WEBVTT
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In this episode, Dylan and I dive really deep into the trenches talking about what it takes to go from$30,000 to$100,000 plus months and what you actually need to fix before you do that so you don't find yourself in a really bad position and broke, burned out, or just quite frankly risking it for the biscuit.
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Enjoy the episode.
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I love talking tips from the trenches.
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From the trenches.
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From the trenches.
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Makes it sound so much more dramatic.
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Tips from the trenches.
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And I like alliteration too.
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Man, you know, I was reflecting back.
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We've been doing this for in this month, Marks, six years since I decided to go into coaching and education away from the agency world of doing stuff.
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And as I'm kind of looking back, I'm like, man, that's six years.
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That's pretty crazy to think that six years ago I went on this trip, and then it took about a year to fully start diving in and saying, I actually want to teach and coach and start a podcast and all this stuff.
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And as I kind of look back, we've worked with over 700 companies and found when I say companies, we mean e-commerce businesses, founders, not like these large corporations.
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Now we've consulted bigger companies, but for the most part, we work with everyday average business owners that are e-commerce business owners, primarily on Shopify.
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And so we learn a lot of stuff through that.
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And I want to talk about today.
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I want to share five things to make sure that anyone listening or watching gets locked down if you're stuck in the 30k trench in order to get or in order to get past$100,000 a month, if you're stuck there.
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And 30,000 is actually such an interesting spot because it's like you've grown big enough to have a serious business and proof of concept, but you're not quite big enough to be able to have any help.
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Yeah.
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And if you do have help, the help eats all of your profit margin and you're completely broke.
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And so if you're in that 30-ish thousand plus or minus a little bit range, I really want to talk through what are five things you need to fix and do before you climb past$100,000 months.
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Because we've had clients climb past$100,000 months using meta ads and some, you know, some of the stuff we teach, and they don't have these, and then they get in really bad, bad shape later.
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Like some crank past it, do multi-six figures or something crazy in no time, and then before and they're doing that and they have no money.
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Or more importantly, they they they aren't our clients, they get to that point, they come in, and we essentially start over with them as like hold on.
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Let me let me reteach you the foundations of this because you basically lucked out and got here, which congratulations, but you locked out.
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Now let me ask you before we get into this, do you feel like this is the magic button?
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Like, like, is this framework that you're about to walk through the magic button to get past 30k?
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And and if if it is, then you know why haven't you shared this with us before?
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And secondly, if it isn't, or like how is it not the magic button?
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The way that I'm thinking about it is like, is it as easy as just doing these things to get past 30k?
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Because I think that's that's what might be in someone's mind is like, can I just do these things and and get there?
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What's the difference?
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These are five things you need to fix before you go to$100,000 months.
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Yep.
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This is not, I mean, if you do these things and you're at$30,000, the probability of you growing to$100,000 months in well beyond is very high.
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And being profitable every step of the way is guaranteed.
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Yep.
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I'm saying fix the you can go past$100,000, not do these.
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You could do like two of them.
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True.
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Many people come in and they do one or two or three of these that are that we see, and then they get in really hot water because they don't do the other two that I'm going to talk about.
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And then like they're completely broke, they have no profit, they're doing$200,000 and they have negative 5% profit margin.
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They're literally losing like$20,000 a month or$10,000 a month.
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Yep.
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And anyone listening, that's like, I wish I did$200,000 in a year, or I wish I was even doing a fraction of that in I'm less and I'm more profitable.
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So if you do these, you'll be profitable along the way, and you will build a solid foundation of a business.
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It kind of goes back to like the three little pigs I kind of think about.
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Okay.
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Like some people like build their house with like sticks, and the big bad wolf comes and huffs and puffs and blows.
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Who's the big bad wolf in this scenario?
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It could be a lot of things.
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It could be it's just, it's just the big bad wolf could be mental.
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Right?
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The big bad wolf could be most of the time it's mental.
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Honestly, like business is more mental, I believe, than practical stuff to do.
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Yeah.
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Like if you look at the decisions we make, it's like 10 to 20% head knowledge and like 80 to 90% behavior.
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And in the behavior, when things don't go according to the when the outcome doesn't meet the expectation, that's when we become our worst enemy and we decide to quit.
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Yeah, and and I think it's it's when people probably decide to quit these things.
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You're not building that foundation to actually get to where you need to go.
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Yes.
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All right.
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Cool.
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Cool.
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Let's get it.
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All right.
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Number one, you have to understand your economics.
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There are a couple economics you you really need to be.
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And I want to give some just rules of thumb of kind of what we see.
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Number one, gross profit margin.
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Number two is average order value.
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Number three, within that economic, is your break-even in your target cost per acquisition a row as.
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Uh, number four is your ad spend percentage.
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And number five is your net profit margin.
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You have to understand all of these economics, what they are, and what is good for you, and what your what your uh non-negotiables are for each of those metrics.
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And this has been a really common conversation in coaching recently.
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It's like just the idea of non-negotiables.
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I every single coaching session, somebody is things are going really well, and they just want to scale and scale and scale.
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And I was like, okay, yeah, yeah, yeah.
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You can do that as long as you're within the parameters of the non-negotiables.
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So for example, if your break-even ROAS is 1.8 and you're at a 1.8, should you scale?
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Probably not.
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If your target ROAS is a 2.5 and you're at a three, should you scale?
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Well, let's go to the other non-negotiable.
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What's your what's your target ad spend percentage?
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If it's 30% and you're at 32, no, you should not scale.
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You will scale and lose money at the end of the day.
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Yeah.
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So, like non-negotiables around these metrics.
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So we're gonna go through these metrics, and then I want to share what I believe the good, like good ranges are for these.
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And then you should create non-negotiables around the economics in your business that if we have to flex on this, then we just don't do it.
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Okay.
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Number one is gross profit margin.
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Now, I'm gonna give a range.
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Here's what we see.
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If you are under 50% gross profit margin on your product, you have to raise the bar.
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You have to raise the standard over 50%.
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I don't know almost anybody under 50% gross profit margin that is scaling and doing really well short of, short of a beef company that we work with that does delivery.
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Okay.
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Yeah, they're doing just fine.
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Yeah.
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They have like 30, 40% net mark profit margin, but but they're doing just fine.
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They're doing just fine.
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High LTV.
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Is that subscription?
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Subscription as well, yeah.
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So like you can weather uh slightly lower than 50% gross profit margin on your products if you have really high LTV.
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Now their LTV is not a good thing.
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Yeah, because then you acquire you acquire the customer and you have no literally you're you're going in the hole to acquire a customer if your margin isn't.
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Yeah, so the the simple math to get to a which is the another metric here is your breakeven return on ad spend or cost per acquisition.
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I'm gonna give you the simple math on ROAS.
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So a break-even CP cost per acquisition is really easy.
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It's like, well, you just take whatever your profit, if you sell a hundred dollar product and you have$50 in COGS and your 50% margin, then you have a$50 breake-even.
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If you return on ad spend, people get confused by this.
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It's one divided by your gross profit margin.
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So if I have a 50% gross profit margin, one divided by 0.5 equals two.
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Your breakeven is two return on ad spend.
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If you get a two-row ads, you are breaking even on a customer.
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So it's like you don't pay anything, you don't make anything, you just got the customer.
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Which, if you have a high LTV business, that's great, right?
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Yep.
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If you're at a 0.3, uh one divided by 0.3, you literally need a 3.33 return on ad spend to be break-even.
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No, no, no, you're not gonna get that.
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Yeah, you're not gonna get that at any degree of scale, maybe for like 25 bucks a day.
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Yeah.
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Uh maybe for a little while.
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We've got to do that.
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And especially if that's your break-even, because if that's your break-even target at all at that.
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Yeah, so like that's why 30% gross profit margin does not work.
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50% should be your minimum.
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50 to 60 is considered really healthy.
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If you're over 60%, that's considered excellent.
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Uh, the second metric within here, you need to understand it's your average order value, and you need to fight to get this.
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Well, actually, before I say my number, you are in also, you've been like a thousand coaching sessions in a gazillion accounts.
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What's a good AOV to you on Meta?
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Well, I I have a little bit of a different perspective on this.
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Yes, I'm in coaching, so I know exactly what that looks like, but actually in our software Breezeway, we have a tool called Benchmarks.
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And benchmarks actually, yeah, benchmarks is a is essentially it takes all of what we consider successful businesses in Breezeway, spending a substantial amount of money on ads.
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That's how we consider successful, because if they're spending a lot, they're probably doing it well.
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And that says the panel median, we use median to to eliminate the outliers, I believe is like 80 to 88 dollars.
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85.
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85.
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Okay.
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So so that's the math.
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I can tell you what I think from coaching.
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I would say I would be happy if people are 65 on the lowest, on the lowest and$65.
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I would say it's kind of hard to get above 85.
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I know it's the median.
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I think that's skewed by some, you know, hundreds, 115s, 120s.
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I would say you need to be between 65 and 85.
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The the range, the median range of the high-performing companies in here are between$52 and 277.
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So obviously it's skewed up a little bit.
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Those are in that meat company is probably one of those skewing it up.
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And some clients we have with like$1,000 AOVs.
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Yep.
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Or some accounts in here that are thousand dollar AOVs, clients are in here and many others.
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But if it depends on the time of the year, if I actually float back a little bit, it's more like 75, 77, depending on the time of the year.
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This is like back in May, June, July.
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So like the median AOV is lowered just depending on the time of the year.
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And by the way, I want to say something real fast on this.
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The number of times that business comes in, starts working with us, and I look at their ads and they have a$20 CPA.
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Because if you look, the median CPA is$22.
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That's like the the median CPA.
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That's what a majority of people have.
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20, yeah.
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Is it 22?
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23.
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23.
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Okay.
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23.
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So the median is 23.
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So the number of times that I see people come in with a$23 CPA, and the CPA is lit up green on Breezeway.
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It's like, hey, this is good.
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You're you're at target.
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You're you're above break-even.
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And the ROAS is bad.
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The ROAS is yellow or red.
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The ROAS is like a 1.4.
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Go fix your AOV.
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If you are advertising on Meta, you it's not even a like, you should try.
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You have to have an AOV of$50 up, minimum$50.
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It really should be$60 to$60.
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So here's I'm going to give here's our observation.
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CPA, when you're dialed in, you can see the median here is 23.
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I was going to say the observation I have is anyone who's performing really well, you're going to get stuck in 25 to 30.
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Yep.
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Here's why.
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You will not get lower than a certain number of dollars per click.
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So like most people are not going to get under a dollar per click.
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$1.20, a dollar.
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The median cost per click, let me just show you right here, is$1.32.
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The lowest is 67 cents, the highest is$2.32 in this entire panel of high-performing companies.
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So you're not going to get lower than a dollar 32 cost per click.
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So if you had a$13 AOV, I'm using a simple math here.
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You need a 10% conversion rate.
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It's just not going to happen.
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Nope.
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So mathematically, if you get a$50 AOV, divide that by the typical what you would expect,$25-ish to$30 to acquire a customer, and you're going to literally be at a two return on ad spend.
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And so that's why we're saying$60 to$70 is probably a really good sweet spot.
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Obviously, over$70 is really good.
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Yeah.
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If you're listening and you're like, I'm sub-50, I'm sub-60, work on getting your AOV up.
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It's going to make a big difference.
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You can only pay so little to acquire, to get a click, but you can make infinitely more money if you can increase a perceived value and all kinds of stuff.
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So we don't have to go deeper in that, but you have to understand AOV, try to go.
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I mean, this says 80, 80 something.
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Yeah.
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85 or whatever it is.
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That's why I gave a range.
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Let's do 55, minimum, minimum, minimum to 85.
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Yeah.
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60 probably.
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50, 60 to probably 80 is a good spot if you can get in there.
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You need to understand your break even.
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You need to understand your ad spend target percentage.
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We recommend between 15 and 30% of your top line net sales in Shopify is called net sales.
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Your net sales going into advertising to acquire new business.
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And the last thing is you need a net profit margin of 15 to 20%.
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So on your profit and loss, if you're less than 15 to 20%, you're going to really, really struggle.
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15 to 20 is considered really great.
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Over 20 is considered excellent, but you don't want it too high.
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If you have like 35% profit margin, what's going to happen is you're going to plateau because you're not investing enough in advertising and you're not able to, you're going to plateau a lot faster than if you're investing more.
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And so we just find 15 to 20 is a really healthy net profit margin.
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All right.
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The second thing you need to fix is you need to build, so number one, understand your economics, lock them in, know them like the back of your hand, and make them non-negotiables.
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Second thing is building a repeatable system for producing and testing new creative.
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There is like, there's no way around this.
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If you're in the 30,000 plus range, meta is going to be the largest contributor of your sales.
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I have not seen almost any company short of some unique outliers meet that case.
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Yep.
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People like, well, organic.
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No.
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Meta will beat organic.
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Meta will beat organic.
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Some people are not gonna like that I say that.
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It's the lifeblood of scaling.
00:15:27.039 --> 00:15:28.320
It's your highest leverage point.
00:15:28.480 --> 00:15:37.600
I can spend if you spend 10 hours a week on Meta and you're making and you're spending$1,000 a day, you could still spend 10 hours a week and spend$3,000 a day.
00:15:37.679 --> 00:15:38.000
Yep.
00:15:38.159 --> 00:15:40.480
It's really not, it really scales.
00:15:40.560 --> 00:15:43.600
And this is like 10 hours a week if you're really building a lot of creative.
00:15:43.840 --> 00:15:45.840
And you should not be outsourcing this.
00:15:46.080 --> 00:15:48.720
Agencies are gonna bleed you dry and they're not gonna give a crap.
00:15:48.799 --> 00:15:49.200
Yep.
00:15:49.440 --> 00:15:51.840
Number three, you got to fix this.
00:15:52.000 --> 00:15:54.560
Get your welcome pop-up offer to convert at.
00:15:54.720 --> 00:15:55.840
I upped my typical.
00:15:56.080 --> 00:15:57.360
I tell people five to ten percent.
00:15:57.440 --> 00:15:59.519
I'm actually upping this like eight to ten percent.
00:15:59.600 --> 00:16:00.480
You should be in that range.
00:16:00.560 --> 00:16:00.720
Yeah.
00:16:00.879 --> 00:16:07.360
Uh if you're under eight percent of that welcome offer pop-up, which I recommend, generally we'll put it like 10 seconds and then it comes up.
00:16:07.679 --> 00:16:10.639
If you're under eight percent, your offer sucks for your audience.
00:16:10.799 --> 00:16:13.840
If you're over 10%, you're giving away too much.
00:16:14.399 --> 00:16:16.320
And there are two tools I really love for this.
00:16:16.480 --> 00:16:18.320
We use a tool called Optimonk.
00:16:18.399 --> 00:16:23.759
I think you can go to eCommerceality.com slash opti, like O-P-T-I monk.
00:16:23.919 --> 00:16:27.120
And if you go there, it's already Is that M-U-N-K or M-O-N-K?
00:16:28.000 --> 00:16:29.679
Like Opta, like opt-in.
00:16:29.919 --> 00:16:30.799
So Optics.
00:16:30.879 --> 00:16:31.440
But what's the monk?
00:16:31.759 --> 00:16:32.320
M-O-N-K.
00:16:32.480 --> 00:16:32.960
M-O-N K.
00:16:33.039 --> 00:16:33.519
Like the monkey.
00:16:34.000 --> 00:16:34.399
Monkey.
00:16:34.560 --> 00:16:36.159
Well, no, no, no, not monk.
00:16:36.399 --> 00:16:37.039
Oh, I don't know.
00:16:37.120 --> 00:16:41.279
When I hear monk, I think of like, you know, those guys that have like the bowl cuts or whatever.
00:16:41.519 --> 00:16:45.519
And they have like the logo, though.
00:16:45.600 --> 00:16:46.480
Is it a monkey?
00:16:46.639 --> 00:16:47.440
It might be a monkey.
00:16:47.519 --> 00:16:48.240
I literally have no idea.
00:16:49.279 --> 00:16:51.039
I feel like it's an optimized monkey.
00:16:51.279 --> 00:16:52.159
Optimonk.
00:16:52.560 --> 00:16:54.480
I don't, I don't know.
00:16:54.720 --> 00:16:55.840
I might need to.
00:16:56.000 --> 00:16:57.360
Now it's gonna get the best of me.
00:16:57.440 --> 00:16:58.639
I just really know.
00:16:58.960 --> 00:16:59.200
All right.
00:16:59.279 --> 00:16:59.919
It's uh it's all right.
00:17:00.000 --> 00:17:01.200
Everybody go check out Optimunk.
00:17:01.279 --> 00:17:02.960
I think it's like it's$29 a month.
00:17:03.120 --> 00:17:05.759
The second one is called Aaliyah A-L-I-A.
00:17:06.079 --> 00:17:07.519
Aaliyah is beautiful.
00:17:07.679 --> 00:17:15.920
The only thing about Aaliyah is it's definitely more expensive price point-wise, and and you could get to 8 to 10% without Aaliyah.
00:17:16.000 --> 00:17:18.880
I mean, we so anyway, those are just kind of my my thoughts on it.
00:17:19.039 --> 00:17:22.320
But get your welcome offer pop-up, converting it 8 to 10% of people.
00:17:22.400 --> 00:17:25.039
And this is 8 to 10% of people opting in.
00:17:25.279 --> 00:17:29.200
If you're sitting at like sub 5%, your front-end offer just sucks.
00:17:29.360 --> 00:17:35.360
Now you could do discount, like if you go from like a 10% discount to a 5% discount, 15% discount, you're like, well, I'm giving away more margin.
00:17:35.440 --> 00:17:39.039
But it could literally lower your cost per acquisition by 25%.
00:17:39.519 --> 00:17:40.240
People don't think about that.
00:17:40.400 --> 00:17:41.519
Like, well, I don't want to give away more.
00:17:41.599 --> 00:17:45.360
It's like, hey, you're just giving more to Meta because less people are taking you up on the offer.
00:17:45.440 --> 00:17:45.599
Yeah.
00:17:45.759 --> 00:17:47.599
Also, you don't have to always discount.
00:17:47.759 --> 00:17:48.720
You can do a discount.
00:17:48.880 --> 00:17:51.119
You could also do free gift with purchase.
00:17:51.200 --> 00:17:52.799
You could do like, hey, enter our giveaway.
00:17:52.880 --> 00:17:53.599
It doesn't matter what it is.
00:17:53.679 --> 00:17:56.720
We need to capture 8 to 10% of people coming to your website.
00:17:56.799 --> 00:18:02.480
If you're having a thousand website visitors a day, we can get 80 to 100 people on your list a day if this is just locked in.
00:18:02.720 --> 00:18:05.759
Which leads me to number four, you have to fix this.
00:18:05.920 --> 00:18:08.000
Your list is going to start growing as a result of this.
00:18:08.159 --> 00:18:15.360
The fourth thing you have to do is you have to get email producing at least 20 to 30% of your revenue between automations and campaigns.
00:18:16.079 --> 00:18:23.840
And there are five core flows you need to set up right out of the gate: your welcome flow, your post-purchase, your checkout abandoned, your browse abandoned, and your sunset flow.
00:18:23.920 --> 00:18:32.320
And those are going to make sure that the welcome flow, as people are joining the pop-up, we're nurturing them, getting them to buy, and take us up on whatever that welcome pop-up offer was.
00:18:32.480 --> 00:18:35.759
And then, of course, when someone buys post-purchase, we need to get them in that flow.
00:18:35.920 --> 00:18:40.480
Checkout abandoned, if someone's going to like checkout and then they ditch, we want to get them back.
00:18:40.559 --> 00:18:43.920
That's a high ROI thing to set up one time and it'll convert forever.
00:18:44.079 --> 00:18:52.320
And then browse abandoned is if somebody's clicking on an email and they go to your website and Clavial or Omni send or whatever tool you use knows that they're there.
00:18:52.400 --> 00:18:56.960
And so it could do a checkout, it could literally send them an abandoned card email because it knows what they were looking at.
00:18:57.039 --> 00:19:02.960
And then a sunset flow is going to cleanse everybody that's been on your list for 120 days and has not been active.
00:19:03.199 --> 00:19:05.039
Email should be 20 to 30% of your revenue.
00:19:05.119 --> 00:19:11.920
Now, the reason we have to fix this before you get much bigger is we have some clients, like recently I was talking, I forget who it was.
00:19:12.000 --> 00:19:13.280
I'm not going to drop their name anyway.
00:19:13.360 --> 00:19:18.960
Uh, I was talking to them and they haven't even taught, like they literally, oh, this client grew really, really, really fast.
00:19:19.199 --> 00:19:24.639
And so fast that his acquisition channel with Meta is crazy, like just crazy.
00:19:24.719 --> 00:19:28.639
He's one of those ones that had like 100x growth in no time, like insane numbers.
00:19:28.719 --> 00:19:29.119
Yep.
00:19:29.360 --> 00:19:31.280
And then he backlogged fulfillment.
00:19:31.360 --> 00:19:32.480
They got constrained on fulfillment.
00:19:32.559 --> 00:19:33.519
He got constrained on time.
00:19:33.599 --> 00:19:38.079
I was talking to him this week in a coaching session, and I was like, he's like, I'm not even sending a weekly email.
00:19:38.239 --> 00:19:40.880
I can't even send do a promo sprint.
00:19:41.039 --> 00:19:46.559
I'm I can't even like like he can't even he doesn't even have the capacity to do that because their ads are performing that great.
00:19:46.719 --> 00:19:46.880
Yeah.
00:19:47.039 --> 00:19:49.920
That many people coming in, which is amazing, right?
00:19:50.000 --> 00:19:56.079
But you can get if you get past there and all every customer from ads costs you dollars in ads.
00:19:56.159 --> 00:20:01.199
So if we can get 20 to 30% of people buying from email, that's gonna, that's just pure profit you're gonna get back.
00:20:01.280 --> 00:20:14.239
So if you're paying, you know,$30 cost per acquisition and you get an extra hundred customers a month email, well, great, you just made yourself another$2,500 or$3,000 a month in profit because you didn't have to give that to ads.
00:20:14.480 --> 00:20:27.199
And if you're if your ad performance on platform looks good, but you can't get your ad spend percentage down and you're not leveraging email, that's an easy way to bring your ad spend percentage down into the range that you want it to be.
00:20:27.360 --> 00:20:34.800
Because if just like what you're saying, if you're relying on Meta to acquire every single customer, you are directly tied to your ad spend percentage.
00:20:34.960 --> 00:20:51.679
But if you produce customers in a different way, then your ad spend percentage is actually more flexible because the only way you can move your ad spend percentage if you're not using email is improving your ads, which is a really hard thing to do if you're already performing decent or good on meta.
00:20:52.239 --> 00:21:00.880
So here's a simple way to look at this is like if you were only running ads, 100% of sales are coming from ads, and and you're getting a a two return on ad spend.
00:21:01.039 --> 00:21:10.239
I'm just gonna use two because it makes my math easier here, and then you start using email, and then you're you start producing 30% of your revenue from email, then you could literally just add 30% to your meta performance.
00:21:10.400 --> 00:21:16.000
It'd be the same thing as if you're able to go from like a two row as to a 2.6 just by literally sending email.
00:21:16.320 --> 00:21:22.480
Now, when it comes to campaigns and flows, is that revenue split 50-50 between them or does one carry more than another?
00:21:22.719 --> 00:21:25.360
Uh rule of thumb, like 60-40 one way or another.
00:21:25.519 --> 00:21:28.400
Or 50-50, give or take, a few 10% each way or another.
00:21:28.480 --> 00:21:31.360
If you're like 60% campaigns, 40% flows, doesn't matter.
00:21:31.440 --> 00:21:37.039
If you're like 10% campaigns, 90% flows, it just tells you where you need to get good.
00:21:37.199 --> 00:21:37.360
Yep.
00:21:37.519 --> 00:21:45.519
So if you if you're if your campaigns are like sub 40% of your total email revenue, you're either not setting enough of them or you just kind of suck at flow campaigns and just go get better.
00:21:45.599 --> 00:21:46.880
Just go lift your skill set.
00:21:46.960 --> 00:21:47.280
Yep.
00:21:47.599 --> 00:21:50.000
Fifth and final thing that you need to fix.
00:21:50.079 --> 00:21:51.199
This is really big.
00:21:51.360 --> 00:22:01.119
This is probably the most I was in a I was meeting with some clients earlier this week, and this is a really, really hard one, but this will destroy you if you don't have a system for this.
00:22:01.280 --> 00:22:05.599
And that is number five, you have to have a system for cash management.
00:22:05.920 --> 00:22:09.760
Cash management is very different than your profit and loss.
00:22:10.000 --> 00:22:13.920
Profit and loss can show you something depending on if you're using cash basis or accrual basis.
00:22:14.239 --> 00:22:20.000
Profit and loss will show you one thing, but sometimes you could look at your bank again, you're like, I don't feel like I have that much profit in the business.
00:22:20.079 --> 00:22:26.079
And it's because their cash moves differently than your than paper.
00:22:26.239 --> 00:22:30.480
So we would consider profit and loss, paper, and then you have actual cash.
00:22:30.639 --> 00:22:44.320
And the problem here is if you're not doing cash basis accounting and many econ businesses are doing accrual-based accounting, if you're not doing that, you might show, hey, I made, I made$20,000 in profit this month, or well, if we're$30K, you're probably not getting$20,000 in profit.
00:22:44.480 --> 00:22:47.039
Let's say I made like$10,000 in profit this month.
00:22:47.280 --> 00:22:53.920
If I made$10,000 in profit this month, it accrual does not take into consideration all the purchase orders for all of the inventory that you had to buy.
00:22:54.000 --> 00:23:00.960
So you may have to, this month you may have had a$50,000 outflow or$20,000 or$30,000 outflow of inventory purchase.
00:23:01.039 --> 00:23:03.760
So your cash just got depleted, but the paper looks really good.
00:23:04.320 --> 00:23:16.639
And the best way to do this, we have an internal entire training system, spreadsheets that we give all of our give our clients in our mentorship program, but it I call it the money management system, the e-commerce money management system.
00:23:16.800 --> 00:23:20.239
But you need to have a system of where your cash goes.
00:23:20.400 --> 00:23:21.920
I'm a huge fan of Profit First.
00:23:22.000 --> 00:23:30.480
If anyone's listening and you haven't heard of Profit First, Mike McAllowitch wrote this book called Profit First, and it was eye-opening for me, where all of the cash that comes in, it comes into an income account.
00:23:30.559 --> 00:23:35.679
You have all these different bank accounts, comes into an income account, and then every week you distribute percentages.
00:23:35.920 --> 00:23:43.440
Like you'd say, hey, I transfer all my sales tax out, which by the way is very dangerous if you're not collecting sales tax and you don't know sales tax law.
00:23:43.519 --> 00:23:44.800
That's something else you have to consider.
00:23:44.960 --> 00:23:56.559
I transfer to sales tax, and then whatever's remaining, I then put this percentage in inventory, this percentage in the profit account, this much in the taxes account, this much in the owner's comp account, and this much in the treasure chest account.
00:23:56.639 --> 00:23:57.679
That's what we like to call it.
00:23:57.840 --> 00:24:00.559
And so you need to have a system for cash management.
00:24:00.719 --> 00:24:23.440
And when it comes to buying inventory, I'm a huge fan of using a profit first-ish methodology where you say, hey, my if my gross profit margin or my cogs and my like if my cogs and gross or my gross profit margin is 60%, then I would say on my product, then I would transfer 40% of my income every week into the inventory account.
00:24:23.519 --> 00:24:29.360
So when I have to go buy new inventory, that is my non-negotiable amount.
00:24:29.440 --> 00:24:32.239
It's like I have to work within what I have here.
00:24:32.400 --> 00:24:40.239
I can't go buy more than that because that means I may need to go into debt or I'll crunch all my cash position in doing so.
00:24:40.400 --> 00:24:46.000
And so you need to have a system for cash management and you need to have some principles on debt, in my opinion.
00:24:46.159 --> 00:24:47.119
How do you feel about debt?
00:24:47.280 --> 00:24:54.320
Just so you know, my principles on debt, I have worked with a lot of businesses that have almost gone under or have gone under because of debt.
00:24:54.480 --> 00:24:55.760
And so there are different types of debt.
00:24:55.920 --> 00:25:01.760
If you're talking like a Shopify loan, that they take a percentage off the top, highly, highly, highly advise against that.
00:25:01.920 --> 00:25:04.079
Credit card debt carrying that, very, very expensive.
00:25:04.159 --> 00:25:04.800
Don't advise that.
00:25:04.880 --> 00:25:08.079
Lines of credit, I see value in that, especially in the e-commerce space.
00:25:08.400 --> 00:25:11.760
So when it comes to your cash, you need to have a system for it.
00:25:11.840 --> 00:25:13.199
So let me go ahead and recap here.
00:25:13.440 --> 00:25:16.719
Number one, if you if you want to go from 30 to 100K plus a month, fix these.
00:25:16.800 --> 00:25:20.239
Or if you're over 30K and any of these are not fixed, you're gonna put yourself in a bad position.
00:25:20.400 --> 00:25:20.480
Yeah.
00:25:20.639 --> 00:25:20.719
Right?
00:25:20.800 --> 00:25:24.000
You might be at 70K and be like, ooh, crap, I got like three of these or two of these.
00:25:24.159 --> 00:25:25.519
Uh let me recap these for you.
00:25:25.679 --> 00:25:27.360
Number one, understand your economics.
00:25:27.440 --> 00:25:33.920
This is gross profit margin, AOV, break-even, uh, return on ad spend or CPA, your ad spend percentage and your net profit margin.
00:25:34.079 --> 00:25:39.199
Number two is to build a repeatable system for producing and testing new creative.
00:25:39.360 --> 00:25:42.559
Number three is to get your welcome offer pop-up to convert it eight to 10%.
00:25:42.880 --> 00:25:44.880
We love Optimunk or Aaliyah.
00:25:44.960 --> 00:25:50.079
Uh, number four is to have email producing at least 20 to 30% of your revenue.
00:25:50.239 --> 00:26:02.639
And number five, you need to have a system for cash management and not get into the trap of saying, I will take my profit later and sake of scale now, because we know million plus dollar businesses that are totally broke.
00:26:02.880 --> 00:26:05.199
Don't be broke and do over a million dollars a year.
00:26:05.440 --> 00:26:05.840
Cool.
00:26:06.079 --> 00:26:08.719
Well, hey, if you enjoyed this episode, please do us a favor.
00:26:08.880 --> 00:26:09.679
Drop a comment.
00:26:09.840 --> 00:26:17.360
Which of these do you need to go kind of tighten up inside of your business if you're watching on YouTube and if you're listening on Apple or Spotify or wherever the heck other ones are out there?
00:26:17.440 --> 00:26:18.480
I don't think there are any other than that.
00:26:19.119 --> 00:26:22.719
Then please do us a favor and give this a simple rating.
00:26:22.800 --> 00:26:28.719
It takes 22 seconds as we're on a quest to become the number one e-commerce business podcast on the planet.
00:26:28.880 --> 00:26:29.280
We love you.
00:26:29.440 --> 00:26:31.119
We'll see you in the next episode.
00:01:37.200 --> 00:01:54.880
In this episode, Dylan and I dive really deep into the trenches talking about what it takes to go from$30,000 to$100,000 plus months and what you actually need to fix before you do that so you don't find yourself in a really bad position and broke, burned out, or just quite frankly risking it for the biscuit.
00:01:55.040 --> 00:01:56.480
Enjoy the episode.
00:02:00.000 --> 00:02:02.800
I love talking tips from the trenches.
00:02:03.600 --> 00:02:04.480
From the trenches.
00:02:04.719 --> 00:02:05.439
From the trenches.
00:02:05.680 --> 00:02:07.280
Makes it sound so much more dramatic.
00:02:08.319 --> 00:02:09.920
Tips from the trenches.
00:02:10.080 --> 00:02:11.680
And I like alliteration too.
00:02:11.920 --> 00:02:13.520
Man, you know, I was reflecting back.
00:02:13.599 --> 00:02:25.439
We've been doing this for in this month, Marks, six years since I decided to go into coaching and education away from the agency world of doing stuff.
00:02:25.599 --> 00:02:28.000
And as I'm kind of looking back, I'm like, man, that's six years.
00:02:28.080 --> 00:02:39.280
That's pretty crazy to think that six years ago I went on this trip, and then it took about a year to fully start diving in and saying, I actually want to teach and coach and start a podcast and all this stuff.
00:02:39.439 --> 00:02:48.719
And as I kind of look back, we've worked with over 700 companies and found when I say companies, we mean e-commerce businesses, founders, not like these large corporations.
00:02:48.960 --> 00:02:57.759
Now we've consulted bigger companies, but for the most part, we work with everyday average business owners that are e-commerce business owners, primarily on Shopify.
00:02:57.840 --> 00:02:59.840
And so we learn a lot of stuff through that.
00:03:00.000 --> 00:03:01.520
And I want to talk about today.
00:03:01.759 --> 00:03:17.120
I want to share five things to make sure that anyone listening or watching gets locked down if you're stuck in the 30k trench in order to get or in order to get past$100,000 a month, if you're stuck there.
00:03:17.199 --> 00:03:27.520
And 30,000 is actually such an interesting spot because it's like you've grown big enough to have a serious business and proof of concept, but you're not quite big enough to be able to have any help.
00:03:27.600 --> 00:03:27.759
Yeah.
00:03:27.920 --> 00:03:32.400
And if you do have help, the help eats all of your profit margin and you're completely broke.
00:03:32.639 --> 00:03:42.960
And so if you're in that 30-ish thousand plus or minus a little bit range, I really want to talk through what are five things you need to fix and do before you climb past$100,000 months.
00:03:43.040 --> 00:03:53.280
Because we've had clients climb past$100,000 months using meta ads and some, you know, some of the stuff we teach, and they don't have these, and then they get in really bad, bad shape later.
00:03:53.439 --> 00:04:00.240
Like some crank past it, do multi-six figures or something crazy in no time, and then before and they're doing that and they have no money.
00:04:00.480 --> 00:04:09.280
Or more importantly, they they they aren't our clients, they get to that point, they come in, and we essentially start over with them as like hold on.
00:04:09.360 --> 00:04:16.159
Let me let me reteach you the foundations of this because you basically lucked out and got here, which congratulations, but you locked out.
00:04:16.319 --> 00:04:20.000
Now let me ask you before we get into this, do you feel like this is the magic button?
00:04:20.480 --> 00:04:26.399
Like, like, is this framework that you're about to walk through the magic button to get past 30k?
00:04:26.560 --> 00:04:31.840
And and if if it is, then you know why haven't you shared this with us before?
00:04:32.000 --> 00:04:37.200
And secondly, if it isn't, or like how is it not the magic button?
00:04:37.920 --> 00:04:43.120
The way that I'm thinking about it is like, is it as easy as just doing these things to get past 30k?
00:04:43.439 --> 00:04:48.560
Because I think that's that's what might be in someone's mind is like, can I just do these things and and get there?
00:04:49.039 --> 00:04:50.080
What's the difference?
00:04:50.560 --> 00:04:53.680
These are five things you need to fix before you go to$100,000 months.
00:04:53.759 --> 00:04:54.000
Yep.
00:04:54.159 --> 00:05:03.680
This is not, I mean, if you do these things and you're at$30,000, the probability of you growing to$100,000 months in well beyond is very high.
00:05:03.840 --> 00:05:07.120
And being profitable every step of the way is guaranteed.
00:05:07.279 --> 00:05:07.680
Yep.
00:05:07.920 --> 00:05:10.560
I'm saying fix the you can go past$100,000, not do these.
00:05:10.639 --> 00:05:11.439
You could do like two of them.
00:05:11.680 --> 00:05:11.920
True.
00:05:12.080 --> 00:05:18.560
Many people come in and they do one or two or three of these that are that we see, and then they get in really hot water because they don't do the other two that I'm going to talk about.
00:05:18.639 --> 00:05:23.840
And then like they're completely broke, they have no profit, they're doing$200,000 and they have negative 5% profit margin.
00:05:24.000 --> 00:05:27.600
They're literally losing like$20,000 a month or$10,000 a month.
00:05:27.680 --> 00:05:27.840
Yep.
00:05:28.000 --> 00:05:37.200
And anyone listening, that's like, I wish I did$200,000 in a year, or I wish I was even doing a fraction of that in I'm less and I'm more profitable.
00:05:37.439 --> 00:05:43.200
So if you do these, you'll be profitable along the way, and you will build a solid foundation of a business.
00:05:43.279 --> 00:05:47.360
It kind of goes back to like the three little pigs I kind of think about.
00:05:47.920 --> 00:05:48.159
Okay.
00:05:48.399 --> 00:05:53.280
Like some people like build their house with like sticks, and the big bad wolf comes and huffs and puffs and blows.
00:05:53.680 --> 00:05:54.959
Who's the big bad wolf in this scenario?
00:05:55.120 --> 00:05:55.920
It could be a lot of things.
00:05:56.079 --> 00:06:00.000
It could be it's just, it's just the big bad wolf could be mental.
00:06:00.399 --> 00:06:00.639
Right?
00:06:00.720 --> 00:06:03.840
The big bad wolf could be most of the time it's mental.
00:06:04.000 --> 00:06:07.920
Honestly, like business is more mental, I believe, than practical stuff to do.
00:06:08.000 --> 00:06:08.160
Yeah.
00:06:08.319 --> 00:06:14.480
Like if you look at the decisions we make, it's like 10 to 20% head knowledge and like 80 to 90% behavior.
00:06:14.639 --> 00:06:22.879
And in the behavior, when things don't go according to the when the outcome doesn't meet the expectation, that's when we become our worst enemy and we decide to quit.
00:06:23.199 --> 00:06:26.879
Yeah, and and I think it's it's when people probably decide to quit these things.
00:06:27.199 --> 00:06:29.920
You're not building that foundation to actually get to where you need to go.
00:06:30.160 --> 00:06:30.639
Yes.
00:06:30.959 --> 00:06:31.199
All right.
00:06:31.360 --> 00:06:31.600
Cool.
00:06:31.680 --> 00:06:31.759
Cool.
00:06:32.000 --> 00:06:32.319
Let's get it.
00:06:33.199 --> 00:06:33.600
All right.
00:06:33.920 --> 00:06:36.800
Number one, you have to understand your economics.
00:06:37.519 --> 00:06:39.519
There are a couple economics you you really need to be.
00:06:39.600 --> 00:06:41.759
And I want to give some just rules of thumb of kind of what we see.
00:06:41.840 --> 00:06:43.600
Number one, gross profit margin.
00:06:43.759 --> 00:06:45.600
Number two is average order value.
00:06:45.759 --> 00:06:50.959
Number three, within that economic, is your break-even in your target cost per acquisition a row as.
00:06:51.120 --> 00:06:53.199
Uh, number four is your ad spend percentage.
00:06:53.280 --> 00:06:56.560
And number five is your net profit margin.
00:06:56.720 --> 00:07:06.560
You have to understand all of these economics, what they are, and what is good for you, and what your what your uh non-negotiables are for each of those metrics.
00:07:06.720 --> 00:07:09.920
And this has been a really common conversation in coaching recently.
00:07:10.079 --> 00:07:12.639
It's like just the idea of non-negotiables.
00:07:13.120 --> 00:07:19.840
I every single coaching session, somebody is things are going really well, and they just want to scale and scale and scale.
00:07:20.000 --> 00:07:21.199
And I was like, okay, yeah, yeah, yeah.
00:07:21.280 --> 00:07:24.399
You can do that as long as you're within the parameters of the non-negotiables.
00:07:24.639 --> 00:07:33.439
So for example, if your break-even ROAS is 1.8 and you're at a 1.8, should you scale?
00:07:33.680 --> 00:07:34.720
Probably not.
00:07:35.199 --> 00:07:39.439
If your target ROAS is a 2.5 and you're at a three, should you scale?
00:07:39.600 --> 00:07:41.360
Well, let's go to the other non-negotiable.
00:07:41.439 --> 00:07:43.199
What's your what's your target ad spend percentage?
00:07:43.280 --> 00:07:45.759
If it's 30% and you're at 32, no, you should not scale.
00:07:45.840 --> 00:07:47.600
You will scale and lose money at the end of the day.
00:07:47.680 --> 00:07:47.840
Yeah.
00:07:48.000 --> 00:07:50.079
So, like non-negotiables around these metrics.
00:07:50.160 --> 00:07:54.959
So we're gonna go through these metrics, and then I want to share what I believe the good, like good ranges are for these.
00:07:55.040 --> 00:08:03.759
And then you should create non-negotiables around the economics in your business that if we have to flex on this, then we just don't do it.
00:08:04.079 --> 00:08:04.319
Okay.
00:08:04.480 --> 00:08:06.000
Number one is gross profit margin.
00:08:06.079 --> 00:08:07.280
Now, I'm gonna give a range.
00:08:07.360 --> 00:08:08.399
Here's what we see.
00:08:09.280 --> 00:08:14.480
If you are under 50% gross profit margin on your product, you have to raise the bar.
00:08:14.560 --> 00:08:16.160
You have to raise the standard over 50%.
00:08:16.639 --> 00:08:30.720
I don't know almost anybody under 50% gross profit margin that is scaling and doing really well short of, short of a beef company that we work with that does delivery.
00:08:31.120 --> 00:08:31.360
Okay.
00:08:31.519 --> 00:08:32.639
Yeah, they're doing just fine.
00:08:32.720 --> 00:08:32.879
Yeah.
00:08:32.960 --> 00:08:36.639
They have like 30, 40% net mark profit margin, but but they're doing just fine.
00:08:36.720 --> 00:08:37.200
They're doing just fine.
00:08:37.360 --> 00:08:37.759
High LTV.
00:08:38.079 --> 00:08:38.799
Is that subscription?
00:08:39.279 --> 00:08:40.240
Subscription as well, yeah.
00:08:40.559 --> 00:08:48.240
So like you can weather uh slightly lower than 50% gross profit margin on your products if you have really high LTV.
00:08:48.319 --> 00:08:49.120
Now their LTV is not a good thing.
00:08:49.279 --> 00:08:57.519
Yeah, because then you acquire you acquire the customer and you have no literally you're you're going in the hole to acquire a customer if your margin isn't.
00:08:58.000 --> 00:09:05.200
Yeah, so the the simple math to get to a which is the another metric here is your breakeven return on ad spend or cost per acquisition.
00:09:05.360 --> 00:09:07.680
I'm gonna give you the simple math on ROAS.
00:09:07.840 --> 00:09:10.160
So a break-even CP cost per acquisition is really easy.
00:09:10.240 --> 00:09:18.079
It's like, well, you just take whatever your profit, if you sell a hundred dollar product and you have$50 in COGS and your 50% margin, then you have a$50 breake-even.
00:09:18.399 --> 00:09:20.799
If you return on ad spend, people get confused by this.
00:09:20.960 --> 00:09:22.960
It's one divided by your gross profit margin.
00:09:23.039 --> 00:09:27.200
So if I have a 50% gross profit margin, one divided by 0.5 equals two.
00:09:27.360 --> 00:09:28.879
Your breakeven is two return on ad spend.
00:09:28.960 --> 00:09:31.600
If you get a two-row ads, you are breaking even on a customer.
00:09:31.680 --> 00:09:34.720
So it's like you don't pay anything, you don't make anything, you just got the customer.
00:09:35.039 --> 00:09:37.039
Which, if you have a high LTV business, that's great, right?
00:09:37.120 --> 00:09:37.279
Yep.
00:09:37.440 --> 00:09:46.000
If you're at a 0.3, uh one divided by 0.3, you literally need a 3.33 return on ad spend to be break-even.
00:09:46.079 --> 00:09:47.120
No, no, no, you're not gonna get that.
00:09:47.200 --> 00:09:50.399
Yeah, you're not gonna get that at any degree of scale, maybe for like 25 bucks a day.
00:09:50.480 --> 00:09:50.559
Yeah.
00:09:50.639 --> 00:09:51.360
Uh maybe for a little while.
00:09:51.440 --> 00:09:51.759
We've got to do that.
00:09:51.920 --> 00:09:56.639
And especially if that's your break-even, because if that's your break-even target at all at that.
00:09:56.879 --> 00:09:59.920
Yeah, so like that's why 30% gross profit margin does not work.
00:10:00.079 --> 00:10:01.360
50% should be your minimum.
00:10:01.519 --> 00:10:03.039
50 to 60 is considered really healthy.
00:10:03.120 --> 00:10:05.440
If you're over 60%, that's considered excellent.
00:10:05.600 --> 00:10:10.720
Uh, the second metric within here, you need to understand it's your average order value, and you need to fight to get this.
00:10:10.960 --> 00:10:17.279
Well, actually, before I say my number, you are in also, you've been like a thousand coaching sessions in a gazillion accounts.
00:10:17.440 --> 00:10:19.039
What's a good AOV to you on Meta?
00:10:19.440 --> 00:10:22.720
Well, I I have a little bit of a different perspective on this.
00:10:22.879 --> 00:10:29.200
Yes, I'm in coaching, so I know exactly what that looks like, but actually in our software Breezeway, we have a tool called Benchmarks.
00:10:29.360 --> 00:10:40.159
And benchmarks actually, yeah, benchmarks is a is essentially it takes all of what we consider successful businesses in Breezeway, spending a substantial amount of money on ads.
00:10:40.240 --> 00:10:44.720
That's how we consider successful, because if they're spending a lot, they're probably doing it well.
00:10:44.960 --> 00:10:51.679
And that says the panel median, we use median to to eliminate the outliers, I believe is like 80 to 88 dollars.
00:10:52.000 --> 00:10:52.320
85.
00:10:52.560 --> 00:10:52.799
85.
00:10:53.440 --> 00:10:53.519
Okay.
00:10:53.840 --> 00:10:55.440
So so that's the math.
00:10:55.600 --> 00:10:57.679
I can tell you what I think from coaching.
00:10:57.840 --> 00:11:05.120
I would say I would be happy if people are 65 on the lowest, on the lowest and$65.
00:11:06.560 --> 00:11:10.879
I would say it's kind of hard to get above 85.
00:11:11.120 --> 00:11:12.080
I know it's the median.
00:11:12.399 --> 00:11:16.639
I think that's skewed by some, you know, hundreds, 115s, 120s.
00:11:16.879 --> 00:11:20.159
I would say you need to be between 65 and 85.
00:11:20.560 --> 00:11:26.000
The the range, the median range of the high-performing companies in here are between$52 and 277.
00:11:26.399 --> 00:11:28.240
So obviously it's skewed up a little bit.
00:11:28.480 --> 00:11:30.639
Those are in that meat company is probably one of those skewing it up.
00:11:30.799 --> 00:11:32.560
And some clients we have with like$1,000 AOVs.
00:11:32.720 --> 00:11:32.799
Yep.
00:11:32.960 --> 00:11:36.159
Or some accounts in here that are thousand dollar AOVs, clients are in here and many others.
00:11:36.320 --> 00:11:42.159
But if it depends on the time of the year, if I actually float back a little bit, it's more like 75, 77, depending on the time of the year.
00:11:42.240 --> 00:11:43.840
This is like back in May, June, July.
00:11:44.000 --> 00:11:47.120
So like the median AOV is lowered just depending on the time of the year.
00:11:47.279 --> 00:11:49.360
And by the way, I want to say something real fast on this.
00:11:49.519 --> 00:11:57.279
The number of times that business comes in, starts working with us, and I look at their ads and they have a$20 CPA.
00:11:57.360 --> 00:12:00.399
Because if you look, the median CPA is$22.
00:12:00.960 --> 00:12:03.759
That's like the the median CPA.
00:12:03.840 --> 00:12:05.039
That's what a majority of people have.
00:12:05.360 --> 00:12:06.080
20, yeah.
00:12:06.320 --> 00:12:06.799
Is it 22?
00:12:06.960 --> 00:12:07.360
23.
00:12:07.519 --> 00:12:07.759
23.
00:12:07.840 --> 00:12:08.000
Okay.
00:12:08.159 --> 00:12:08.480
23.
00:12:08.639 --> 00:12:09.600
So the median is 23.
00:12:09.679 --> 00:12:15.279
So the number of times that I see people come in with a$23 CPA, and the CPA is lit up green on Breezeway.
00:12:15.360 --> 00:12:16.320
It's like, hey, this is good.
00:12:16.399 --> 00:12:17.840
You're you're at target.
00:12:17.919 --> 00:12:19.679
You're you're above break-even.
00:12:19.840 --> 00:12:21.600
And the ROAS is bad.
00:12:21.759 --> 00:12:23.600
The ROAS is yellow or red.
00:12:23.759 --> 00:12:25.919
The ROAS is like a 1.4.
00:12:26.399 --> 00:12:27.840
Go fix your AOV.
00:12:27.919 --> 00:12:32.560
If you are advertising on Meta, you it's not even a like, you should try.
00:12:32.879 --> 00:12:38.720
You have to have an AOV of$50 up, minimum$50.
00:12:39.200 --> 00:12:40.399
It really should be$60 to$60.
00:12:40.560 --> 00:12:42.639
So here's I'm going to give here's our observation.
00:12:42.879 --> 00:12:45.840
CPA, when you're dialed in, you can see the median here is 23.
00:12:45.919 --> 00:12:50.560
I was going to say the observation I have is anyone who's performing really well, you're going to get stuck in 25 to 30.
00:12:50.720 --> 00:12:50.960
Yep.
00:12:51.039 --> 00:12:51.519
Here's why.
00:12:51.759 --> 00:12:54.799
You will not get lower than a certain number of dollars per click.
00:12:54.960 --> 00:12:58.080
So like most people are not going to get under a dollar per click.
00:12:58.240 --> 00:12:59.200
$1.20, a dollar.
00:12:59.519 --> 00:13:03.120
The median cost per click, let me just show you right here, is$1.32.
00:13:03.360 --> 00:13:08.560
The lowest is 67 cents, the highest is$2.32 in this entire panel of high-performing companies.
00:13:08.720 --> 00:13:12.399
So you're not going to get lower than a dollar 32 cost per click.
00:13:12.639 --> 00:13:17.440
So if you had a$13 AOV, I'm using a simple math here.
00:13:17.600 --> 00:13:18.879
You need a 10% conversion rate.
00:13:18.960 --> 00:13:19.679
It's just not going to happen.
00:13:19.759 --> 00:13:19.840
Nope.
00:13:20.000 --> 00:13:30.639
So mathematically, if you get a$50 AOV, divide that by the typical what you would expect,$25-ish to$30 to acquire a customer, and you're going to literally be at a two return on ad spend.
00:13:31.039 --> 00:13:34.960
And so that's why we're saying$60 to$70 is probably a really good sweet spot.
00:13:35.039 --> 00:13:36.320
Obviously, over$70 is really good.
00:13:36.399 --> 00:13:36.560
Yeah.
00:13:36.720 --> 00:13:41.279
If you're listening and you're like, I'm sub-50, I'm sub-60, work on getting your AOV up.
00:13:41.360 --> 00:13:42.320
It's going to make a big difference.
00:13:42.480 --> 00:13:50.159
You can only pay so little to acquire, to get a click, but you can make infinitely more money if you can increase a perceived value and all kinds of stuff.
00:13:50.240 --> 00:13:54.320
So we don't have to go deeper in that, but you have to understand AOV, try to go.
00:13:54.480 --> 00:13:56.639
I mean, this says 80, 80 something.
00:13:56.799 --> 00:13:56.879
Yeah.
00:13:57.200 --> 00:13:58.240
85 or whatever it is.
00:13:58.399 --> 00:13:59.120
That's why I gave a range.
00:13:59.600 --> 00:14:04.159
Let's do 55, minimum, minimum, minimum to 85.
00:14:04.320 --> 00:14:04.399
Yeah.
00:14:04.639 --> 00:14:05.039
60 probably.
00:14:05.279 --> 00:14:08.159
50, 60 to probably 80 is a good spot if you can get in there.
00:14:08.399 --> 00:14:09.440
You need to understand your break even.
00:14:09.600 --> 00:14:11.679
You need to understand your ad spend target percentage.
00:14:11.759 --> 00:14:17.759
We recommend between 15 and 30% of your top line net sales in Shopify is called net sales.
00:14:17.840 --> 00:14:21.440
Your net sales going into advertising to acquire new business.
00:14:21.600 --> 00:14:24.879
And the last thing is you need a net profit margin of 15 to 20%.
00:14:25.200 --> 00:14:30.000
So on your profit and loss, if you're less than 15 to 20%, you're going to really, really struggle.
00:14:30.159 --> 00:14:32.000
15 to 20 is considered really great.
00:14:32.159 --> 00:14:34.720
Over 20 is considered excellent, but you don't want it too high.
00:14:34.879 --> 00:14:44.240
If you have like 35% profit margin, what's going to happen is you're going to plateau because you're not investing enough in advertising and you're not able to, you're going to plateau a lot faster than if you're investing more.
00:14:44.480 --> 00:14:48.879
And so we just find 15 to 20 is a really healthy net profit margin.
00:14:49.120 --> 00:14:49.440
All right.
00:14:49.600 --> 00:14:58.560
The second thing you need to fix is you need to build, so number one, understand your economics, lock them in, know them like the back of your hand, and make them non-negotiables.
00:14:58.879 --> 00:15:03.600
Second thing is building a repeatable system for producing and testing new creative.
00:15:04.000 --> 00:15:07.120
There is like, there's no way around this.
00:15:07.279 --> 00:15:13.360
If you're in the 30,000 plus range, meta is going to be the largest contributor of your sales.
00:15:13.600 --> 00:15:19.039
I have not seen almost any company short of some unique outliers meet that case.
00:15:19.200 --> 00:15:19.440
Yep.
00:15:19.600 --> 00:15:20.879
People like, well, organic.
00:15:21.039 --> 00:15:21.279
No.
00:15:21.519 --> 00:15:22.960
Meta will beat organic.
00:15:23.120 --> 00:15:24.080
Meta will beat organic.
00:15:24.159 --> 00:15:25.440
Some people are not gonna like that I say that.
00:15:25.679 --> 00:15:26.960
It's the lifeblood of scaling.
00:15:27.039 --> 00:15:28.320
It's your highest leverage point.
00:15:28.480 --> 00:15:37.600
I can spend if you spend 10 hours a week on Meta and you're making and you're spending$1,000 a day, you could still spend 10 hours a week and spend$3,000 a day.
00:15:37.679 --> 00:15:38.000
Yep.
00:15:38.159 --> 00:15:40.480
It's really not, it really scales.
00:15:40.560 --> 00:15:43.600
And this is like 10 hours a week if you're really building a lot of creative.
00:15:43.840 --> 00:15:45.840
And you should not be outsourcing this.
00:15:46.080 --> 00:15:48.720
Agencies are gonna bleed you dry and they're not gonna give a crap.
00:15:48.799 --> 00:15:49.200
Yep.
00:15:49.440 --> 00:15:51.840
Number three, you got to fix this.
00:15:52.000 --> 00:15:54.560
Get your welcome pop-up offer to convert at.
00:15:54.720 --> 00:15:55.840
I upped my typical.
00:15:56.080 --> 00:15:57.360
I tell people five to ten percent.
00:15:57.440 --> 00:15:59.519
I'm actually upping this like eight to ten percent.
00:15:59.600 --> 00:16:00.480
You should be in that range.
00:16:00.560 --> 00:16:00.720
Yeah.
00:16:00.879 --> 00:16:07.360
Uh if you're under eight percent of that welcome offer pop-up, which I recommend, generally we'll put it like 10 seconds and then it comes up.
00:16:07.679 --> 00:16:10.639
If you're under eight percent, your offer sucks for your audience.
00:16:10.799 --> 00:16:13.840
If you're over 10%, you're giving away too much.
00:16:14.399 --> 00:16:16.320
And there are two tools I really love for this.
00:16:16.480 --> 00:16:18.320
We use a tool called Optimonk.
00:16:18.399 --> 00:16:23.759
I think you can go to eCommerceality.com slash opti, like O-P-T-I monk.
00:16:23.919 --> 00:16:27.120
And if you go there, it's already Is that M-U-N-K or M-O-N-K?
00:16:28.000 --> 00:16:29.679
Like Opta, like opt-in.
00:16:29.919 --> 00:16:30.799
So Optics.
00:16:30.879 --> 00:16:31.440
But what's the monk?
00:16:31.759 --> 00:16:32.320
M-O-N-K.
00:16:32.480 --> 00:16:32.960
M-O-N K.
00:16:33.039 --> 00:16:33.519
Like the monkey.
00:16:34.000 --> 00:16:34.399
Monkey.
00:16:34.560 --> 00:16:36.159
Well, no, no, no, not monk.
00:16:36.399 --> 00:16:37.039
Oh, I don't know.
00:16:37.120 --> 00:16:41.279
When I hear monk, I think of like, you know, those guys that have like the bowl cuts or whatever.
00:16:41.519 --> 00:16:45.519
And they have like the logo, though.
00:16:45.600 --> 00:16:46.480
Is it a monkey?
00:16:46.639 --> 00:16:47.440
It might be a monkey.
00:16:47.519 --> 00:16:48.240
I literally have no idea.
00:16:49.279 --> 00:16:51.039
I feel like it's an optimized monkey.
00:16:51.279 --> 00:16:52.159
Optimonk.
00:16:52.560 --> 00:16:54.480
I don't, I don't know.
00:16:54.720 --> 00:16:55.840
I might need to.
00:16:56.000 --> 00:16:57.360
Now it's gonna get the best of me.
00:16:57.440 --> 00:16:58.639
I just really know.
00:16:58.960 --> 00:16:59.200
All right.
00:16:59.279 --> 00:16:59.919
It's uh it's all right.
00:17:00.000 --> 00:17:01.200
Everybody go check out Optimunk.
00:17:01.279 --> 00:17:02.960
I think it's like it's$29 a month.
00:17:03.120 --> 00:17:05.759
The second one is called Aaliyah A-L-I-A.
00:17:06.079 --> 00:17:07.519
Aaliyah is beautiful.
00:17:07.679 --> 00:17:15.920
The only thing about Aaliyah is it's definitely more expensive price point-wise, and and you could get to 8 to 10% without Aaliyah.
00:17:16.000 --> 00:17:18.880
I mean, we so anyway, those are just kind of my my thoughts on it.
00:17:19.039 --> 00:17:22.320
But get your welcome offer pop-up, converting it 8 to 10% of people.
00:17:22.400 --> 00:17:25.039
And this is 8 to 10% of people opting in.
00:17:25.279 --> 00:17:29.200
If you're sitting at like sub 5%, your front-end offer just sucks.
00:17:29.360 --> 00:17:35.360
Now you could do discount, like if you go from like a 10% discount to a 5% discount, 15% discount, you're like, well, I'm giving away more margin.
00:17:35.440 --> 00:17:39.039
But it could literally lower your cost per acquisition by 25%.
00:17:39.519 --> 00:17:40.240
People don't think about that.
00:17:40.400 --> 00:17:41.519
Like, well, I don't want to give away more.
00:17:41.599 --> 00:17:45.360
It's like, hey, you're just giving more to Meta because less people are taking you up on the offer.
00:17:45.440 --> 00:17:45.599
Yeah.
00:17:45.759 --> 00:17:47.599
Also, you don't have to always discount.
00:17:47.759 --> 00:17:48.720
You can do a discount.
00:17:48.880 --> 00:17:51.119
You could also do free gift with purchase.
00:17:51.200 --> 00:17:52.799
You could do like, hey, enter our giveaway.
00:17:52.880 --> 00:17:53.599
It doesn't matter what it is.
00:17:53.679 --> 00:17:56.720
We need to capture 8 to 10% of people coming to your website.
00:17:56.799 --> 00:18:02.480
If you're having a thousand website visitors a day, we can get 80 to 100 people on your list a day if this is just locked in.
00:18:02.720 --> 00:18:05.759
Which leads me to number four, you have to fix this.
00:18:05.920 --> 00:18:08.000
Your list is going to start growing as a result of this.
00:18:08.159 --> 00:18:15.360
The fourth thing you have to do is you have to get email producing at least 20 to 30% of your revenue between automations and campaigns.
00:18:16.079 --> 00:18:23.840
And there are five core flows you need to set up right out of the gate: your welcome flow, your post-purchase, your checkout abandoned, your browse abandoned, and your sunset flow.
00:18:23.920 --> 00:18:32.320
And those are going to make sure that the welcome flow, as people are joining the pop-up, we're nurturing them, getting them to buy, and take us up on whatever that welcome pop-up offer was.
00:18:32.480 --> 00:18:35.759
And then, of course, when someone buys post-purchase, we need to get them in that flow.
00:18:35.920 --> 00:18:40.480
Checkout abandoned, if someone's going to like checkout and then they ditch, we want to get them back.
00:18:40.559 --> 00:18:43.920
That's a high ROI thing to set up one time and it'll convert forever.
00:18:44.079 --> 00:18:52.320
And then browse abandoned is if somebody's clicking on an email and they go to your website and Clavial or Omni send or whatever tool you use knows that they're there.
00:18:52.400 --> 00:18:56.960
And so it could do a checkout, it could literally send them an abandoned card email because it knows what they were looking at.
00:18:57.039 --> 00:19:02.960
And then a sunset flow is going to cleanse everybody that's been on your list for 120 days and has not been active.
00:19:03.199 --> 00:19:05.039
Email should be 20 to 30% of your revenue.
00:19:05.119 --> 00:19:11.920
Now, the reason we have to fix this before you get much bigger is we have some clients, like recently I was talking, I forget who it was.
00:19:12.000 --> 00:19:13.280
I'm not going to drop their name anyway.
00:19:13.360 --> 00:19:18.960
Uh, I was talking to them and they haven't even taught, like they literally, oh, this client grew really, really, really fast.
00:19:19.199 --> 00:19:24.639
And so fast that his acquisition channel with Meta is crazy, like just crazy.
00:19:24.719 --> 00:19:28.639
He's one of those ones that had like 100x growth in no time, like insane numbers.
00:19:28.719 --> 00:19:29.119
Yep.
00:19:29.360 --> 00:19:31.280
And then he backlogged fulfillment.
00:19:31.360 --> 00:19:32.480
They got constrained on fulfillment.
00:19:32.559 --> 00:19:33.519
He got constrained on time.
00:19:33.599 --> 00:19:38.079
I was talking to him this week in a coaching session, and I was like, he's like, I'm not even sending a weekly email.
00:19:38.239 --> 00:19:40.880
I can't even send do a promo sprint.
00:19:41.039 --> 00:19:46.559
I'm I can't even like like he can't even he doesn't even have the capacity to do that because their ads are performing that great.
00:19:46.719 --> 00:19:46.880
Yeah.
00:19:47.039 --> 00:19:49.920
That many people coming in, which is amazing, right?
00:19:50.000 --> 00:19:56.079
But you can get if you get past there and all every customer from ads costs you dollars in ads.
00:19:56.159 --> 00:20:01.199
So if we can get 20 to 30% of people buying from email, that's gonna, that's just pure profit you're gonna get back.
00:20:01.280 --> 00:20:14.239
So if you're paying, you know,$30 cost per acquisition and you get an extra hundred customers a month email, well, great, you just made yourself another$2,500 or$3,000 a month in profit because you didn't have to give that to ads.
00:20:14.480 --> 00:20:27.199
And if you're if your ad performance on platform looks good, but you can't get your ad spend percentage down and you're not leveraging email, that's an easy way to bring your ad spend percentage down into the range that you want it to be.
00:20:27.360 --> 00:20:34.800
Because if just like what you're saying, if you're relying on Meta to acquire every single customer, you are directly tied to your ad spend percentage.
00:20:34.960 --> 00:20:51.679
But if you produce customers in a different way, then your ad spend percentage is actually more flexible because the only way you can move your ad spend percentage if you're not using email is improving your ads, which is a really hard thing to do if you're already performing decent or good on meta.
00:20:52.239 --> 00:21:00.880
So here's a simple way to look at this is like if you were only running ads, 100% of sales are coming from ads, and and you're getting a a two return on ad spend.
00:21:01.039 --> 00:21:10.239
I'm just gonna use two because it makes my math easier here, and then you start using email, and then you're you start producing 30% of your revenue from email, then you could literally just add 30% to your meta performance.
00:21:10.400 --> 00:21:16.000
It'd be the same thing as if you're able to go from like a two row as to a 2.6 just by literally sending email.
00:21:16.320 --> 00:21:22.480
Now, when it comes to campaigns and flows, is that revenue split 50-50 between them or does one carry more than another?
00:21:22.719 --> 00:21:25.360
Uh rule of thumb, like 60-40 one way or another.
00:21:25.519 --> 00:21:28.400
Or 50-50, give or take, a few 10% each way or another.
00:21:28.480 --> 00:21:31.360
If you're like 60% campaigns, 40% flows, doesn't matter.
00:21:31.440 --> 00:21:37.039
If you're like 10% campaigns, 90% flows, it just tells you where you need to get good.
00:21:37.199 --> 00:21:37.360
Yep.
00:21:37.519 --> 00:21:45.519
So if you if you're if your campaigns are like sub 40% of your total email revenue, you're either not setting enough of them or you just kind of suck at flow campaigns and just go get better.
00:21:45.599 --> 00:21:46.880
Just go lift your skill set.
00:21:46.960 --> 00:21:47.280
Yep.
00:21:47.599 --> 00:21:50.000
Fifth and final thing that you need to fix.
00:21:50.079 --> 00:21:51.199
This is really big.
00:21:51.360 --> 00:22:01.119
This is probably the most I was in a I was meeting with some clients earlier this week, and this is a really, really hard one, but this will destroy you if you don't have a system for this.
00:22:01.280 --> 00:22:05.599
And that is number five, you have to have a system for cash management.
00:22:05.920 --> 00:22:09.760
Cash management is very different than your profit and loss.
00:22:10.000 --> 00:22:13.920
Profit and loss can show you something depending on if you're using cash basis or accrual basis.
00:22:14.239 --> 00:22:20.000
Profit and loss will show you one thing, but sometimes you could look at your bank again, you're like, I don't feel like I have that much profit in the business.
00:22:20.079 --> 00:22:26.079
And it's because their cash moves differently than your than paper.
00:22:26.239 --> 00:22:30.480
So we would consider profit and loss, paper, and then you have actual cash.
00:22:30.639 --> 00:22:44.320
And the problem here is if you're not doing cash basis accounting and many econ businesses are doing accrual-based accounting, if you're not doing that, you might show, hey, I made, I made$20,000 in profit this month, or well, if we're$30K, you're probably not getting$20,000 in profit.
00:22:44.480 --> 00:22:47.039
Let's say I made like$10,000 in profit this month.
00:22:47.280 --> 00:22:53.920
If I made$10,000 in profit this month, it accrual does not take into consideration all the purchase orders for all of the inventory that you had to buy.
00:22:54.000 --> 00:23:00.960
So you may have to, this month you may have had a$50,000 outflow or$20,000 or$30,000 outflow of inventory purchase.
00:23:01.039 --> 00:23:03.760
So your cash just got depleted, but the paper looks really good.
00:23:04.320 --> 00:23:16.639
And the best way to do this, we have an internal entire training system, spreadsheets that we give all of our give our clients in our mentorship program, but it I call it the money management system, the e-commerce money management system.
00:23:16.800 --> 00:23:20.239
But you need to have a system of where your cash goes.
00:23:20.400 --> 00:23:21.920
I'm a huge fan of Profit First.
00:23:22.000 --> 00:23:30.480
If anyone's listening and you haven't heard of Profit First, Mike McAllowitch wrote this book called Profit First, and it was eye-opening for me, where all of the cash that comes in, it comes into an income account.
00:23:30.559 --> 00:23:35.679
You have all these different bank accounts, comes into an income account, and then every week you distribute percentages.
00:23:35.920 --> 00:23:43.440
Like you'd say, hey, I transfer all my sales tax out, which by the way is very dangerous if you're not collecting sales tax and you don't know sales tax law.
00:23:43.519 --> 00:23:44.800
That's something else you have to consider.
00:23:44.960 --> 00:23:56.559
I transfer to sales tax, and then whatever's remaining, I then put this percentage in inventory, this percentage in the profit account, this much in the taxes account, this much in the owner's comp account, and this much in the treasure chest account.
00:23:56.639 --> 00:23:57.679
That's what we like to call it.
00:23:57.840 --> 00:24:00.559
And so you need to have a system for cash management.
00:24:00.719 --> 00:24:23.440
And when it comes to buying inventory, I'm a huge fan of using a profit first-ish methodology where you say, hey, my if my gross profit margin or my cogs and my like if my cogs and gross or my gross profit margin is 60%, then I would say on my product, then I would transfer 40% of my income every week into the inventory account.
00:24:23.519 --> 00:24:29.360
So when I have to go buy new inventory, that is my non-negotiable amount.
00:24:29.440 --> 00:24:32.239
It's like I have to work within what I have here.
00:24:32.400 --> 00:24:40.239
I can't go buy more than that because that means I may need to go into debt or I'll crunch all my cash position in doing so.
00:24:40.400 --> 00:24:46.000
And so you need to have a system for cash management and you need to have some principles on debt, in my opinion.
00:24:46.159 --> 00:24:47.119
How do you feel about debt?
00:24:47.280 --> 00:24:54.320
Just so you know, my principles on debt, I have worked with a lot of businesses that have almost gone under or have gone under because of debt.
00:24:54.480 --> 00:24:55.760
And so there are different types of debt.
00:24:55.920 --> 00:25:01.760
If you're talking like a Shopify loan, that they take a percentage off the top, highly, highly, highly advise against that.
00:25:01.920 --> 00:25:04.079
Credit card debt carrying that, very, very expensive.
00:25:04.159 --> 00:25:04.800
Don't advise that.
00:25:04.880 --> 00:25:08.079
Lines of credit, I see value in that, especially in the e-commerce space.
00:25:08.400 --> 00:25:11.760
So when it comes to your cash, you need to have a system for it.
00:25:11.840 --> 00:25:13.199
So let me go ahead and recap here.
00:25:13.440 --> 00:25:16.719
Number one, if you if you want to go from 30 to 100K plus a month, fix these.
00:25:16.800 --> 00:25:20.239
Or if you're over 30K and any of these are not fixed, you're gonna put yourself in a bad position.
00:25:20.400 --> 00:25:20.480
Yeah.
00:25:20.639 --> 00:25:20.719
Right?
00:25:20.800 --> 00:25:24.000
You might be at 70K and be like, ooh, crap, I got like three of these or two of these.
00:25:24.159 --> 00:25:25.519
Uh let me recap these for you.
00:25:25.679 --> 00:25:27.360
Number one, understand your economics.
00:25:27.440 --> 00:25:33.920
This is gross profit margin, AOV, break-even, uh, return on ad spend or CPA, your ad spend percentage and your net profit margin.
00:25:34.079 --> 00:25:39.199
Number two is to build a repeatable system for producing and testing new creative.
00:25:39.360 --> 00:25:42.559
Number three is to get your welcome offer pop-up to convert it eight to 10%.
00:25:42.880 --> 00:25:44.880
We love Optimunk or Aaliyah.
00:25:44.960 --> 00:25:50.079
Uh, number four is to have email producing at least 20 to 30% of your revenue.
00:25:50.239 --> 00:26:02.639
And number five, you need to have a system for cash management and not get into the trap of saying, I will take my profit later and sake of scale now, because we know million plus dollar businesses that are totally broke.
00:26:02.880 --> 00:26:05.199
Don't be broke and do over a million dollars a year.
00:26:05.440 --> 00:26:05.840
Cool.
00:26:06.079 --> 00:26:08.719
Well, hey, if you enjoyed this episode, please do us a favor.
00:26:08.880 --> 00:26:09.679
Drop a comment.
00:26:09.840 --> 00:26:17.360
Which of these do you need to go kind of tighten up inside of your business if you're watching on YouTube and if you're listening on Apple or Spotify or wherever the heck other ones are out there?
00:26:17.440 --> 00:26:18.480
I don't think there are any other than that.
00:26:19.119 --> 00:26:22.719
Then please do us a favor and give this a simple rating.
00:26:22.800 --> 00:26:28.719
It takes 22 seconds as we're on a quest to become the number one e-commerce business podcast on the planet.
00:26:28.880 --> 00:26:29.280
We love you.
00:26:29.440 --> 00:26:31.119
We'll see you in the next episode.
