Jon is a former Amazon marketplace executive, current 8-figure Amazon seller, and Partner at Color More Lines, where he provides full-funnel digital marketing solutions for high growth brands. In addition, Jon authors the widely popular Best@Amazon newsletter, a weekly newsletter for the Top 1% of Amazon Sellers. Jon started his career in M&A advisory with KPMG, spending 9 years serving Fortune 1000 companies, before joining Amazon, where he served as Head of 3P Marketplace for Consumer Electronics on Amazon Canada and worked directly with the top 1% of third-party Consumer Electronics sellers.

> Here’s a glimpse of what you would learn…. 

In this episode of the Ecomm Breakthrough podcast, host Josh Hadley interviews Jon Derkits, an experienced Amazon seller and partner at Color More Lines. They delve into the intricacies of managing working capital, optimizing cash flow, and scaling Amazon brands. Dershowitz shares insights on negotiating with suppliers, leveraging credit for ad spend, and the benefits of a diverse traffic strategy. He also discusses the use of Google and Amazon ads, the halo effect on Amazon, and the significance of financial literacy. Additionally, Derkits introduces Prism, a tool for Amazon analytics, and offers access at a discounted rate. The episode wraps up with personal recommendations and resources for listeners interested in e-commerce success.

Here are the 3 action items that Josh identified from this episode:

Action Item #1: Master Financial Literacy: Understanding the cash conversion cycle and the role of working capital is crucial for Amazon sellers. Take the time to educate yourself on these financial concepts to effectively manage cash flow and operational efficiency in your business.

Action Item #2: Negotiate with Suppliers: Actively engage in negotiations with your suppliers to improve your working capital position. Request price reductions, extended payment terms, and damage allowances to free up cash that can be reinvested into growing your Amazon business.

Action Item #3: Explore Funding Options: Investigate alternative funding options beyond traditional lenders, such as asset-based lending. Assess whether leveraging debt through a line of credit aligns with your business goals and financial strategy, but proceed with caution and strategic planning to ensure sustainable growth.

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This episode is brought to you by eComm Breakthrough Consulting where I help seven-figure e-commerce owners grow to eight figures. 

I started my business in 2015 and grew it to an eight-figure brand in seven years.

I made mistakes along the way that made the path to eight figures longer. At times I doubted whether our business could even survive and become a real brand. I wish I would have had a guide to help me grow faster and avoid the stumbling blocks.

If you’ve hit a plateau and want to know the next steps to take your business to the next level, then email me at josh@ecommbreakthrough.com and in your subject line say “strategy audit” for the chance to win a $10,000 comprehensive business strategy audit at no cost!

Josh (00:00:00) - Welcome to the Ecomm Breakthrough Podcast. I'm your host, Josh Hadley, where I interview the top business leaders in e-commerce. Past guests include Kevin King, Michael Gerber, author of The E-myth, and Stephen Pope from My Amazon Guide. Today, I have the pleasure of speaking with Jon Dershowitz, a former Amazon Marketplace executive and a current eight figure seller. And today, we're going to be talking about some clever strategies for improving your cash conversion cycle, as well as some interesting growth hacks in order to scale your brand to eight figures and beyond. This episode is brought to you by Ecom Breakthrough Consulting, where I help seven figure companies grow to eight figures and beyond. Listen, Jon, I started my business back in 2015 and grew it to an eight figure brand in seven years, but I made a lot of mistakes along the way. That made the path of getting to eight figures take a lot longer than it needed to. At times, I made bad hiring decisions. I had to take money from my own personal checking account in order to fund payroll.

Josh (00:00:43) - Because of cash flow issues, I stressed about whether our brand could survive when Covid caused us to experience a 90% decline in sales. I remember wishing for a mentor that could guide me, somebody that had been there, done that, and somebody that could help give me the secrets to overcome those obstacles and to help scale. That's why I've decided to offer that one on one coaching and consulting, where I share the nitty gritty cashflow frameworks, the sales strategies, and the operating systems that have helped me scale my own business. And because I believe in giving each entrepreneur my undivided attention. I only work with three clients at a time. But first, I want to make sure we're a perfect match. So I'm offering a completely free, no strings attached, comprehensive business strategy audit session. And this is my goal of just to make sure that we are the right fit. So to our listeners, if this sounds like it's something that you're up for, drop me an email at Josh at EcommBreakthrough.Com. That's E-comm with two M's.

Josh (00:01:27) - And in your subject line say I want to pick your brain. And then let's chat about how we can take your brand to the next level. But today I am super excited to introduce you all to Jon Derkits. Jon is a former Amazon Marketplace executive, a current eight figure Amazon seller, and a partner at Color More Lines, where he provides full funnel digital marketing solutions for high growth brands. In addition, Jon authors the widely popular Best to Amazon newsletter, a weekly newsletter for the top 1% of Amazon sellers. Jon started his career in M&A advisory with KPMG, spending nine years serving fortune 1000 companies before joining Amazon, where he served as the head of three key marketplace for consumer electronics on Amazon Canada and worked directly with the top 1% of third-party consumer electronics sellers. So, with that introduction to welcome to the show, Jon. Josh, that was awesome. I'm happy to be here.

Jon (00:02:12) - I don't know if anyone's ever told you this, but you have an amazing podcast voice.

Josh (00:02:15) - So I guess I'll take that as a compliment, I appreciate it.

Josh (00:02:18) - My voice for audio. My face was not meant for video even though it's on YouTube. Yeah.

Jon (00:02:23) - No, it's so melodic. I feel like I could fall asleep or it feels like a vocal hug.

Josh (00:02:30) - Well that's good. Well, hopefully we're not putting anybody to sleep while they're driving while listening to this.

Jon (00:02:34) - Yeah, no. Hopefully not. And look, I love what you're doing out there with Ecomm Breakthrough Advisory and helping. First of all, you've walked the journey, right? And you've been on the path that many people are on. you're just further along and I love that you're giving back. I love that you're advising on cash management, finance. Those are my love languages. And we're going to talk about that today. but it's such an important predictor of success in a business being able to manage cash. Right.

Josh (00:02:59) - 100%. And Jon, let's jump straight into it today. I mean, you know, our audience here, the people listening to this, their seven figure brand owners, they're looking for actionable strategies in order to grow and scale to eight figures and beyond.

Josh (00:03:10) - They have big aspirations for their brand. You know, I think over the last few years, Amazon has gotten more and more challenging. And right now, I think Amazon is at its peak, the most challenging state that it's ever been in. you know, I think we all, all of us that started back in 2016, 2015, we look back on those days of fond memories and be like, oh man, I wish I could go back with the knowledge I have now, and I would go slay it. But we've all learned and grown. So, Jon, I'm curious, you've been at Amazon, you've worked with the top sellers, you publish a newsletter just for the top sellers. So what's on the top of your mind and what do you see the future looking like for Amazon sellers for the next 12 to 18 months? Yeah.

Jon (00:03:46) - Good question. Good question. There is a look, I think one thing that you said just really rings true and that is the arc of Amazon over the past decade.

Jon (00:03:56) - I, I cheekily posted several years back my three immutable laws of Amazon law. Number one is that each passing year gets harder. Number two is that each passing year gets costlier. In law. Number three is that Amazon is simultaneously the best and worst partner you've ever had. And I think that's more true today than it's ever been. Especially, you know, in the first half of this year, sellers have been bombarded with all these new feeds which we won't get into the details of. They all have their own nuances, headaches, problem areas. but In my mind what that means for 2024 and beyond. In terms of selling on Amazon and succeeding on Amazon, you need to have better command of your numbers of your financials than ever before. Like you said, 2015 2016 outsourced the product. Throw it on Amazon. Don't have to know anything about branding, about PPC, really about anything. As long as you stay in stock, you're going to sell. You're going to hyperscale. 2018, 2019, 2020 got a little harder, needed to be a little sharper on the marketing side, whether that was branding or PPC.

Jon (00:04:56) - and then 2020, 2021. Degree of difficulty increased again, right? Because you had all this venture money coming in through aggregators where they were inflating CPCs across categories. So now you have to be super nimble with your advertising. They were elevating the game on the branding side. On Amazon, traffic was not sufficient. You need to pull it off. Amazon sources your product quality needed to be better than ever. You have to be at the top of your game across so many different disciplines. Plus, to the credit of so many Amazon entrepreneurs, which is why I love this ecosystem. Everyone elevated their game. When I look at 2024 and beyond, the next area where people are going to need to elevate their game is in finance, it's in accounting, it's honestly in the boring stuff. But the stuff that I love, and you've experienced it yourself, taking personal funds and putting them into the business. Right. Struggling to meet payroll, dealing with precipitous declines or just volatility in the business.

Jon (00:05:46) - That's super hard. whether you have one skew or 100. And so having an understanding of how money flows in your business, you know, through the P&L, through the balance sheet and ultimately to your bank account, is what we care about. That's going to be the critical skill. I'll I'll maybe. What a period of this sentence. with this other point, which is. There's a reason that in the past three years, there's been a rise of fintechs, fintech econ lenders looking to support Amazon brands as well as just digitally native brands on, working capital. There's a significant need for working capital in retail businesses. physical retail businesses could be served by traditional lenders. There was a gap in the market. So you had fintechs. You had venture backed lenders emerge to fill that gap. Now, in the shadow of every strength or every thing that's good in a market is a weakness, which is these lenders are not cheap, right? There is a reason that they are willing to write you a big check in less than 24 hours.

Jon (00:06:53) - when money comes fast, that money is not cheap. and I think what a lot of sellers are realizing now, maybe a year or two years after taking a loan from a fintech company, taking a loan from Amazon, lending, which, you know, sunset itself about two months ago, but nevertheless was a source of capital for brands. I've talked to so many sellers. Maybe you have two who are just underwater on their debt payments. Underwater is maybe not the right term, but they're smothered by them. You know, whatever cash was coming into their business and then going into their bank account is now being taken up by the debt. The remaining cash is going to fund inventory to grow. There's just nothing left. and so much of what I've been doing lately is what I'll call capital advisory, helping sellers kind of refinance out of that debt into better debt that's more sustainable. Or just looking at the business, you know, to the extent it's not bankable anymore and building a strategy around getting out of getting out from under that debt.

Jon (00:07:41) - And a lot of times that's just taking the P and turning it into a cash flow forecast. Looking at the balance sheet and figuring out what the right rate of growth is. part of the problem is you're chasing growth, and that growth needs capital and it causes you to overextend. And I think a lot of sellers do that. So again, I'll put a period on the sentence. But the meta point here is finance and numerals. Numerical literacy is going to be the skill that I think is the next one that sellers and brands need to level up in 2024 and beyond.

Josh (00:08:11) - Yeah. Yeah. Jon, I would 100% agree. I think that the biggest thing that you can focus on now as an Amazon brand owner is operational efficiency, which comes from knowing your numbers and knowing which levers you're going to pull. So, Jon, you've got a lot of information I think we're going to be able to unpack here today. But there's two kinds of real main things I would love to dive into.

Josh (00:08:32) - Number one, I would love to hear some of the case studies. And as you do like the capital advisory, like where are the best places for funding? Because I've heard the same thing from a lot of those fintech companies. They're the widely popular names that you guys have probably heard of. They sponsor a lot of conferences. They ain't cheap. And good grief, if you look at the true Apr, that's not a good deal for you, frankly speaking. and so I want to talk about that and some of the case studies. And then secondly, I want to talk about okay, so what does an entrepreneur do that doesn't have a financial background. Right. They don't love numbers. But hiring a CFO is also not in the realm of possibilities right now either. So what do you do? So those are the kind of the two things I would love to double down on with you. But let's start with capital advisory.

Jon (00:09:15) - Yeah. No, I, I want to give your listeners just truly tactical, actionable guidance here.

Jon (00:09:22) - Probably preface it with just foundational information. And I'll simplify this foundational information to say working capital impacts cash flow. So many sellers are focused on the P&L that they look at maybe daily or weekly in their business. And that's great. I love that people are looking at their pls. That's the right thing to do as a business owner and with software tools like Seller Board or, you know, a handful of others, that ingests data from Amazon, you can get a real time financial snapshot. The problem is your net profit margin of 20% is is not what goes into your bank account. Because of that 20%, a portion of it is always going to be locked up in inventory. So working capital impacts cash flow. Free cash flow is your money in the bank, but it's really your profit, dollars less your working capital needs, your inventory needs that dictate what goes into your bank account, what you can then reinvest in the business or take home if that's what you want to do. So let's let's talk about that working capital, that inventory plug, how you find it.

Jon (00:10:17) - Well, if you have stuff in the bank, that's how you fund it. But most people don't, especially as you're starting up in an Amazon business. Now, this is where those fintech lenders kind of fill the gap, as you said, expensive, borderline predatory. mostly, you know that their core products are revenue based loans and merchant cash advances. Merchant cash advances, actually, are a clever way to get around usury laws, laws that cap interest rates. But I'm okay. I digress, and I won't get into that, but. This is my roundabout way of essentially saying. If you need to finance your business and your options are fintech, or you think your options are fintech versus traditional lenders, those are not the only two options. There's a substantial middle ground, some of which is composed of fintech lenders who have moved to the middle and started to offer more reasonable traditional financial products like lines of credit or fixed term loans that, while ours are higher, are still better than the implicit APIs of revenue based loans.

Jon (00:11:13) - But also in the middle, and where I like to take clients, is a category of lending called asset based lending level. Now, I'm not going to put a big hairy asterisk on this by saying. There are. Maybe half a dozen ten tables that will lend in the e-commerce space. I've worked with all of them. Most of them have a minimum size threshold. So what that means is. Possible for a lender that the level of effort on their part to originate a $100,000 working capital facility is the same as as originating a $10 million working capital facility. But guess what? The 10 million facility is going to come with higher fees. So for that reason, they set minimums in the business. Most of these animals do, and they make exceptions on a case basis depending on other things going on in the business. Maybe the business just raised equity from significant investors, but nevertheless, Labels if you are of a decent size in your Amazon business. Let's say you're doing at least a million in EBITDA, and you could reasonably need a $1 million facility.

Jon (00:12:16) - Abels are a great lender for you. and let me put some numbers around it. So an asset based lender will typically offer either a fixed term loan or a line of credit. Lines of credit are kind of the direction that I steer my clients in 90% of the time, because it's like a credit card, you know, you can keep a balance on it as long as you want. You pay the minimum, or you pay some, some. But you can continue to draw down on that line of credit until you reach your limit. Some of these labels will dynamically adjust the limit as your business is growing, but nevertheless, you have essentially a sweep account that you can use as a checking account and pull money and deposit money in as you need. It's it's exactly what most retail businesses need labels because their loans or their lines of credit or secured by assets in your business, in this case, your inventory and receivables, they offer friendlier interest rates, typically with the levels that I work with, Prime plus 2 to 6% is kind of the range of rates that they offer on their asset based lines of credit.

Jon (00:13:15) - Prime is 8% just for simple math. So think about that. You can potentially get a working capital line of credit, an asset based working capital, and get it for 10%. And so, you know, you have a $1 million line. You draw down all of it for a big inventory order of $1 million. So you're paying a 10% annual interest rate on that. And you only have to pay the interest so you can kind of ride out your cash conversion cycle, meaning you can ride out until that big million dollar inventory purchase actually turns into cash to pay down that million dollar facility. so I love asset based lending. I love asset based lines of credit for borrowers whose businesses are of a certain size. So that's kind of one of those in the middle options that I love to, to bring clients to bring brands to. But what if you're not that big? What are your options? Like I said, the fintechs are moving to the middle a little bit more. and I press them when they approach me and want to talk about their new products and share, because in general, I'm dismissive because I expect they're going to come with very high rates in front of clients for that reason.

Jon (00:14:19) - but what I've seen is even though we're at a higher interest rate environment, they're recognizing the commercial realities of lending to Amazon businesses and what it takes as a borrower to service that debt. And they know that they can't sustain themselves by continuing. This is my hypothesis. They know that they can't continue to sustain themselves by continuing to write revenue based loans, merchant cash advances. Those are or hits of sugar for the business if they need. If they want to build long term sustainable lending institutions, they need a diversified lending portfolio that consists of loans that, frankly, are going to have a lower default rate because they are serviceable. That's what I think is happening. So a handful of the so-called legacy fintech lenders are now moving into more standard working capital lines of credit, fixed term loans. In fact, sellers formerly known as Sellers Funding, which is one of the Amazon lending partner lenders that shows up in the offers they recently introduced a working capital product, that was much better than the working capital they had in the past, which was really just a revenue based loan labeled as working capital.

Jon (00:15:20) - these lenders, one of the reasons I don't speak very highly of them, and one of the reasons is because they use a lot of marketing speak to mask what things really are, as they call things growth capital or working capital when it's really just a high interest loan or revenue based loan. I don't like that. I think finance works when there's transparency, when there's trust, when there's kind of a long term orientation. and when you apply to a lot of industries, but when you have venture money in there, a lot of those kinds of tenants of an industry start to shift away at, But yeah. Let me, let me maybe put a pin.

Josh (00:15:52) - Yeah. Jon, I think that's, that's very eye opening for people and for them to know. Kind of like what that landscape looks like. My question would be this, Jon, what if you have the working capital to not take on a loan? Does it still make sense to take out even a line of credit to fund inventory? Right, so that you can put that money elsewhere in the business? Or would you recommend, you know, bootstrapping it 100%, not taking on debt? What would be your recommendation for a lot of Amazon based brands?

Jon (00:16:20) - You know, I'm kind of thinking of.

Jon (00:16:21) - I think it's an old Charlie Munger quote. When he talked about the three things that will do a man in, ladies, liquor and leverage. Oh.

Josh (00:16:32) - I know that quote.

Jon (00:16:33) - Yeah. So, I mean, gosh, I want to say take on debt that that's. That's the optimist. The growth at all costs. Artemis. but the prudent thing to do, the conservative thing to do is to bootstrap it. it always comes back to growth. What is your business and what are the working capital requirements of your business? So how much growth do you want in your business? That's a personal choice. There's nothing really for me to say there, but how much working capital is required in your business? Let me touch on that. So working capital. Inventory. Less receivables, less cables. That's simple math. Those are the assets, the current assets on your balance sheet that comprise your working capital. Those items in them, in and of themselves are sort of determined by.

Jon (00:17:20) - How long they stay as assets on your balance sheet or liabilities, and how quickly they turn to cash inflows or outflows. What I mean by that is. Your business, like your business, is likely to just have positive working capital in it. On average you hold x number of days of inventory, you have y number of days of receivables, and then you have Z number of days of payables, which is often less than the other two. So you need positive assets in your business at all times in order to grow it. And I think that's the key detail there. If you're running with positive working capital, then you need funds to grow the business in which if you don't have the funds organically from the business and you want to grow above your current rate, then the plug is that if alternatively you have negative working capital, which by the way, this is Amazon famously negative working capital, then what that means is the business produces funds to grow the business. and there's a, there's another side of that which I won't get into because it's kind of wonky.

Jon (00:18:15) - But suffice it to say, and to answer your question. If you have. People are afraid of this, and you want it to go to this. But at any given time, you have too much working capital needs in the business. Then you need to plug the gap with that. or you need to get creative to bring your working capital needs down. So let's talk about that for a second. And I've. I think I've given these quote unquote hacks away in different settings, but, I'll share a few of them here. So but I'm gonna.

Josh (00:18:47) - I'm going to tee this up because this part I've heard you present and this part is critical. I promise you, those people that are listening, look, you may not have a finance background. I have a finance background. So like this, like I could jam all day long talking about these things. But I know, like, 90% of you are like, I hate numbers, I hate finance, I hate accounting. Like these strategies that Jon is about to share, literally like these can be game changing strategies for your business, and you don't need to have an extensive financial background in order to execute these.

Josh (00:19:16) - So all I'm saying is I just want to tee you up to be like, pay attention, because Jon is going to rattle off some really impactful things that you can do for your business to help improve the free cash flow that's coming into your brand. That's then going to allow you to scale. That's then going to allow you to cut yourself a, you know, a paycheck and actually, you know, live off the business. So, Jon. Yeah, it's the goods.

Jon (00:19:36) - Awesome. All right. We're going to start with something that I think will be intuitive to every business owner, irrespective of financial acuity or competency or interest. Right. and that is you build a business based on relationships with suppliers. Right? I talked about if you're growing and your business needs this much working capital and you want to grow more, you have to plug the gap. Plug the gap with that. Well, lenders are not the only source of that. Your suppliers can become your creditors. And among the hacks that I talk about to reduce your working capital needs, remember working capital inventory receivables less payables.

Jon (00:20:09) - So you can either reduce inventory, reduce receivables or increase payables. Giving yourself more time to pay your suppliers is a different way of putting that. So, one of the things I talk about to extend your days payable, to give yourself more buffer is on a regular cadence, approaching your suppliers for one of three things, or 3 or 3 things. I mean, it depends on your relationship, but on a regular basis, you should be approaching your supplier with a request for price reductions, with request for extended payment terms, and with request for damage allowances. And so let me let me take all three of those. Accounting rights reductions is the easiest. That's the one that's met with the most resistance all the time. Right. And I think you can only go down the path of price concessions when you've built up a decent relationship with your supplier, when it's become apparent that, you know, it's symbiotic, it's a mutual benefit. And even then, out of respect, the way that I approach price concessions is to point to macro factors that are compressing profitability.

Jon (00:21:07) - if you have a client base supplier, FX rate fluctuations between the USD and the wall, But price reduction is often met with resistance. And that's okay as part of my negotiating toolkit. I'm going to ask about it with the expectation that the answer is no. But because the answer is no, now I'm in a better position to ask for other things. and this is just a kind of psychology. The other things that I will ask for. Honestly, the other things that I want more are better payment terms. Both Amazon sellers start with payment terms that are along the lines of like 30% down, and then so 30% of your Po goes before you receive any product. And then 60 days later when it's on the water or ready to go on the water, you pay the remaining 70%. And then it's on the water for 20 to 30 days, that it takes three months to sell it through. So like, you can kind of do the math on how long your cash left your bank account and how long does it take for it to come back.

Jon (00:21:58) - That's kind of what I'm talking about. Your payment terms are so important. Now 30 down, 70 point shipment. Awful. But it's where you start. What I like to do is progress and ask for improved payment terms. Ultimately getting to a point where I'm either net 45, net 60, or even net 90. And for the listeners that don't know what that means, it just says, look, you're my supplier, Josh, I want 10,000 pieces of this widget. You're going to make it for me. It might take you 60 days. You're gonna put it on the water and. At some point you're going to invoice me and I will have 60 or 60 days to pay you back at 90, 90 days to pay you back. But that's so important because you might get a shipment and then. You can sell it in 90 days, which means you can essentially fund the business from the sales of the product and pay back your suppliers for that, rather than being out of pocket.

Jon (00:22:45) - So payment terms are so powerful as a way to expand your business's runway, improve cash flow. Your supplier is a great source for quote unquote, debt in the business by way of improved payment terms. And so I'll ask my suppliers for price reductions, better payment terms. Or the third thing I'll ask for is damage allowances. We all know that 100% of your pots do not come in perfect condition. We get customer returns to that effect. No one knows where the damage comes in, but nevertheless, less than 1% of products are perfect. You paid for a shipment where 100% should be perfect and manufactured defects. And so for that reason, kind of what I do with my suppliers is kind of a. A squeaky wheel approach whereby I am sending them detailed data on a monthly basis on customer returns and saying this products weren't right because of X, Y, and Z, and you get to the point where I don't want to hear it anymore, and you can kind of then say, all right, well.

Jon (00:23:37) - In lieu of onesie twosie reimbursements, let's just agree to an x percent damage allowance, which is a reduction price on appeal, and we can revisit it on a quarterly basis as product quality improves. So those are kind of my three three go to’s with suppliers to improve. cash flow from your payables to your supplier. And, like I said, turn your supplier into your pay. There's one other way that you can kind of turn your supplier into a bank or, differently, relieve you of a cost in your business. And that is, many suppliers in China in particular will hold products for you. So if at one point you had a US three PL and you were paying warehousing costs. Ask your supplier if they'll hold the product aside, line it for a period of time and you know they'll produce it all at once, but ship it 30 days later, 60 days later, straight away, to eliminate an expense from your business. I, my partner and I, with one of our brands, just did this this past year.

Jon (00:24:29) - Where we're using a mix of Amazon warehousing and distribution, which I'll tell you about those in six months. But we're also having our supplier hold back roughly 40% of the shipment, and send it to us. 30, 45, 60 days later. There's really no hard limit on that. So days payable with your suppliers, unlocking cash flow in your business. Another way to unlock cash flow in your business with a supplier that many people don't think about is with Amazon. if you're selling on Amazon, you're most likely running pay per click ads. And guess what? Your supplier, your vendor for those ads is Amazon. And if you're well, honestly, if you're any advertiser, new or old, Amazon defaults you to a $500 ad spend credit limit, which, you know, if you put your ads on a credit card for rewards. And I hope everyone here does. and you're spending $30,000 on PPC a month. You have 60 charges on your credit card that month for $500 each. But what if you had a larger ad spend limit? What if you could take the ad spend in month one? That would be on your credit card and due in month two, and stretch that ad spend into a little bit of month two so that when your credit card cycle ends, some of your ad spend is then due in month three.

Jon (00:25:38) - So you're kind of unlocking cash flow that way. There is a script and I've shared it with people. I think I've even published it in my newsletter before, but it's as simple as opening up a case with Amazon ads and asking for a higher ad spend credit limit. And, you know, I've, I've worked with brands that are spending 600 K a month and gotten massive increases in their credit limit, but most brands should be able to get $1,000, $5,000 in terms of their ads credit limit, which is a huge unlock. It really is so and I think it.

Josh (00:26:06) - Goes to what, $10,000 right now is. The top genre's a go even higher.

Jon (00:26:10) - I've heard I've heard of hiring the best I've ever gotten for a client was 10,000, but I kind of regret that I didn't ask for more. And now when I help people with this and I do it for free, I. I don't have them negotiate against themselves. That was my mistake. I would kind of go into these cases with Amazon, these chats, and I would ask for a number that I thought was reasonable.

Jon (00:26:31) - I've since pivoted and told people to ask for a number higher than what they think is reasonable, and let Amazon tell you what they'll give you. Yeah. So negotiating one on one mistakes on my part learned from it. I mean, not leaving too much money on the table, thankfully. But yeah, I've seen 10-K. I think I was in a chat and someone said something like they were able to get 50 K, which you gotta be spending a million a month on. yeah. Something about that.

Josh (00:26:55) - So on that note. And Jon, I know you've got some more to share here. So, one of the things I followed that advice when I was like, that was an unlock when I saw that in your newsletter and presentation, did it the next day, immediately got flipped to Hyatt to higher terms. And then the way we're doing it now is our accounting team will go through and we've got, what, ten different credit cards that we'll use for our ads to rotate through the rewards and whatnot.

Josh (00:27:18) - But here's the benefit. They all have different statements. Start dates right. So what we'll do is we will instead of I mean, yes, we're focused on optimizing the rewards. But secondly, we're optimizing to make sure this payment hits during the first 5 to 7 days of the new statement period. And now effectively, this credit card is now turned into what, 45 to 60 day payment terms for this new ad spend. And so now instead of, you know, the worst thing you can do is charge something on the last day of a statement date for a credit card, and then that things do super quick so you can really extend things out. so there's a, there's a whole strategy of the way you use credit cards. And I'm also astonished with the number of people that tell me like, oh, I've just I didn't even know you could spend it. You use your credit card on ads. And I was like, oh my, oh my goodness. How many rewards points you've missed out on.

Josh (00:28:04) - But not only that, super damaging to the cash conversion cycle of your business. If you're letting Amazon just deduct that from funds, that's leaving immediately. So, I love that point.

Jon (00:28:14) - Josh I love what you've done there and I'm going to steal that. Although I think you brought up something highly relevant, which is you have an accounting team that can manage this. If you're a solopreneur, that's super hard to do. And, you know, you just have to, again, kind of do the math to understand how much cash that is going to unlock for you and whether it's worth your time. Right. There's that effort impact calculation. But I love that. That's super clever. and it's working.

Josh (00:28:36) - On your newsletter.

Jon (00:28:37) - Jon, I'm going to call it out. I'll add one more dimension to this, and spend credit limit strategy. And that is the right credit card. You know, you can optimize for rewards, but you can also optimize for statement periods or days payable for credit cards.

Jon (00:28:55) - And I've recommended to a lot of people the Amex plum card, which for an annual fee, you get I think it's 60 days, 60 or 60 days. And it cycles, which is huge. So now it's your point. You know, if you can time it right, you're maybe going from 30, 45 days to pay back that ad spend to 100 plus. and that's huge.

Josh (00:29:16) - Let's double down on that, because this goes back to your earlier point of working with your manufacturer. Even if they have, you do wire transfers right there. Are there software solutions that you could tap into that will allow you to pay? And it comes with what, 2.9 sometimes a 3% credit card fee. I'll pay a 3% interest. I'll call that my interest rate, so to speak, or a financing charge all day long. Because here's the other hack that we've done with our own business. We will actually reach out to our suppliers and say, hey, I know this is due on the 13th, but my credit card statement date starts on the 16th.

Josh (00:29:48) - Can I push this like I'm going to pay you? No questions about that. Can I charge this on the 16th, please? And every single time I'm like, yeah, that's fine. But we have a long history with them, right? Yeah. And then and then we'll use the plum card as well. So now effectively I have turned what is a large Po. Not only do they have, but you also know, their own payment terms. Right. But now I also have 90 days in addition to whatever payment terms my supplier is giving me. So effectively, what we're saying is, if you work in some of these strategies, whether it's net 60, whether it's net 90, you could have a cash conversion cycle where you're not paying for that inventory for 180 days in your business, you've made money on all of those products. That's where growth comes from. And it's ten times better than any of these financing options that we talked about earlier.

Jon (00:30:31) - Yes, it's amazing how you can kind of hack together different solutions that expand your payment terms and reduce or maybe eliminate the need for debt.

Jon (00:30:40) - but sellers, a lot of people just don't know this. And I'll give people a reference for, you know, you said you can make payments to a supplier, through different tools. Meglio payments is one of those. They are fintech. But you can essentially put a Po on a credit card. So, take your Amex plum card, link it up to Meglio, pay the 2.9% but your supplier receives an ACH or a wire consistent with what they want. a good relationship, like you said, ask for a few more days to time it out based on statement periods. All these little things add up and they add up considerably. Because to your point, you know, if you're not collecting or not paying cash for 180 days, that's a long time to sell through your products and have that inventory turn into actual cash for you. Yourself. I like to think that most people are doing this because they want to make money for themselves. They just need to reinvest and fall into that cycle. So yeah, there's a lot of clever things that I've learned along the way that I've used for my businesses.

Jon (00:31:37) - a lot of the stuff would never fly in a corporate environment, but it's what you have to do as a solopreneur, a small business owner, in a space as challenging as Amazon.

Josh (00:31:46) - Yeah, I completely agree. Now, Jon, we're on and up on time, you and I, we could, we could Joe Rogan this podcast out. We could go for three for maybe five hours if we really wanted to. But we've got to limit ourselves. So, Jon, are there any other quick hitting strategies you want to give us and 60s. Yeah.

Jon (00:32:03) - let's move away from finance for a minute and let's just talk about Amazon operations. And you and I talked about this before we went on. I think the name of the game from a traffic perspective for Amazon in 2024 and beyond is creating a symphony of traffic that isn't just Amazon PPC, Amazon DSP, but pulls in new shoppers from other areas on the web. So off Amazon, traffic is critical for success going forward. And my preferred method for driving off Amazon traffic, at least from my brands.

Jon (00:32:30) - Which brands are their Amazon private label businesses? But, for my brands, I like to run Google, Amazon ads and their software tools out there, you know, carbon six pixel me. I think a lot of people have had good success with that. I've tested it out for some of my businesses. You know, I think with Google and Amazon, there's different ways to skin that cat. but the way that I do it, my particular strategy is to drive big bursts of traffic. You know, Amazon floods my detail pages for a short period of time and then dials it back. And the thinking around this initially was there is a well studied, well studied internally at Amazon, but I think it's been studied some on the outside. But there's a well-studied halo effect that exists for products on Amazon, particularly post deal periods or just post deals in general. and Amazon has publicized some of this, but the basic idea is, you know, you run a deal, you spike your product, and then for a period of time, typically about two weeks, there's kind of a latency, a halo in which your sales, your sales stay elevated.

Jon (00:33:28) - I found that to be the same thing with Google, Amazon track. So rather than spend $25 a day for an entire month, you know, I might spend $100 a day for a week or ten days and drive a bunch of traffic to my listings that are converting. And it's being run through attribution, of course. And then for the rest of month, I'll kind of take off, take them off, and lean into the organic list that I get. so, it's a strategy that has worked generally well for me across most of my products, other products I need to keep pumping every day. But because of Amazon traffic on a big Google to Amazon fit, I don't yet feel comfortable with my abilities, my teams' abilities around email marketing, around affiliate marketing, around influencers. It's just it's not in my circle of competence yet. But to my point earlier, Amazon gets harder, its costlier, best and worst partner you'll ever have, and it's an area where I know I need to skill up for 2024 beyond.

Josh (00:34:17) - Yeah, Jon, I love this amazing strategy with the Google ads. I love that. So, Jon, as we wrap things up here today, I love to leave each episode with three actionable takeaways. So here are the actionable takeaways that I've noted. You let me know if I'm missing something. So, action item number one is to become more financially literate in your business. And that means if you are not having, if you're not having a monthly finance meeting with yourself and whoever is running the books for your business, and I certainly hope that somebody else is running the books other than yourself for the business. But make sure you sit down. Yes, walk through the profit and loss statement. But here's one of the things that a lot of entrepreneurs kind of overlook. What's your cash flow statement look like? Right. So, what is that cash? You know what your inventory balance looks like? What cash came into the business during that last month? What cash left the business and why understanding those things.

Josh (00:35:05) - And here's the thing. You don't need to go get an MBA to learn any of this stuff. Just go Google it. Just go to YouTube. Like you can find some very basic financial instructions there. But understand that. And then the other thing to really focus on if you could be that cash conversion cycle. So, learn to study more on that. And Jon's got his newsletter two that he shared a lot of these strategies with as well. So that's action item number one. Action item number two is focusing. Before you consider getting a loan, you have to first work with your supplier. That is your best inventory sort like that is your best financing partner ever. And it always will be for any e-commerce brand as your supplier. So, create a good relationship with them. Don't treat them like garbage. Make sure you pay on time because if you don't pay on time, all of this goes to the wayside. And guess what? Then you have to start paying the 20 plus percent interest rate on your financing efforts because you've screwed it over with your best financing partner.

Josh (00:36:00) - Who's your supplier? So, follow Jon's. Jon's advice. He gave three actionable things that you could ask for with your financing partners. And then third, last but not least, my third action item is optimizing your credit card statement dates. So, from your Amazon ads to when you pay your inventory. And I would argue you should always be paying for your inventory on a credit card. I will pay 3% all day long. If that means I get an extra 90 days if you use the plum card to pay that back, man, that's 1% interest, or so to speak, on a monthly basis. Not bad at all. So, Jon, anything that I missed here, Holy.

Jon (00:36:32) - Cow, you did an awesome recap. I feel like you were probably a very good student back in the day when you were taking notes there and recapping. No, that was awesome. You did remind me though, with your first action item. Your first takeaway? a question that you asked at the beginning I forgot to answer, which is you can't afford to hire a CFO.

Jon (00:36:48) - what do you do? You're not financially literate. You can afford to hire a CFO. Well, there are fractional CFO services out there. I have probably a half dozen that I've referred people to. But, you know, you can kind of bring in someone with CFO level, capabilities, competencies, experiences, and, you know, rent them for a period of time either to set up systems, set up controls, or just help you understand where's the money going in my business. So fractional CFO remember that term. I'm happy to give references. I'm sure you know some of Josh. But that can be a key plug for people that listen to everything that we've talked about today and realize, like, yeah, this is super important, but I don't know how to get there.

Josh (00:37:22) - Yeah. 100% echo that. So, Jon thinks thanks for remembering that. Super important. And again, you don't need to be an expert, right. In all things like I am not a sourcing expert. Right. so go go find the right people.

Josh (00:37:33) - It's all about the who, not the how. So, Jon, here we go. Our three final questions for the episode. Number one, what's been the most influential book that you've read in line?

Jon (00:37:43) - Gosh. All right. It would be so easy to go non-fiction here and honestly, kind of boring and hit you with fiction. And it saw the Complete Works of Sherlock Holmes by Arthur Conan Doyle. just like. If you think about the time it was written. If you think about the sophistication of the stories told. I don't think I've ever read one of the short Sherlock Holmes stories, and they're all like 60 to 100 pages, because they were in magazines at the time and came out as like weekly circulars, I remember. But like I, even as I reread them, I could never guess who the thief was, who the criminal was just so artfully written, and I enjoyed them so much. And they just got me to think beyond the confines of my normal thought patterns.

Josh (00:38:25) - I love that that is a non, I guess I would say that's a book.

Josh (00:38:28) - I've never been recommended on this podcast, but an interesting approach in terms of being able to think creatively and step outside the realm of reality and think, because that's truly where the best ideas come from. So, I love that. I love that. All right, Jon. Question number two. What is your favorite software tool that you are using either personally or with your business that people probably haven't heard of?

Jon (00:38:47) - All right. I'm going to do something here, which is maybe normal in the podcast world, but I'm going to plug my own software. So around the time we're recording this, I just announced that my Amazon agency merged with another one. The master agency merged with reliance. And as part of that merger, customer lines had spent several million dollars over a period of time investing in analytics and recording software, which our clients get, the team uses operationally. But it's a pretty sophisticated toolset on everything from P&L reporting to inventory management to ads, to Poisson analysis. we call it prism, and I've been using it now for the better part of two months, but we're going to bring it to market for something that, you know, for me, it's important that it's affordable.

Jon (00:39:32) - There's so many software tools out there that the average Amazon seller can't access because, let's face it, the tool stack, the tech stack for Amazon sellers has grown substantially, and it's hard to get all the software that you need for under $500 a month, which is money that would be spent elsewhere. So, yeah, more to come soon, but we are bringing it to market. I'm excited to offer, you know, people. Great. Early bird pricing, and I think I mentioned this to you, but if anyone is interested in looking at it, what I will do is, and I'll enter this for what I say in the questionnaire? The first ten, first 20 people. If you email me Jon at Color More Lines, what I will do is I will give you a lifetime rate of $25 a month for our prism software. That's amazing. First 20 people only, subject line, but econ breakthrough econ with two M's. And, you know, whenever you're hearing this, I'll make sure I honor that regardless of how many, you know, new users we get between now and that awesome Jon.

Josh (00:40:32) - That's amazing. Super generous offer. and I know I'm going to be picking your brain at what's in that software, so I'm looking forward to that. All right, Jon, last question here. Who is somebody that you admire or respect the most in the e-commerce space that other people should be following and why? Yeah.

Jon (00:40:46) - I am going to call out my business partner. Her name is Madeline Masterson. I know her as Maggie. She is a fellow x Amazon person. She worked in the policy side. We all know the name Dharmesh, right? She was in his work and did a lot of things to shape policy for sellers in a good way. You know, I, I look, I think about what she did at Amazon during the time that she was there, and she was the washer behind the wall, resisting against all the forces that Amazon wanted to come down on sellers. but she's a fantastic business partner. She is the true operator in our relationship, and she's just so quietly good at what she does, which is advising brands, running an agency business.

Jon (00:41:25) - She's not prominent on social media. but what I've found is sometimes the best operators aren't right because their heads down doing the job that they're quite good at. So, Madeline Masterson, you know, you can find her on LinkedIn. but don't expect her to be posting much. She's an absolute rock star.

Josh (00:41:45) - Amazing, Jon. Great recommendation. Now if people want to follow you, Jon, they want to see your newsletter. They want to follow your software. They want to follow your agency. Where could they reach out to you?

Jon (00:41:53) - Yeah. I'll give people three places to find me. Number one obviously my newsletter. Best at Amazon. I think I'll put the link in the show notes published once a week. deep dives into, you know, typically a single topic and then a potpourri of interesting Amazon things that I find throughout the interwebs, other places that I'm pretty active as LinkedIn, call it the stuff that doesn't quite make the cut for the newsletter or, and then the final place, which is where I have all my fun, is on Twitter for X.

Jon (00:42:21) - I'm @guyfosel, which was the first phrase that I uttered as a child. and I guess my name is Bearded Egg FBA. There's kind of a long story that goes behind that involving a bet that I lost, but I have a lot of fun on Twitter. I still talk mostly about Amazon things, but it's a mix of Amazon think pieces and Amazon memes. So yeah, those are the three places. Find me best on Amazon, LinkedIn, Twitter.

Josh (00:42:44) - Amazing. Well, Jon, you're somebody certainly that other people should be following. So I recommend people continue to follow you and your newsletter. But thanks for your time and joining us for this episode today.

Jon (00:42:53) - Yeah, Josh, thanks for having me. It's been fun.