The Tool I Use To Forecast DTC Brands For Profitable Growth transcript

So many e-commerce businesses are so much less profitable than they should be because they don't have a good way to forecast their businesses. And it is that simple. If you forecast your business effectively, you will see all of the pain points in the business where you need to carve out less cost or more growth or whatever to drive profit. And there's a tool I use to do that with my clients. And it's a cohort-based forecast.

I'm going to show you the tool I use today. If you're listening to this, I'm going to talk you through it in a way that should be pretty clear. I'm going to show you exactly how I use it and how it is so helpful for driving profit in your business. No matter how big your business is, you can use this at any size business. I'm going to walk through it. I think it's really helpful for you to see where are the pain points in your business and how you can be more profitable.

So, I have a client right now who uh who has gone through some back and forth about the profitability of the business. they have um you know had some really good moments in the last year and then uh had some lower moments at the same time and so they're feeling frustrated right they're going they're going like ah what is happening at the end of the year holiday wasn't quite as good as they had hoped etc and over the last few weeks we've been meeting together to talk about wait a minute let's look at the design of the business and think a little bit more about where profitability could be better where is it worse where are we overspending where are we underspending all those kinds of things um now there's been a bunch of tools we've used for a while as an eight figureure business mature operator who knows what they're doing.

But um it's been really interesting because when the business has been less profitable than we have wanted it to be, we have a really key and clear tool to help us go solve the problem. And this is something that is really easy to underestimate. Having some way to go attack the problem of where there are problems in a business, like having a clear method for answering that question goes really far for solving the problems.

And the starting place for that is with a really simple uh concept that Taylor Holidayiday um had had has been public about for a while. I don't remember if it's original to him or not, but it's basically um what he calls four quarter accounting, right? And and so I want to actually start by just for a second thinking through the notion of four quarter accounting for your business because it's a really helpful way to conceptualize your business.

And if you can keep this straight, then you can um then you can begin to get a sense of okay, here is how um here is how like uh I I can understand better where the profit problems are in my business and where they are not. All right. So um so so here is the simple idea of four quarter accounting. Okay. And again, if you're listening and not watching, then it's okay. I'm gonna I'm going to walk you through it. Okay. that there there basically you can break your e-commerce P&L in really any P&L but your e-commerce P&L into four sections okay the first is cost of delivery cood cost of delivery is everything associated with getting an order from uh from the order being placed on your website to the customer's door okay that means um not only the cost of goods not only the cost of packaging not only the freight of those of your cogs making it from your from your manufacturer to your warehouse house.

Um it means not only um the cost of getting the product from your warehouse to the customer, the package, you know, that packaging that that goes in like the box. Uh it's it's all of those things. It's also merchant account fees, right? So the 3% you pay to the credit card company um via your Shopify bill or whatever it is. There's there's all of these different things that are associated and those are variable costs associated with basically every order.

Now, if you've been in e-commerce for a while, this is not news to you. But here immediately, there are all kinds of places where brands are really, really underoptimized. Okay? So, um so you start there. Okay? Start with cost of delivery. That's all the variable costs associated with getting um an order from order to the customer's doorstep. Okay? Number two, CAC. Okay? That's advertising spend all together. So, forget if it's Meta or Google or Postpilot or anything else, right?

It doesn't matter. Okay? Tik Tok, Snap, anything that's an advertising cost. Those those are all ad spend associated again um with growing your business. Not the not the agency fees, but just the actual spend itself. Okay. And uh and that is some percentage of your revenue. So there's cost of delivery, there's CAC, okay? Customer acquisition cost total total CAC. Number three is your fixed costs, your opex. Okay, that would be um salaries, agencies, rent, um software.

Those are the big ones typically in e-commerce. Okay. And then the fourth bucket, the fourth quarter is profit. And as you'll see in this percent in this little screen share I have right right now I've got cost of delivery at 40%, CAC at 40%, opex at 15%. That adds up to leave 5% left over. And there is something magical about breaking down your P&L into these simple formats. And it is this. Imagine for a second that your business is not profitable.

Okay? And I just changed the opex here from 15% to 20 to to 25%. And now uh my business is actually fi at negative 5% profit. Okay, if that is a situation that my business is in, I can look at all three of these other sections and I can say where am I going to shave costs or how am I going to grow the business somewhere to make this work. In fact, those two are actually answering the same question. It's possible that I can grow the business in such a way where imagine my cost of delivery stays the same.

My c stays the same. But suddenly, let's say I go from a million dollars in revenue to $2 million in revenue. Now my opex might shrink. And I didn't do all the math here, but my opex, my fixed cost in the business don't go up with that spend, right? The c stays the same. The variable rate, the variable cost stay the same, but now my opex gets lower. I've grown the business a little bit more. And now I've gone from 25% profit to 15% profit.

Okay? So, that's a way to look at this. I'm going to show you some more of this in a second, right? Or you could say, "Okay, what happens now if I can actually get my CAT down to 35%." Well, there's a couple ways you can do that, and I'm going to show you that again in a second, show you how um e-commerce businesses work. Okay, what happens if I can go renegotiate with my manufacturer, and now I can get my cost of delivery from 40% to 37%.

Okay, so I got three points of margin back. Suddenly, I have 13 points of margin in the business, etc. But what you can do with these four categories is analyze your business through this lens and then start answering the question where do I have too much cost. Now here there are some heruristics you can use to think through um where there is too much and where there's not enough cost in your business. Like for example uh a classic one I use is that opex at 15% or less is like a really crucial part of e-commerce businesses thriving.

E-commerce businesses scale very well against the number of people you have. have. There's a lot of other things you can do and I'm going to talk about each of these sections more in a section in a second. Okay? But first, I just want you to conceptualize that idea. Four sections of your P&L, okay? Four quarters. Cost of delivery, CAC, OPEX, profit. If your business is going to be profitable, you need to be able to know which ones how those three numbers cost of delivery, CAC, and opex are going to add up to be less than 100% of your revenue.

And the whole game in some ways is that simple. And if you've never thought about your P&L this way, you need to because if you can start thinking that way, you can start to understand more what it means to to build a lean growing um profitable business. Okay, so that's the simple way to begin to frame this exercise of going, okay, what is that at the top level? How do I think through all this? Okay, so so there's that.

Now, um let's say you are trying to do that exercise and you want to understand where in the world I can actually shave those costs. So, I'm going to show you now a much more complicated tool, but one that's really, really helpful. And I want to pause right here and say you should subscribe to my channel. This is the kind of stuff I'm talking about all the time. So, if you're watching, listening, stop what you're doing right now.

Subscribe if you like this content so far. Um, I think you're going to really like a lot of my content. If you do, I talk to operators about this kind of stuff all the time. Um, in fact, I've got an episode coming very soon with Kelsey Laric from from a holding company. Kelsey and I talked about this exact thing, these exact dynamics in a bunch of different businesses that he's working on, that I've worked on, and gave a bunch of real examples of this.

Okay. So, um, so be like this, subscribe, wherever you're watching, listening, and I'm also about to show you a document that I'm going to give away for free. Okay? So, I'll talk more about that in a second. But that document is a cohort-based forecast. Okay? And the key here is that you take those four categories I just mentioned and you take those and you and you now go and forecast the details of each section all the way through your business.

And I am telling you that my clients who are most religious about this, who think about their business in these terms and update this all the time and think about this are most likely to be successful consistently. And it's because they have total clarity to what's happening at every part of their business. Man, if you do this exercise and you think about lowering your opex by having incredible talent for the Philippines in your business, you will see exactly the power of the value proposition of offshoring with great talent uh for an e-commerce business.

That is basically the exercise that I did that led me to start working with more staffing for my business. More staffing is the recruiting firm that I use and love in my own business to help connect me to incredible talent in the Philippines for my business. And I'm not just talking about $5 an hour executive assistants. I'm talking about manager, director, executive level talent. My partnership with people uh from the Philippines, from more staffing across my businesses has been one of the biggest unlocks that I have been able to achieve in any business that I'm working on.

And there are two sides to that coin. The first is the obvious one, which is when you hire talent, you want talent. You want great people impacting your business with um strategic thinking, thoughtfulness, and that could be any part of your business, right? Supply chain, operations, marketing, whatever. wherever they're working, you want the best talent you could find. But if you can also find that in a way that keeps your opex low as a percentage of your revenue.

Um, then it is an absolute massive unlock in your business and that is what is available to you in the Philippines. And my friends at more staffing can help you find it. You should be thinking about how to do that and build and build a lean opex in your business and you should be doing it with more staffing. I just can't recommend them highly enough. Uh, it's also very little risk to you. More staffing will help find great talent in the Philippines for you. people with deep e-commerce resumes, like I said, really, really good talent, and then they'll give you a one-year guarantee on that talent, which is way longer than what most recruiting firms give you.

What that means is if that person doesn't work out for a whole year in your business, they will replace that person for free. Uh, so go to morstaffing.co/af. If you've been considering getting involved with offshore talent, with Filipino talent in your business, I can't recommend it highly enough. Again, everything I do honestly in some ways touches uh or is touched by uh talented people in the Philippines. I can't recommend it enough.

More staffing.co/ af. In fact, I've even thought about this for AJF Growth for my service business, right? Like I have to have this level of clarity for my business. I'm actually reworking my P&L to think the same way about this business. business. Now, it's going to be structured a service business really differently than an e-commerce business, but to have um clarity through the buckets of my P&L and then the subsections within those buckets and where I can shave costs, where I can um seek to push more growth and be more aggressive.

It's not just about shaving costs, right? It's about both. Um and to think about all those things. Okay? So, um I'm going to show you now this cohort-based forecast. And I want to I'm not going to give you the entire breakthrough of everything that is going on in a cohort forecast. That is too big of a document. Um there's too much going on. But I'm going to show you the basic um uh charact the basic um contours of this doc so that you can see it.

Okay. And what I've done, I'm going to start with the monthly tab of this document. And it's basically uh functioning as a monthly income statement. Okay. And and so it's a P&L designed document. There's a whole bunch of stuff going on here. And I've got it started in April 2025 because this ep this episode will release in March. So you can imagine starting it in April, okay? For a brand new brand, a brand that did not exist.

Imagine you're launching a brand on April 1. Okay? And I've made up all these numbers, by the way. So, this this is not a real business. Um, just so you know. All right. So, um, I have I have here a a a section by section breakdown of everything going on in the business. And what you'll see first at the top, okay? Again, if you're listening, I'm going to talk you through it, so it's all right. What you'll see first at the top, although this this episode may be better to watch.

So, if you have Spotify, YouTube, it may help you to to switch over to that at this point. If you go to the top of this, okay, what you'll see is uh is the month- by-month breakdown revenue. And immediately what you'll see is the revenue is broken down between new and returning customer revenue. Okay, you might wonder how returning customer revenue, how is how there's any of it in the first month of the business. There is a little bit, and I'll show you that more in a second.

Okay, so the first thing to know is I never look never look at a business's revenue by just looking at revenue. I'm always breaking it up into new and returning customer revenue. Okay. Now secondly, um from there I've got all after that after the revenue portion, I've got my cost of delivery. Okay, total COGS broken out by different line items, products sold, packaging, forward shipping, merchant fees, fulfillment expense, returns baked into that, return shipping and processing if you're it takes cost you any money to process returns.

Um all of these things are in here. Um uh so that you can do that. You could add whatever lines of this you wanted, okay, into this and and you could really break this down even more um from there. But those are all there. And so I've got COGS built into the business. Okay? And that tells me right away where my gross profit is. So if you're following along in this business, I'm forecasting $29,000 in April or about $30,000 in April.

Okay? Again, brand new business for a gross profit of $20,325 or 68% gross margin. Put another way, that means my COGS or my cost of delivery total, like I just referenced before, would be about 32%. Okay? uh 32% of the business goes out the door in COG. So if I come came back to um this sheet over here for this business that first month it would be 32%. All right. Okay. So now if I uh if I come back here, I've got all of those built in and then I've got my ad spend built out for for advertising expenses.

As you can see, you've got um CAC built into this basically in the same way. There's no percentage here, but you can see contribution margin at the end. So again, this is assuming $16,500 in Meta and Google spend broken out into two different lines with the hope of growing meta-pend month over month. So from April, it'll be 15,000 up to 45 to 45 uh in May and in June and then in July you go to 75 and in August you go to 90.

So this business is forecasting that their metas-pend is growing as they put time into that. Maybe they're running manual bids and everything's going great and and all that's worked out. You've got um total advertising expenses and uh and me right there and contribution margin as well. And now you have some sense of how many contribution dollars are in the business, which is all of the dollars after cost of delivery and CAC.

Okay, so there's the basics there. And then you go down from there to opex, and that's all of your operating expenses that are fixed costs broken out again into personnel costs, marketing overhead like PR, agencies, whatever. Um, you've got a meta ads agency in here, brand work, and design work, tech expense, other fixed and variable, um, general administrative expenses, and you've got those all there. Okay, so this is the basic idea of how this sheet is organized is line by line under each of these four sections or those three sections of costs, how this all works out.

And what I want to show you is the summary tab. Okay? Because the summary tab of this sheet then begins to give you more clarity about what's going on. So the first thing to see is that um the gross revenue in the business, you can do this by quarter or by month. Now breaks it out with those percentages that I've shown before. So Q2 2025 if you do April May and June rolled together you see a gross margin of 68 points.

Advertising as a percentage of revenue of 48 points. Okay. Um that means contribution margin of 19%. OPEX um uh and other overhead uh is down to 23% in that early going. That's obviously too high, but uh for an early business it might just be something like that. You might also take out some personnel costs and some salaries because you can't really pay yourself in the beginning of a business, whatever. But just again, take it in this business 23% and now this business has lost just about 10 grand or minus 4.3% in the first quarter of its existence.

That's not too surprising. Okay, so that's the way this whole sheet works. Now, let's talk a little bit more about how I think about using this sheet to drive profit. Okay, so imagine in this business that I want to create more profitability. You can look at this quarterly, you can look at this annually, whatever. Let me pause here and say you can have access to this sheet for free by going to my website ajfgrowth.com and entering your email address either in the popup or in the footer on that website.

I will send you this for free. You can duplicate it and use it yourself. Okay. Um so so go do that. That will also sign you up for my newsletter which I send out once a week. I think you'll like it. All right. So what I want to show you though is the dynamics of profit as they go through a growing e-commerce business. All right. Um what you'll see here um is this is driven by cohort tabs. Okay, cohort analysis. So um all everything in this sheet is driven by this cohort tab on it.

Again, I'm going to explain as well as I can for those who are listening and not watching. Okay. Um the cohort tab breaks down a few things starting with the AOV of your customers. New customer AOV and returning customer AOV. For this madeup business, I've got new customer AOV at $60, returning customer at $40. Some businesses, those numbers are much closer. Some of them they're really different. You've got meta and Google spend by month.

Um and then a bunch of other stuff here that we that I'm not going to bother getting into, but the but the basic concepts are all there. And then crucially, you've got um at the top of this uh cohort retention over time. Okay. And the idea is what percentage of customers come back and make an order uh after they first make a purchase. Okay. And and in what months? Okay. And the beauty is with lifetimely or even Shopify's cohort analysis, you can get this data pretty easily for your business.

And and the way I have this broken out is, for example, in month zero, so within the first 30 days of a customer making a purchase, uh, a new customer making a purchase, 13% come back and make a second purchase. Okay? Within month one, 9% um make uh uh their their next purchase and and so on. Okay? And so it goes down from there to where less and less people are coming back over time and the returning customers uh fade out over a long enough time period.

This business has pretty good retention but not incredible retention. And what you're seeing is is uh what percentage of customers come back over time. Like I said, this this information is easily available for you in lifetimely or in uh Shopify's customer cohort analysis. you can go fill it in exactly this way. Including if you want there's a line here for initial customer cohort retention which is basically anybody who um already was in the business before you built this this forecast.

So what you know if you have initial customers you just put them right here. All right. So I'm not again I'm not going to walk through how to do this entire thing. There's there's a bunch of information including where you sign up if you want me to send you this sheet uh on how to fill out this sheet. I'll send you some other instructions with that. But um what I want you to notice is the dynamic that happens in e-commerce businesses here.

If you like this episode, but you want to go deeper on these kinds of concepts, there's an unparalleled resource for you, and that is with Admission from Common Thread Collective. If you're trying to grow an e-commerce business profitably, and you have never done any of the courses and been involved with admission, you are missing out. admission is the best place to stay upto-date on all the key profit-driven uh ways that that good people at Common Thread Collective are using to grow incredible seven and eight figure businesses um that they see all the time.

There's simply no better course style content in the world of e-commerce than what's available at admission. Um and I know that because they're updating that stuff all the time. Taylor Holidayiday, one of the best thinkers in e-commerce. Like I said in this episode, he is the one whose brainchild fourquarter accounting was or thinking about businesses this way or at least the one who popularized it. Taylor is in there doing a once a month private closed Q&A where you can get his input.

You also get free coaching calls for your ad account if you've listened to or engaged with others of my content. You want to learn how to really use cost caps, bid caps, target rorowass bidding and meta ads. Stay up to date what's going with Google ads. Um, they've just got constant stuff coming down the pipe all the time. And you can even get coaching from deeply experienced media buyers who will help you figure out how to leverage those tools in your own ad account.

And it's even better than that, which is that if you use my link, which is in the show notes or in the description of this episode, go to my link, sign up for admission through that link, or just tell them that I sent you. Okay? Even if you don't use my link, go to yourmission.co, tell them I sent you. Okay? uh you'll get the first of those calls for free, which is just amazing because uh so many people DM me all the time saying, "Hey, what would you do in this case, Andrew, with this ad account, etc." And I don't have time to look, but I know they're spending hundreds, thousands of dollars on underoptimized media buying setups in their meta ads account.

They would save so much money and make so much more money if they would just join admission and leverage the coaching calls. Go to your admission.co. Like I said, tell them I sent you or follow the link in the show notes or in the description of this episode to get started today. It is an unparalleled resource for profitable e-commerce growth. If you have any retention, what you see at first is that this that if I come back to the monthly statement, returning customer revenue grows over time.

That is a very simple idea, but it's really really important. The way I have this business forecasted is that by the middle of 2025, they get up to $90,000 in meta ad spend. Okay? And they maintain that meta ad spend for years. That's the way I have it built. And what that does is it makes it so that new customer revenue stays pretty much flat month over month um uh over time. And again, you've got it. All the forecasts are right here.

I've got some bumps for holiday and things like that, but uh but basically Meta Ads is is pretty much flat for a really long time um in this business. A couple little bumps here and there, but it's pretty much flat. And what that ends up doing is making it so that as you have your new customer revenue in the business that's pretty consistent month over month over month, returning customer revenue grows month over month slowly but surely.

People who bought today buy again next month and then they buy again in six months and they buy again in 10 months. And even if that's a relatively small number of people, as you build those um snowballs of customers, what happens is your advertising spend as a percentage of revenue goes down. Okay? And so what you see here is that um is that the ad spend as a percentage of revenue over time in this business goes down.

So if I'm showing right now the quarter by quarter breakdown basically by holding ad spend flat but returning customer revenue growing the revenue grows without without associated ad spend cost and the cost of ads the CAC goes from 48% to 50% in the early stages. So first it it takes some time to to build up but then it goes to 42% 43% 38% 39% 34% and so on. So what happens is more and more profit opens up in the business.

At the same time as revenue grows if you hold your fixed cost constant. So revenue grows um now your opex even if it grows some gets smaller as a percentage. So I started with that big 23% number but by year two it goes to 10% 9% 10% those kinds of numbers. Maybe it stays, maybe it goes up over time, if people need raises, whatever it is. Maybe the business has to grow to support any of the kind of money you want to take out of it, whatever.

But you get the idea. The idea is uh is that as revenue grows, you can uh be careful to think about how your fixed costs change in the business with that. And if I was forecasting my business, okay, what I would do is I would say, okay, what do I think I need to accomplish if I'm going to make this business work for me the way I want it to? In this business, I have personnel costs going up over time. But maybe at some point I'm like, "Oo, this business is not profitable enough." So, I just walk into this section and I go, "Okay, I'm going to cut my personnel costs a whole whole bunch." Right?

If I do that, now I've got more profit. I'm going to cut some agencies. Okay? Maybe my a my ad agency is costing me uh $2,000 is costing me uh $4,000 and I'm going to take it down to uh my email agency is cost me $4,000 and I'm going to say, "How do I get down to two or whatever it is, right?" I mean, I don't know. I'm just making those numbers up off the top of my head. But the the basic idea is that you go point by point do that.

And so when I when I think about this um client of mine with whom I was I was working on this problem, this is exactly what we did. We looked at our opex as a percentage of revenue and we said, "Okay, if we're not as profitable as we want to be, are there any places here we can cut and make the percentage of that revenue lower?" And we went through this exact sheet. We went line by line. We jumped into his accounting software.

And we said into QuickBooks and said, "Okay, are there places here where we can cut some kind of cost that just kind of piled up over time?" is a piece of software we tried out at one point and then they raise the price over time and we can we get that from 2,000 a month to a,000 a month and can we and you just start going down that list, you know, and suddenly there's like $25,000 in the business per month that we've cut out and will it make the business work a little bit worse?

It might for a little while. That $25,000 probably wasn't doing nothing, but maybe it'll make it better by opening up profit because we got a little fat because we were working on some other things. And that's just how business goes, right? Like unless you're insanely disciplined, those kinds of things happen. And so at the opex level, we start doing that. At the same time, we started looking at the percentage of our COGS and we started going, okay, wait, what happens if we can make it so that our fulfillment fees go down and and our fulfillment costs change?

And so what happens if you say, okay, my my um fulfillment cost right now is 5% of my new customer orders, but what happens if I make it go down to three? Well, what happens is you you get a whole bunch of profit back, and suddenly your your profit increases in the business over time. and and uh and now things work better. And you can do this line by line with this exact forecast. You can also do something else which is what happens if my retention gets better.

You can what happens if my um September cohorts and on I do something new. I add a bunch of subscribers and all of a sudden my cohorts perform about 10% better in retention than they did before if I do that. What happens to my business? And you can just go and keep looking and make all these changes. Jump back over to this tab and see what the profitability is like over more time as you go and do that. But what what having all of these things filled in allows you to do is exactly the thing I just said and whatever format you do it, whether it's a cohort forecast or not, by forecasting every point of the P&L, you can then go and make adjustments like this.

Think about your business and go, what do I need to do for this business to work better? My favorite thing to use actually on this is to ask this same question, but to ask it by looking at um looking at things across the business. So, I've got these adjusters built into it. Like one question you might have is what happens if I could spend 50% more money but at 20% less efficiency. Well, I've got built adjusters into this into this um forecast so that you can exactly see that scenario all the way through the business.

Or what if I spent 10% less money um but I did it at 10% more efficiency? Do I get more profitable or not? And you can look and see how does that affect the business? What happens if my retention goes up by 10%. Like I said, how big of an impact is that? Should I put my time there? And so you begin to play with it. And the key here is not that you're going to be right in all of these things. The key is not that you're going to be right with this forecast.

The point is if you want profitability in your business, you have to design it for profitability. And so this sheet is the design. The way I like to talk about it is if the treasure at the end of the treasure map is profit. Okay? Then having something like this is the is the treasure map and is the little dots and arrows on the treasure map that guide you to the treasure. If you can build this in such a way where you have it filled out reasonably accurately, you can make it so that your business doesn't have any giant surprises.

Well, I mean, you're going to have big surprises because that's what business that's what business is. But you're going to know what those are and you track it month over month. How do we do relative forecast? How do I need to adjust my forecast? How do I need to adjust my opex? How do I need to adjust my COGS? How do I need to adjust my CAC? Do I need more volume? Do I need less volume? And you can start to play with it and visualize what the scenarios are going to look like, not only this year, but on down.

This particular forecast is modeled out through 2028. Okay. Now, again, you're going to be wrong about it. Like I said, this is a this this is for a hypothetical business that starts on April 1st. Who knows what the returning customer rates going to be. You have no idea, right? Because it's it's a brand new business. But for a lot of you, you're going to have a whole bunch of backwards looking data. And you can do that.

If you're a growth marketer watching or listening to this, the way you can be the most helpful possible to your uh partners, your operators, your clients is by actually understanding how your media buying impacts and your creative strategy impact u works out onto a sheet like this. What happens when you change the offer? How how does that affect the the cogs, right? If you suddenly give a larger discount up front or you push the AOV up or whatever, right?

How does that affect uh cost of goods when you when you change that sort of thing? How does that impact the retention rate and what does that mean for the rest of the business? What happens if you can spend 20% more at a lower rorowass or or whatever, right? All of those things are different for every business and there is simply no way to be as effective and efficient in your in your business as possible if you don't have something like this so you can design the business because the truth is your P&L was not handed down from from on high.

Every single cell in this sheet represents a decision and that's the crucial point. every sh every sale represents a decision. And so you get to make a decision about what do I want to do? What products should I lead with? What products should I go shop for new vendors and for manufacturers with? Um where should I put my ad dollars if I'm not sure if my Google if my PMAX campaigns are doing anything in my business? What happens if I take them away?

You know, all of these things. Every one of those represents a decision. So you design the P&L that you want and you design it for profit the way you want. If you and if you do all of this and you input all these numbers and the outcome in the profit number is never a number that is satisfying to you or that looks reasonable to you. If you have to go do all this and you go like wait a minute I don't have a chance at success.

Well then you have some other questions to ask about the nature of your business and the the foundational principles involved. Um but for me what I've come to believe is that really great e-commerce operators they don't have to have this exact version of it. I'm showing you this because it's the one I use with my clients. Okay, but they have to have something like this to think through the business. They might add an Amazon piece.

They might add a mass retail piece, whatever. But they have something like this to guide what is going to happen in their business. And then and then the really really great operators connect this to a cash flow forecast that goes along with it. Okay. So um that is that is that is the point of this exercise. The point of this exercise is to visualize the future of your business and its profit and then to track your performance against that and see how you need to change that in the future to know that you are designing the business that you actually want to have and that you have a chance and a pathway to uh achieving the outcomes that you're trying to achieve.

All right, this episode is different than many episodes that I do in the sense that it was much more of a screen share showand tell type episode, but I've got all kinds of stuff like this uh that is on the same topics of profitable e-commerce growth all the time. So, like I said, subscribe if you like this show. Um, I've got a great conversation coming up, like I said, with Kelsey Leric, who is is going to be very much on some of these same topics.

If you like this conversation, subscribe. You're going to love that conversation with Kelsey. Um, you can reach out to me at podcastfgrowth.com or on Twitter, Andrewj Ferris. Um, and don't forget, like I said, to if you want to use that cohort forecast sheet that that um that I just showed you, if you want to play around with it yourself, just enter your email address at ajfgrowth.com in the footer or on the popup there. that'll also sign you up for my email address and give you a couple other free resources that'll really really help you.

Stuff I use all the time with my clients. Um, so you'll like that a lot. Thanks so much for watching or listening. I'll see you next time. [Music]