performed like 40% or maybe even worse than that I think let me think about the math really fast the RASS without saying any numbers out loud because it's not my brand uh yeah about 40% worse than their target okay for those campaigns so they spent hundreds of thousands of dollars at 40% below their other Target and the operator of the brand told me when they did this he said even when when uh we move ads from the creative testing campaign into our like scale campaign quote unquote uh very often they don't actually get any more spend which means they probably would even were sort of dragging down the total spend of the account because meta didn't really want to spend on them at all even if they were quote unquote winners uh that like is everything you need to think about gra Dustin campaigns they're costing so much money they're costing money directly and lost contribution margin when you spend below Target they're costing money indirectly because they're sucking away spend from other ads that meta could be spending on so they're less efficiently Distributing your dollars I talk about this a lot I know I try to come back to it often because it still happens so much I still see people all the time saying things like yeah but I need to I need to what if I just do like a little bit of spend to cretive testing campaigns like just stop it launch your ads with manual bids in all of your other campaigns they will meta will see the winners and they will scale them I've worked with um another uh outside creative Agency on a client of mine we're sharing work on a client like this and they're great great creative agency they have launched their campaigns along their ads alongside mine despite this isn't the way they would normally do it and they have said in that or and what has happened over and over is their ads have spent alongside my ads meta has distributed them just fine like it just even people who disagree with me about this right uh there's just plenty of knowledge that can and plenty of learnings that meta can get on those creative testing ads if you run them with manual bids meta can figure out what which ones are winners which ones are losers and can uh and and can scale them and you can reduce a massive cost massive cost in your business um by doing that okay if you want to see my whole case for this um just go search Andrew Ferris creative testing campaigns you'll find a couple of things I've done about that still a couple my more popular episodes uh just Andre creative testing you'll find a couple of them I'll try to get those links in the show notes as well so you can just click over to them all right um okay no stop doing those they're costing you money number four you are spending too much money on branded search this is another thing that happens all the time I'll start working with a client what I always tell clients about Google uh Google ads is I can't make you money there but I can help you stop losing money there and this is the number one way I see people losing money branded search uh is may have some incrementality to it but if it does it is a very low amount so you need to be running branded search ads um at at least a 10 to one in your ad account on a click-based Rass basis at least a 10 to one probably a 15 to one before it's um for it to be incremental at all if you're not running them at some extremely high number like that you are um you are almost for sure just costing yourself money for no reason at all because otherwise the cost of the ad uh is more than the incremental dollars that you would make uh by getting those clicks you're just paying a Google tax that's it okay so many people already know that right they that you should do that and there's a little simple trick I do here I'll set branded search ads to like a Rass Target or a CPA Target and little by little I'll just keep tightening that Target more and more right so like make my tcpa lower make my Ros higher and uh make my rest Target higher like if you're not you know if you're managing Google ads yourself is a simple thing to do just do that little by little and then just keep an eye on your search and impression share if you're above 85% of your search impression share or above maybe even 90% you're probably still getting most of the Impressions and what you'll see is that you can keep raising your roas Target in Those ads for a long time and Google will still spend and get 90% plus impression share on those ads and so you'll take an ad from like a five to one to a six to one to an 8 to one to a 10 to one to a 15 to one I've get taken to like a 20 or a 25 to one and still gotten just as many impressions as I got before like Google is just taking my money before that they were not Distributing it as efficiently as possible just over bidding on stuff that on um placements that I was going to win anyway that's a simple thing you can do there's two other things to to look at for Branded search number one is if you have not excluded branded search from your pmax campaigns I just guarantee you your pmax campaigns are just needlessly costing you money uh for sure they are less incremental than you think either way uh they you should think of pmax as like lower to midf funnel most likely um but branded search if they are in there that's dragging it down even more so you really need to get them out of your pmax campaigns or they're going to throw off your Blended roas the other thing that happens is that people will actually have categorical search or categorical shopping campaigns like camp aigns in Google where they are trying to Target um non-branded traffic okay and yet branded terms will slip in there like a misspelling will happen or of your brand name or a specific product name or something like that something that you have not put on a negative keyword list will slip into those search and shopping campaigns and you'll be like oh great my search and shopping is working that's awesome but then you go look at the actual search term report and realize oh actually some branded Search terms were making their way in there this is actually always how I judge Google ads agencies when I look at the work they're doing for other people when I see branded Search terms making their way into categorical campaigns non-brand campaigns it's just a clear indication to me that people are not managing the account closely enough because it's just one of the most obvious things to me if you're running branded search people will be spending thousands of dollars on on branded Search terms that are running it like a three to one and that's you're just flushing money down the toilet if you do that stop it save your money um get that out of there okay that's number four branded search run it at a very high row ass don't blend it with other stuff um it's costing you a bunch of money okay number five you aren't testing your pricing I've talked about this in a recent episode as well but I want to come back to it because um as as I've said elsewhere price the price of your product is probably the most consequential decision that you have made in your business the most irrationally right like a decision that has a huge impact on the performance of your business and yet you probably didn't think carefully you probably were like looked at your price relative to some competitors that you kind of wanted to be like and put a number on it right even like sometimes is a big thing like you need to change your price 20 or $30 relative to you could command a lot more money take a little less orders but get more profit per order something like that like or or come lower actually could be the case as well you need to do that um but people are so nervous about this and and the thing that blows me away like I said is just how poor the decision-making process is in testing price but price has a huge impact on your customers experience of your brand and on their decision um price is core to the offer when I think of the notion of an offer I think of an offer for is two things product and price and how you put those two things together like could be a big bundle and then a discount or something like that right how you combine those two things is what I mean by an offer and um and and so people make this decision around price and they're so nervous to ever raise the price they think they're GNA get a huge customer backlash if they ever do that what you really should be doing is testing your price at some point okay because even if you can get two or three more dollars per purchase without any price elasticity so like the custo you get the same amount of orders that can make a meaningful impact on your margin it can make a big impact on your margin so you should be playing with that if you can get a few more dollars here and there over enough orders over enough time it can really really help so um I would actually start with some bigger price tests but but really especially earlier stage Brands where you don't have you know this this basically becomes really difficult once you have a lot of channels in your business um but if you're especially DTC peer play you can really mess with this a lot without it causing any other Ripple effects in your business and look if some customer gets price a and price B separately and they're confused because the price went up or something like that there's a simple thing to do here take care of in customer service just let them know yep no problem we saw the earlier price you can have that price like it's really simple you're not going to get a huge backlash of customers um I have mentioned price testing before you've got to find a way to do it um in your business uh and so yeah test your price okay huge impact on your margin huge impact on customers experience totally irrational decision the most robust split testing conversion rate optimization software in e-commerce is intellig certainly including the thing I just mentioned on this episode which is price testing that was the first thing that actually drew me to intell was when their Founders who had come over um from a big tech company uh and seen the way that big Tech was handling price testing they were seeing how that was not happening in e-commerce and they built a tool that could handle that as well as everything else you needed for cro um intell is incredible software you really should be testing stuff on your site all the time I don't know why you wouldn't be it's something could be running in the background alongside a lot of other things you're doing especially because intellig gems makes testing easy you don't need to be a developer installing it is extremely easy it's all drag and drop type stuff like it's really really easy so intellig gems. you can test all kinds of stuff here like free shipping threshold you do full Shopify theme tests landing page tests just like simple AB content tests test your PDP why are you not testing your PDP you should be doing it and certainly as I mentioned your price your price of your product a huge needle mover in your business go to .io to get started today tell them I sent you intell gems. okay let's go we've done Opex we've done CAC let's go over to cogs okay so the the variable costs outside of your business if you think about this I'm sort of organizing this whole episode the same way I think about organizing a p&l there's fixed costs your Opex there's variable costs in uh and customer acquisition uh that's CAC okay there's variable costs for your actual product that's cogs or cost of delivery okay um and there's two things that are happening at the level of cogs that again are tremendous mistakes that brands are making all the time okay number one is that you are not talking to to enough manufacturers okay so I guess this is number six this is uh this is number six in your business the sixth thing that the sixth way you are um costing your your your business a lot of money is not talking to enough manufacturers okay you're not talking to enough manufacturers and the way that I know that is because I'm working on starting a brand right now and I have just been amazed at the power of talking to lots of Manufacturers just like shopping and negotiating figuring this out there there are a lot of Manufacturers for nearly every product a lot of suppliers for nearly every product and there's all kinds of things you can do to negotiate once you have a supplier and and to build a relationship that's beneficial for them as well you know look here's the thing about supplying suppliers right uh manufacturers manufacturers make their money on volume and so a lot of times you can create a mutually beneficial relationship that includes negotiation along the way if you are if you can show them that it's a pathway to more volume because the more you're ordering for them the more value you create for them and so there's something things they can do including related to terms and suppliers and all those things along the way that's great once you have that relationship and I recommend you do those things and work those things out blanket Po's can be part of that all kinds of stuff okay but at the start I bet most people watching or listening to this who have started a brand have talked to like a few manufacturers like maybe five or something like that I have worked with team a team that I'm working with to start my a brand that I'm working on the side reached out to in the first week of working together 60 right maybe maybe they located 60 and reached out to 40 I forget right they maybe eliminated some of that I'm going to talk to them but like there like incredible amount of work and you know what the net result of that is is that when I go to launch this product the person from that team also based in the Philippines I should say incredible supply chain people um the person from that team has told me that they are uh that the person from that team has told me that they're like a little nervous about if they're going to be able to add value in the long term because our supply chain is going to be so good from the start right like I've got product samples they're really good quality products we're coming in under the suggested cogs um that I that I modeled the business on and all those things like it's just crazy if you've talked to like I said less than let's call it 10 manufacturers 10 suppliers for your core product it is time to start going for more of them I um I've talked to a client of mine recently who um who realized after some shopping that they could probably get their cogs down by like 20% I talked to another friend of mine who said they're going to get their cogs down by 30% after shopping more manufacturers and these are real numbers that that b have been floated to me recently just from talking to more manufacturers like that is a huge business impact where you where like just having higher cogs makes everything harder another client I talked to recently was able to get one product down from $5 per order to $2 per order okay by basically um working with in that case it was a different supplier for their manufacturer just crazy and and that makes uh again makes a huge difference and and so it is possible it is possible to get cheaper cogs and it's the kind of thing that has gigantic impact on your business um e-commerce Supply chains in my view are the most under optimized parts of most e-commerce businesses because people just don't know what they're doing and so um finding good help for that is a huge deal I mentioned earlier in this ad more Staffing they've got a company called move supply chain that they work with or that's a that's a it's a sister company of theirs that is somebody who I would be um talking to about this that's who I'm working for with mine so um reach out to more like I said in the ad earlier reach out to move like I said in the ad earlier they're going to really help you okay number number seven this is a newer one that I'm thinking on this is a little bit something I'm less sure of but it's something I want to really start thinking about a little more so take this one with maybe a little bit of grain of salt and just pick up a phone and explore it okay and that is if you are shipping everything this is another way you're costing yourself money you are shipping everything with us-based 3pls shipping everything with us-based 3pls uh the reason that that is a very big deal right um is because it is possible I'm just seeing some stuff around this that are some other ways to ship that again are meaningfully cheaper and this is another thing fundamental to e-commerce is the idea of shipping products straight to somebody's door and so if you can make that process cheaper it's like there's a huge amount of cost there for Brands if you can make that proc process cheaper without hurting your quality too much it can really really help I'll give you one example right away which is that for some Brands you should be exploring portless um I don't have a sponsorship relationship with portless but I've been impressed by them for a long time portless is in China and they ship from China straight to your door and so this doesn't work for every brand right but they Air Freight from China straight basically straight to a customer's drawer to the customer everything looks just like a regular you know order from you know with tracking numbers and all that kind of stuff like any other order they they don't know the difference or anything like that and the shipping timelines that I had seen most recently were like five to eight days something like that so a little long but um by Saving on frighting stuff um you know across the ocean uh you can really save a lot of money um and there's also like some duties involved that can can be worked around I I don't understand all the details of this but I've seen like 30% per order sh cost shavings on that um the other thing is it it uh can can also make it so that your turnaround time on uh or on fulfillment is a is as much cheaper U or what I mean is you now don't have to bake in like an extra month uh in your um lead times for from your manufacturers to get something overseas which can also be a really huge deal for your cash conversion cycle so you should look into portless and see if it's a good fit for you again I tell them I sent you but but I'm not being paid for that okay um the other one though that I'm that that maybe brand should be looking into is Mexican and if you're in the US Mexican and Canadian 3pls um I'm seeing some whispers about this and again grain of Sal here take a call explore it for yourself I don't have any names to recommend yet but I talked to somebody recently who was talking about um three PLS just over the Border in both of those places like Toronto which is just you know just just barely north of the US right and some places in Baja um just right over the border from San Diego in Southern California down in Mexico where like trucks are being driven across the border the the shipping timeline at the shipping timeline is the exact same as the US um and the labor is meaningfully less expensive really good quality 3pls from everything I can tell I mean shipping Major Brands and have been shipping major brands for a long time some really impressive um you know clients uh for some of these Brands it's something you should be looking into because again I'm I'm talking to a client recently who's talking about maybe shaving another like $150 per order in fulfillment costs maybe $2 um especially if you have last touch manufacturing like that's that's a labor intensive as aspect of your 3pl like that's you know custom monogramming or anything like that that goes on at the last minute right those kinds of Brands uh where labor is a huge part of the cost that could be a big deal so um the space you know storage fees can be a lot better so yeah you should be looking into that I heard about it in such a way recently where I thought it needs to be included in this episode because Brands need to check it out but man I got to tell you it is uh it is something I would be beating down the door to go figure out if I was running an e-commerce business right now mine hasn't launched yet but the moment that we go to a 3pl uh assuming that I don't hear anything between now and then it's going to make me regret this uh it will be the first place I look uh because I think it's a really big deal so okay number let's go through all seven again really fast number one problem you're fat number two you're not offshoring why are you not offshoring that's on the OPC side number three you're running creative testing campaigns number four you're spending tooo much on branded search number five you're not testing your pricing number six you're not talking to enough manufacturers number seven you're shipping everything with USB 3pls you are costing yourself money if you are doing those things uh and you should stop and you should make add more money to your bottom line run a leaner tighter business uh and you will get a bigger business at the same time because now you'll have more money to invest in things that grow your business instead of just costs that eat away at your margins I have so many good interviews coming up you should subscribe wherever you're watching or listening right now to this because you're not going to want to miss them Barry hot coming very soon I'm interviewing him just a couple of days to talk about creative strategy got Olivia Corey coming to talk about incrementality testing Shireen alar is coming back to talk about who knows what but shireen's always a great time uh just a bunch of interviews that you're not going to want to miss make sure you subscribe wherever you're watching or listening if you have feedback for me about this episode you can go to a.com to not only see everything I'm doing but email me podcast aaf.com or reach out to me on Twitter at andrewj Ferris um I guess you could see what I'm doing at agf growth.com give me feedback on those channels you know how it works you know how the internet works I don't need to tell you uh that's it uh thanks so much for watching for listening I'll see you next time [Music]