Matt Putra, an experienced CFO and founder of EightX. Matt will be sharing insights on negotiating better terms with suppliers, including extending payment periods (net 30, extra safety stock, etc.), through effective forecasting strategies.

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

In this episode of the Ecomm Breakthrough podcast, host Josh Hadley talks with Matt Putra, founder of EighX and an experienced CFO. Matt discusses various strategies for ecommerce businesses to scale profitably, including the importance of managing fixed costs, inventory for the right SKUs, and ad spending. He offers advice on financing options like PayPal Capital and Mayflower, warns against overusing credit cards, and suggests leveraging cards like Parker and Ramp for better terms. Matt also touches on the significance of maintaining stock levels, especially for Amazon sellers, and shares a case study where optimizing ad spend led to increased profitability. The episode concludes with Matt's top three tips for ecommerce owners and an invitation to connect with him for further financial guidance.

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

Action Item#1 Streamline business operations and make strategic decisions, such as cutting non-performing SKUs.

Action Item#2 Build strong relationships with suppliers to negotiate favorable terms, impacting cash flow positively.

Action Item#3 Explore creative financing options, such as stacking credit cards and leveraging different financing tools, to gain a competitive edge.

Special Mention(s):

Related Episode(s):

Sponsor for this episode...

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 Hadley (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 E. Gerber, author of the E-myth. Norm Farrar and Steven Pope of My Amazon Guy. Today, I have the pleasure of speaking with Matt Putra, an experienced CFO and founder of EightX. Today, we are going to be sharing some actionable strategies that you can implement in your business to A make it more profitable, and then B be able to bring more cash into the business so that you can continue to scale to eight figures and beyond. This episode is brought to you by Ecomm Breakthrough Consulting, where I help seven figure companies grow to eight figures and beyond. Listen, Matt, I started my business back in 2015 and I 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. I made bad hiring decisions.

Josh Hadley (00:00:43) - There were times where I had to take money from my own personal bank account in order to fund payroll because of the cash flow constraints. When Covid happened, we watched our business decrease by 90% overnight, so I was stressed about whether it would be able to survive. And I remember wishing for a mentor, somebody who could guide me through the maze of scaling up somebody who had been there, done that and could help me overcome all of these obstacles. That's why I've decided to offer that one on one coaching and consulting, where I share the nitty gritty cash flow frameworks, the sales strategies, the operating systems that have helped me scale my own brand. And because I believe in giving each entrepreneur my undivided attention, I only work with three clients at a time. So first, to begin, I want to make sure we're a perfect match. And so, I offer a comprehensive business strategy audit session. And this is my way of providing you as much value as I can up front to see if we're a good fit.

Josh Hadley (00:01:26) - So to our listeners, if this sounds like something you're interested in, email me at Josh at Ecommbreakthrough.com. That's Ecomm with two M's. 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 Matt Putra. Matt is an experienced eCommerce CFO, having served 40 plus ecommerce brands and agencies across the US, Canada, UK, EU and Australia with revenues ranging from 1 million to 80 million. And before starting, Matt was actually the CFO of a private equity group that did over 500 million in investments across Canada. EightX was created to help ecommerce owners scale their businesses with more cash and less stress. They do that in three ways by providing strategic financial support from fractional CFOs bookkeeping, accounting, financial operations, and then three helping brands improve their operating systems, making sure that all team members are aligned on the right goals. So with that introduction, welcome to the show, Matt.

Josh Hadley (00:02:20) - Thank you so much, Josh. It's a pleasure. Matt, super excited to have you on the show here and really dive into a lot of the key financial metrics that are the lifeblood of any e-commerce brand. At the end of the day, if you have no cash, it is really challenging in order to scale. So, Matt, I guess that would be my first question that I want to dive into. You've worked with a lot of brands. You talk to a lot of brands, and I'm curious to hear what are some of the big mistakes or just the general mistakes that you see ecommerce brand owners making in their business as it relates to finance and profits and cash? Sure. I'll start with some common ones that I just always see.

Matt Putra (00:02:58) - I think one is adding fixed costs too early. So adding hires, adding like an office, anything that anything fixed. And I see that because, you know, let's say you have a good few months or even a good year and you're like, great, now I can kind of take my foot off the gas a bit and I can hire this and that, and then there's a tough year or a tough few months in.

Matt Putra (00:03:16) - So then you're like, oh, then you're in a pinch. So, this is something I see throughout everybody I work with, and it never changes. And so, one of my mantras is like, be as lean as possible as long as possible. The other one that I see is buying too much inventory or buying too much of the wrong SKUs or imagery. You know, we've all heard the 80-20 rule and 20% of your SKUs is 80% revenue. And so, I still relatively frequently see people investing in SKUs that don't make up a large portion of their revenue. And what you're doing is you're taking a big bag of money and you're putting it on a shelf, and you can't do anything with that bag of money until you somehow can sell through the inventory. whereas if you could invest it in, I don't know, creative or ads or something else, you would see the return a bit faster. So that's something I see quite a bit. One newer one that I'm noticing is people having a hard time figuring out how to scale their ad spending.

Matt Putra (00:04:06) - And over the past three years. There's been a lot of learning about contribution margin, meaning if you deduct all your burial expenses from a dollar of revenue, how many centers are left over right? For Amazon sellers, it's usually between 10% and 20%, Shopify between 15% and let's say 25%. And for wholesale, it's actually like it could be upwards of $0.30 on the dollar. So what's happening is people learned about this and agencies learned about this. And now we're like, okay, great, let's keep it at 20% always. Well, as you and I know and most people listen as you scale, as you buy more traffic, the traffic gets more expensive and you don't get corresponding decreases in your costs from your suppliers or your shipping costs even. And in fact, as we were just talking about before we started the show, Amazon is now taking more money from you too. And so your contribution margin as a percentage tends to decline. So what I'm seeing is when the contribution margins decline a bit, I'm seeing people pull back on the growth.

Matt Putra (00:04:57) - But what we're missing, though, is let's say your contribution margin is at 3 million a year. It's 20%. So 600,000. So at 4 million a year, your contribution margin could be, let's say not 15% but 18%. And you actually make more dollars in your pocket. And so it's okay to allow some decay in that margin as a percentage, as long as you make sure you have more dollars. So that's something that's fairly new that I'm seeing people over indexing their contribution margin. Yeah.

Josh Hadley (00:05:26) - Interesting I love that. And I kind of want to double down on that because cash flow is the lifeblood of any e-commerce business. And so talk to me more about it. Don't worry so much about that contribution margin. Because again we talked about this Amazon fees are only going up Amazon inventory placement fees low inventory fees I mean the fees are just endless. And guess what. They're here to stay. They're never going away. They're only going to increase. So just plan on it. Yeah.

Josh Hadley (00:05:48) - So Matt, how do we take that into consideration saying we want to grow. But that contribution margin is just continually going to be chipped away at. So what do we focus on?

Matt Putra (00:05:58) - Well I think so. There's a few things. one is understanding and I just I'm really looking off here is I'm doing some math so that I can actually speak more eloquently to it. And so one of the things is understanding your contribution dollars, not just the margin. And I made a tool and I'll send it to you. You can send it to listeners, and use it however you'd like. Really. but the key with the growth side is to understand contribution dollars. So what I mean by that is, again, like I said before, if you're doing 3 million a year and your contribution margin is 20%, that's 600 grand. That will cover your fixed costs and or go into your pocket right as you grow, you can allow for some decrease in that margin as a percentage. So at 3.5 million, if you did 18%, you make $630,000, which means it's actually $30,000 more in your pocket.

Matt Putra (00:06:43) - So you can allow for some decay in that margin as a percentage. And that's something to watch. And it's something to understand, because what I'm seeing is people going, well, I want to go to 3.1, but the margin decays a little bit like, no, I'm going back to three. But in reality, there's more dollars on the table that you could bring into the business and put in or put in your pocket as an owner. And so that's a pretty big one. right now and again, you can map this out. So the tool that I'll give you, it'll, it'll help you map this all the way through and even give you tracking for your agency and an email you can send them to help them understand all of it. But basically, you're going to deep dive into your PNL and have a video and watch it through the deep dive into deep dive into all your variable costs, and you can look at how they might change as you scale your spend and revenue. And then you can kind of target on what is the minimum you're willing to, the maximum decay you're willing to accept.

Matt Putra (00:07:29) - And then there's an email template and everything to send to your agency to say, look, we want to scale. Here's what you're allowed to let our ad spend go to. And these are the parameters around it. And you know and so it helps. That's a big one because again you know generally speaking if you put a dollar into ads I mean, again, it doesn't actually work like this. But you can expect the dollar back in 1 to 2 months. So if you learn how to scale with these dollars in mind, you will actually increase your cash flow and your profit, even if the margin as a percentage declines. So that's you.

Josh Hadley (00:07:56) - Know, I love that. And I think that's super important. It kind of puts the emphasis on why it's so important to have somebody with some sort of financial background and like even having a fractional CFO on your team. Are you able to say like, hey guys, we don't need to be so worried about Amazon ad costs going up right now.

Josh Hadley (00:08:14) - Ideally that's not happening. But that's the reality, right? So that's okay because hey, we're still going to be more profitable or bring in more cash. it just might be at a lower contribution margin. And there are things you could obviously try to raise your prices. But I think on Amazon, everybody's seeing more lower priced competitors joining every day, which makes it even more challenging to say, well, I'm going to solve this by just raising my prices. And the US consumer, I think, is more conservative than they ever have been right now.

Matt Putra (00:08:43) - Yeah. Well, actually, I'm seeing a couple people I know have highlighted some pretty interesting indicators that there might be an upswing in purchasing activity. There's a consumer confidence index. And then there was something in the S & P that changed just very, very recently. And I wish I could remember the indicator but I don't and that indicator has gone up. And it predicted another upswing in the economy like a couple of years ago.

Matt Putra (00:09:04) - So we might see some ability to raise prices soon, especially if consumer confidence is going up. But you're right. I mean there's always price pressures in losing your buy boxes. You know, it's not fun. So yeah.

Josh Hadley (00:09:13) - 100%. So I'm also interested. Let's go back to one of the other mistakes that people generally make. And that's adding fixed costs too early. Give me some additional examples of just bad fixed costs that you see people adding on to their business and give me some case studies to work with here.

Matt Putra (00:09:29) - So generally the umbrella topic is building infrastructure for who you're going to be rather than who you are. That's the overall mistake. What I mean by that is, let's say your 3 million today, you could assume you'll be at five, six, ten next year or the year after. And you might want to go, I'm going to build a team that can handle ten. What if the ten doesn't happen? You've lost a lot of money. And so, this is something I've seen time and time and time again.

Matt Putra (00:09:55) - There is an agency I used to work with. They hired a bunch of really great talent, six figure talent, to manage relationships, to manage operations. And the growth didn't materialize. And so they got a massive cash crunch. We had to cut all the staff and figure out how to do things again. That's one. There's another one where they were growing quite, quite quickly. And like past eight figures, well, not past I'd be like into the eight figures in mid. But they built a leadership team that was like nine figures. And so what happened is that and this will happen to anybody that the building structure they're going to be is taking money out of the available capital to grow the business. Right. Because let's say you're swapping 100 grand that you can spend on growth, for 100 grand for a person. And that person isn't going to give you the velocity of growth. Usually most people do not, as quickly as the 100 grand spent on actual growth activities.

Matt Putra (00:10:41) - So driving revenue activities, what has been happening is that this client, or at least at the time that we work with them, they were starting to get overtaken by some competitors who stayed very, very lean and had, let's say they could spend 40% of revenue on growth activities and this client could spend 20. And so when you can spend 40% of your revenue on growth. It's a massive competitive advantage because you can afford to pay more for the eyeballs and the customers than your other person can because they're stuck with all this infrastructure. So. Yeah. And so what I mean. There's really two options. Either figure out a way to grow cheaper, which isn't always available. Bring infrastructure back to where it should be, which is definitely possible. And in some cases you can raise money or use debt. But using debt in this case is something I don't recommend because it's just if it doesn't work, you're saddled with all this debt. Equity can work because your investors know that there's risk and stuff, but sometimes there's negative founder effects from raising equity at the wrong time.

Matt Putra (00:11:35) - Build your infrastructure. I say build it in arrears. So as you hit the growth, your team is going to be stressed. And just tell them, look, we're going to hit another level. It's going to be super stressful. I know that. I know that I'm going to be adding people. And as we stabilize at the new level, and that's how I run my own teams.

Josh Hadley (00:11:50) - I think I think you hit the nail right on the head here. because there's one phrase that I love in this quote is whoever can spend the most to acquire the customer wins. Period. Okay, so if most of your money and expense is going to your team and overhead like you're fighting a massive uphill battle to the basement entrepreneur that's working 80 hours a week and doing everything himself, right? And he's putting everything he earns, and he's living in mom's basement so he doesn't have to pay anything. He's just milking everything from his parents still, right? That guy is investing 100% back into the business.

Josh Hadley (00:12:27) - That guy is going to grow faster than the person that's saddled with a lot of overhead expenses. And so I loved your recommendation. That's kind of like building in arrears and letting your team know, like, hey, we will expand, but only as things stabilize and only as we can appropriately add new team members. And I myself have made that mistake in the past of saying, hey, we want to be a $25 million brand. Now that's cute. But if I go higher to go be a $25 million brand immediately, like I'm saddling myself up with and preventing myself from actually being able to grow in order to get there. Because now I have to pull back an ad spend in order to bring in more money for the business. So, I've experienced this, so I just wanted to echo that. Like, that statement is so, so true.

Matt Putra (00:13:07) - Totally. And the other thing that I didn't say, which I know you're a fan of, is, people still don't understand the value, the level of talent you can get from non-North American folks.

Matt Putra (00:13:17) - I think you and I both have high level people from the Philippines or wherever. I have someone from Argentina, the Philippines, and other places as well. And I did a competitor survey for this client that we used to work with, and they're similar eight figures. No one was a bit bigger. Eight figures. This one was like lower eight figures. And I looked at the team structure for this other company. They were less than half the number of people and most of their staff were overseas. Even some of their directors and managers and whatnot were overseas. And so, these people, the weight, because they just believed that there's talent everywhere. They're paying a third to a half of what the other company was paying. And so then again, all that money can go back into growth. and I know you know a lot about this, because I got your deck on hiring from offshore, and I use it like the Bible in some cases.

Josh Hadley (00:13:58) - Yeah. And I think that's a good call out to that.

Josh Hadley (00:14:01) - You know, there's a lot of good talent overseas. I don't think the US or Canada and North America are just like the UK, right? Europe. I don't think that they own all the intellectual capital in the world by any means. Right. and we've proven this time and time again that we've had candidates really run circles around people that are applying from the US. And so being very cognizant that not every role needs to be hired from North America, that you can go and source management level staff overseas. And if people want to learn more about that, one of my earlier episodes walks you through that seven-step process. You'll also hear me speak about it on stages. But I'm a big, big believer in that.

Matt Putra (00:14:38) - Yeah. And I would just echo that. Josh is seven steps I've seen on the webinar. Go get them. Listen to it, do it. Do it exactly how he says it. Because it works like we found good staff before I met Josh. and then using his methods, like I've increased the hit rate of getting great people on board.

Matt Putra (00:14:53) - So definitely all the listeners like, go, go listen to the episode and I will tell people like, I've done a study on a nine-figure company. Even they have manager director level. I shouldn't say even. They also have director and manager level staff from, I believe, Colombia, Brazil and other places like the people. It's untapped. It will, it will. I think someday people will realize it in mass or right now. It's a total competitive advantage to understand that that's the value

Josh Hadley (00:15:19) - Out there. Yeah, 100%. It truly is like a core competitive advantage that you can implement in your business. 100% love that. All right, Matt, you also talked about another mistake people are making is putting money into inventory for the wrong SKUs. So, tell me more about that. And how is that a problem? And how do brand owners, especially if you're trying to stay lean, how do you and you've got a large SKU count, for example, like how do you actually do the correct demand planning, forecasting, etc.?

Matt Putra (00:15:44) - Yeah.

Matt Putra (00:15:45) - Well, so I mean, I think a lot of people start to ask SKUs because they're like, well, how can I increase my AOV and my loyalty and all these things and, and those are probably good reasons to think about it. And I think. What I would suggest is if you do believe, well, first of all, understand your customers really, really, really well. I work with one brand currently. Every time they learn something new, it's the best launch they ever have. And I've never seen someone do that consistently. And they understand their customers really well. They have a community, and they talk, and their customers are on TikTok and they talk to each other. So, they've cultivated a group of customers that talk to each other so they can monitor and see what people are saying. The second thing is they monitor their competitors, and they could see what their competitors were launching, and they had some way to track, like the estimated sales of their competitor launches. And by colors, too, I believe that the software was called a particle.

Matt Putra (00:16:30) - They don't pay me to say that. But so they knew what competitor logic they knew was working for competitors. And so then when they launch competitive products, every time they launch a new product, it is better than the last launch. So, if you want to do it, do it like that. They also launched limited runs. So, if it failed, they didn't lose a ton of money. So, let's say you've done some, let's say you want to do some launches, right. That's a good way to do it is with this client of ours did the, the converse inverse, is where you don't do a bunch of testing you just this, this product should make sense with that product. And so, then you just buy a bunch of it and hope that it sells. Don't do it that way. And then let's say you have a number of SKUs in your business. The first thing that I looked at when I joined most, well, one of the first things I looked at is the relative rate of sale across your SKUs and the percentage of revenue each of your SKUs contributes.

Matt Putra (00:17:23) - And then the margins by skew. And I am a big fan of additions by dilution, meaning grow your business by removing shit that holds you back. And so, I will recommend people cut their bottom 20% of SKUs, and I'll bring that up once or twice a year at minimum. Oh hey, we cut those 20%. Here's another 20%. And. I am being. A little glib sometimes, but I want people to think about it because, like, do you really need that skill? Is it really helping you if you didn't have to demand plan for it, if you didn't have to talk to suppliers about it, if you didn't have to get financing for it, if you didn't have to update your PDP's and your Amazon store listings and your and you'd have to pay the storage fees and Amazon FBA centers, and if you didn't have all that stuff, would you be better off? And in some cases, those bottom 20%, you'd just be better off not having them at all. And this is about staying lean.

Matt Putra (00:18:13) - Lean in cost but also lean in focus. and there's a transition point where you can add new stuff because you're big enough. But I don't really know when that is. I think it's different for everybody. But again, I mean, be lean in your SKUs too. Don't launch six colors, launch two or test colors like with a limited, limited run, or even try stuff on pre-sale like sometimes and sometimes it doesn't always work. Buy the inventory six months in advance. But again, what I'm really saying is cut stuff that doesn't work all the time, sort of always pruning things that don't work for business, including inventory. So now why write if I have a slow turning skew and I buy a bunch of it? Imagine taking a big bag of money and just putting it on a shelf. And now that big bag of money is on the shelf. Not only is it locked up money, but I'm actually paying Amazon to touch it and count it and hold it. And for the storage space.

Matt Putra (00:19:05) - So I'm paying Amazon money to hold on to my money, which is crazy. you wouldn't pay a bank to hold your cash. Actually, in some countries they have to do that. But anyway, neither here nor there. you wouldn't pay a bank to just keep your money for, you know, you would if that was what was going to happen, you would take the money away from the bank and hold it yourself. We'll do that with your skews, too. if you're skewed, don't move. I mean, if you have this, it doesn't move. You have to get rid of it. Sure. Don't buy more of it. because, again, that money, I could do a bunch of stuff with it if I had it instead of Amazon holding onto it for me, I could again put it into growth. I could pay myself more. Maybe, I could pay down debts. I could buy more of them. Screw that. Or the few screws that really work.

Matt Putra (00:19:45) - When you buy more of those SKUs that really work, then you can have more purchasing power with the supplier and you can say, well, I'm going to focus on these things, and it makes it easy for your supplier. It makes it easier for you to forecast demand. And when you can forecast demand, you can then give that to your supplier anyway going on here. But I have a client where again, they focused on these core SKUs and their supplier, then gave them 30-day terms. When we started giving them annual forecasts for those few SKUs and then, oh, hey, what if we made some in advance and held them for you, they didn't have to pay for as a supplier would, and kept safety stock. And then the supplier went so far as to say, well, look, if we're in a pinch, will give you 60-day terms if you have to have it. Why? Because we focused on these few. With one supplier. I can lean in, focus with the supplier, cultivate a relationship with the supplier, but again, didn't have a bunch of SKUs that we didn't need.

Matt Putra (00:20:32) - And so now we're getting all these concessions. and so again, I think. I mean probably even sub 20 million, like most companies, don't have a massive amount of firepower to manage multiple high performing SKUs. I don't see that. so.

Josh Hadley (00:20:45) - Yeah, I love that. That's great feedback. And I think that the important thing that rang true to me is to be lean in your focus. Right. So, if you can move 20% of your SKUs, right. You talked about all the financial benefits, but let's talk about just the ease of mind that comes and the freedom, the creativity that can come. If your team or yourself is no longer bogged down by having to demand, plan or think about or strategize, how are we going to sell these? How are we going to increase sales, whatever it needs to be, if it's just the runt of the litter, then just move on, right, and focus on the things that are actually working and moving the needle in the business.

Josh Hadley (00:21:20) - So I know that's good food for thought, even for myself, because we have a really large skew catalog. And so, I think that's, you know, it's focusing on one thing. Right. And being able to double down in the areas where you're winning. That's where the fastest growth will come from in your business.

Matt Putra (00:21:36) - Yeah. And I think again, I mean, you know, I said 20 million. But like that's not a hard rule or anything. there are people that manage a larger catalog quite well, but probably not at 5 million. So, if you're I mean, I don't know, what would you say the number is like? When, when do you think someone has the firepower to manage a larger catalog?

Josh Hadley (00:21:51) - Yeah, I think that the challenge is, like every business is different, right. And at the end of the day, like for us, we built our business based off of, you know, SKUs that could sell 200 units a month. Right. That was like our bread and butter scaling up our brand.

Josh Hadley (00:22:07) - Now, that required bringing in a lot of SKUs in order to get to an eight-figure brand, for sure. However, there's other people that I would, you know, the grass is always greener on the other side, but that have three, five SKUs and an eight-figure brand. Right. And they're moving thousands of units a month. Right. And so, it's different based on like strategy. But you obviously need to plan accordingly, right, for whatever your business model is. And so just know that, yeah, whoever else you're probably competing with. Right. They're probably in the same boat. And the principle is this: can you be as lean as possible so that you can reinvest more money to be able to grow faster than they are? Whoever can spend the most to win the customer is going to be the ones that win. At the end of the day.

Matt Putra (00:22:48) - That makes sense. Yeah, that makes sense for sure.

Josh Hadley (00:22:50) - So now I'm very interested though you provide a lot of CFO coaching to clients.

Josh Hadley (00:22:55) - Give us. Let's get into the nitty gritty details in the weeds here. Like maybe even sharing some case studies of here are things that business, e-commerce, business owners need to be improving in their business and implementing.

Matt Putra (00:23:07) - Sure. I'll do one case study for a client. They were losing six figures a year. I made six figures. They lost the prior two years before we joined them. And then when we joined the very next year, they made six figures. And now they're making seven figures and they're going to exit in the summer. So.

Matt Putra (00:23:25) - Basically.

Matt Putra (00:23:27) - Okay. So, these people, one of the things, they had a really great community and they ended up not being able to manage the community. It becomes a lot of work when communities get large. From what I understand, I don't have to do it myself, so I don't really know. So, when they sort of wound down the community, they had to then figure out on the outside how they were going to perform. And so that ended up being a struggle just because they didn't have a hard time with this contribution dollar and margin thing.

Matt Putra (00:23:50) - And so they weren't sure. How do I scale ads and growth while giving my agency clear directions for when to pull back and when to push and all that. So, one of the first things we did was, of course, we built the financial model and everything, which is an income statement and also cash flows and also balance sheet. So, the first thing we did was we built a separate sort of model for the marketing spend and growth to give the agency a very good clarity on what are our targets and what are the metrics that we need to watch, and how do you self-manage yourself as an agency working for us? So that was big. Another thing that we did was a strong focus on cash flows. So, the model that we built. We built it sort of with e-commerce drivers, meaning ads and page visits, conversion rates, rate of sales. But we did it like, you know, a lot of companies will do a forecast. We're like, okay, last year we sold 10,000 units in June.

Matt Putra (00:24:40) - This year we should do 10% better. So, we'll sell 10, 100 units. We don't do that. We look at how many impressions or visits do I have to buy? What's my customer acquisition costs? What does the customer do when we get them? And that's how we model our sales. And so, we did that. We did everything else. So, inventory, purchasing planning all this. And so, we would meet this person probably biweekly for the first six months. And every time we met, we went, this was the plan. Here's how it's looking. What do we think about going forward? And we were constantly changing assumptions, testing. If this happens, then cash flows like that. If this happens in cash, it looks like this. And we were testing these scenarios all constantly for the first six months. And what we created was an extreme focus on cash flow for this client. And we said, when you push ads, cash goes up, but if you push ads and it breaks, cash goes down.

Matt Putra (00:25:24) - And so we are helping them figure that out. We were looking at how much inventory you can buy and when you can buy it. So again, if you overbuy even a good skew, it's still a problem because now you have too much of the skew and you don't have money to sell that skew. So how do you buy the right amount of inventory for the, for the season and for the sales period that you're in? So, for them, that was a big part. We also like to do some operational consulting too. So, they didn't do any pre-sales ever. So, when they sold out, they just shut it off. I was like, why don't you test it? And pre-sales crushed again. They knew their customers quite well and so their pre-sales really crushed and put a ton of money back into the business. so, we recommend that. That worked awesome. We also helped them find that. And as good of sources as you can find, when you've lost six figures two years in a row, it's not great, I'll tell you.

Matt Putra (00:26:11) - but we help them find the debt and manage the cash flow. So we had to then integrate that payments, inventory, payments, marketing, hiring staff, all of the stuff had to integrate. And we were looking at each other all the time. So then we made the debt payoff plans. And as of now, there. Almost all the way out of all that debt I had to take on back then.

Josh Hadley (00:26:28) - What are some of the cash flow strategies that you could recommend people implement in their own brands then? Like what is. Is it adding, you know, paying for your supplier invoices on credit cards instead of wires. Right. And. Oh good point. Yeah. Credit cards for ad spend. Like walk me through, walk me through some like quick hitting. Like, if I need more cash flow in my business, give me some quick wins okay.

Matt Putra (00:26:51) - Huge quick win that we've seen. You can sometimes get terms with the supplier by offering them like a percent more on the cost of goods. We've done this successfully a couple times.

Matt Putra (00:27:02) - we went from 30 days with the supplier to 60 just by saying, hey, we'll pay. What if we pay you a percent and a half more on this invoice? Will you take it for a big company? They do not have opportunities to make what equates to 20% return a year. So often, if they're big and they trust you, they'll take that deal instantly. We send that to somebody. They accepted it in two hours. Yes, I'll take it. No problem. So we got six day terms. I have seen oh, another strategy is a good friend of mine named Kevin. He taught me this concept called nibbles. Nibbles are very small. Easy asks of your suppliers. Meaning right now, if you're on 50% on on order, 50% on shipment, you don't ask, can I go to that 30 fully? No, it's too big of an ass. They won't do it. Then what? What you'll do is you go look, can I go 40% on deposit, 60% of shipment, or can you go 30, 70? Then you hold the end of the bargain for three months.

Matt Putra (00:27:49) - Three months? Have you come back and go, great. Now that I'm 40, 60, can I go? Can I go 40% on deposit, 40% on shipment? Yeah, and 20% on delivery. And you're asking these little questions and they stack up over time. And we if you can just do there's a, there's a power of one thing that it's called. If you can sell 1% more, if you can pay your suppliers one day later, if you can collect cash one day earlier, anyway, you can kind of measure this. We did this for brand making 5 million a year, and they would have 200,000 more in their bank account from these very small changes. So back to what you can do. Call your suppliers, ask for nibbles. In terms of debt, kick further is a really good one for American folks, American businesses because they have the ability to give you money, and you don't have to start paying through inventory lands and you start selling it. The reason that's huge is because most financing, including, you know, Shopify, Wave Flyer or Clear Co, a few others like that, you'll take money for inventory, you'll pay your deposit, and you'll already start paying way far back, for example, and you'll pay them half or 75% back before your inventory lands, meaning that, like, you're not even you're not even using the money for the purpose, like you're paying the money back with itself rather than the purpose of the of the money was inventory, and selling the inventory paid the money off.

Matt Putra (00:29:06) - That doesn't even happen. So kick further is a really, really, really great option, which is there's a lot it's crazy, but it's typically oh yeah, the Apr is like 40%. oh it's nuts. However, the interest cost is rarely the best way to measure debt. It's the payment terms. Here's why. So let's say you take a hundred grand from Wave Flyer. Most small businesses under 10 million will have a four, maybe five month payback. Okay, so you'll take a hundred grand, you'll purchase your inventory or pay the deposit with inventory, let's say. Okay. And over the next four months, you'll pay way far off. Then your inventory lands and you're like, well, I still don't have any money. So you have to take another way. Fire to pay off the wave flier basically. Whereas with kick further you'll pay for inventory, it will land, you'll start selling it, and then you start paying kick further. So the margin of the inventory is paying off the debt rather than new debt paying off debt.

Matt Putra (00:29:55) - So yeah, it's 40%. but rarely is that the most important thing to look at. There are times that it's important, but payment terms are often the most important. a piece of debt to look at. You asked, should you pay for credit cards? In an ideal world, you wouldn't. And here's why. my general rule, if things are okay in the business, if things are not okay, you do whatever you have to do, right? Things are okay in the business. You want to match your debt payoff time frame with the payoff time frame of the activity that you're using the debt for. So for advertising credit cards, why will you put a dollar into your advertising machine today? You will get it back in 30 to 60 days, which is when you have to pay the debt off with the credit card, right? With inventory, if you put it on a credit card, it doesn't live for four months. And so you're using other sources to pay off that inventory debt, which is, again, where those sellers Fi is another good one.

Matt Putra (00:30:46) - PayPal capital is a good one. So there's a lot of good ones for eight figures. Mayflower has a really great enterprise product. That's like a line of credit proper. So if you use your credit card to buy inventory, it's okay. It's not the worst, but it's just okay because you're paying off the credit card with other stuff rather than the inventory credit card. Right. never use credit cards for, like, for, like, operating expenses, like payroll. I know we wouldn't think of that, but sometimes you beg, borrow and steal, and you're shifting money around. And so it really is your credit card that's paying your payroll. So don't get me. Don't do that. but there are also some cards, I think. Parker, I'm not as familiar with Parker, but I've heard that they have longer terms and longer payback time frame, so you can use inventory in that. And that's the case on a Parker card. What else can you do? Oh, I mean, right now I am suggesting to people I mean, now this is different for Amazon.

Matt Putra (00:31:37) - You don't wanna sell out when you're an Amazon seller because it really hurts your, your visibility and all that. but if you're not on Amazon. I mean, you do want to allow yourself to sell out here and there, because if you're always never selling out, then you're always over buying. Right now on Amazon, I think you would agree you probably shouldn't sell it on Amazon, right?

Josh Hadley (00:31:55) - Yeah. I mean, yeah, that's the first rule of Amazon. Never, never go out of stock. Right. That's what.

Matt Putra (00:31:59) - I thought. Yeah. So different, so different , different , different. And the way you can manage your inventory is you can buy you can you can locate your this is getting a bit technical, but you can look at your rate of growth and you can look at your variation in sales. And you can actually use normal distribution statistics to be 90% or 95% confidence level in stock. I don't have a tool for that, unfortunately. But people on Upwork will be able to figure that out for you if you get any like a mathematician from anywhere on Upwork, they'll be able to answer that for you with like 500 bucks probably.

Matt Putra (00:32:27) - So, but yeah, you can use normal distributions to make sure you stay in stock, with some sort of confidence level. So and again, like the quick win is that growth piece the contribution dollar. Because again if you're so I walked into it. So, there was a company I worked with at one point doing high eight figures. I walked in the door and made 300 grand profit because they just weren't understanding the contribution thing. So, there's money lurking for most brands in this contribution dollar concept, which will send people a tool if you want it. I made some three grand in two weeks. The first two weeks I made three grand just because they didn't know. and so that's a fun one. Seller's another great inventory option. Yeah. They are. They were settle.co I think. Or maybe .com now, but they're an info provider where they will pay for inventory, and you will pay them back over time. They're pretty good. They tend to match the inventory timelines and they're pretty good to work with.

Matt Putra (00:33:11) - The gold and standard would be zero. Like, your customers are paying you before you have to pay your suppliers so you can stack facilities together to do that. you can use a parker with a subtle width, with negotiated terms of supplier. And in some cases, I think Bob actually got those zero days at some point, by stacking these pieces together so you can get there. and I think the stack they talked about could be Settle plus Parker plus Terms is, I believe, what they talked about. I got pretty close with Terms and Settle and, basically, A line of credit. But then now your customers are paying you before suppliers, which is then you can scale to the moon and quite quickly.

Josh Hadley (00:33:48) - Yeah, that's game changing for a business, right. Having that cash conversion cycle be positive. You make money before you pay your suppliers back. 100%. That's game changing. So I love anything else and that's the reason why I asked you about credit cards for inventory. Because it's like the Amex plum card gives you 60 days, right? Yep.

Josh Hadley (00:34:05) - so, Parker, that's a new one I haven't heard of. Are there any others? And I know some, credit cards are good on ad spend because you've got, like, 4X bonus points on Amex card, the gold card for ad spend. Right? And it's like, look, you're going to pay this off. So, you might as well collect the points. So any other quick credit card wins that you know of or cards that people use.

Matt Putra (00:34:26) - Ramp is one. Parker Brex could be one. B-R-E-X.

Josh Hadley (00:34:32) - Love it, love it. Those are some awesome quick wins. Matt, do you have any other case studies to share with us?

Matt Putra (00:34:38) - Yeah, so another one of our CFOs, his name is Leandro. Brilliant man. He joined a client where they were spending 500K, and this is a bit of Shopify, but Amazon both, and they're spending 5K a month combined. And they were doing sales of whatever it was at the time. I don't I don't recall, when we looked at the contribution dollar, we sensed that there was a whole bunch of ad spend that was actually decreasing their contribution dollars.

Matt Putra (00:35:03) - And so what we did is we started modeling and testing what would happen if we decreased ads. And at the end of the day, we cut our spending by a third, and they went from making -50,000 a month, 250,000 a month profit. And so what was happening here is they were just buying at the very top end of the traffic. and so yeah, we, we, we kind of happened by third and they made like $100,000 more money per month. And that was pretty crazy. Yeah.

Josh Hadley (00:35:27) - And that's making advertising more efficient. And are you tracking that through like a Roas metric then.

Matt Putra (00:35:32) - Well, this is a hotly debated topic, but for a CFO or a CEO, my opinion it's supported by my work, I suppose, is that blended ROAS is the best metric for you to manage agencies' internal teams. Why? Because it relates directly to your personnel. You have revenue, you have ad spend and your profits in there, and you can divide them and you can map it right onto your PNL all day.

Matt Putra (00:35:54) - So because it's so direct, it is the number that I focus the most on as a CFO. When I'm diving in with marketing teams, I can dig into CTAs, all the stuff. But, from a high level it's Roas. And so we looked at their roles and we just, you know, again, we monitored it and we just had a hunch that it was an unprofitable amount of spend. And as they cut spend back blunder has skyrocketed. In a way that we didn't expect, to be honest. We weren't really that good. yeah. And like I say, they weren't profitable. And so, understanding there's a portion of spend where there's an optimal amount or there's an optimal contribution margin and dollar, and they were well beyond it. And somehow Leandra figured out I should ask him how we figured it out. or maybe, you know, someday, but anyway, whatever. But, Yeah, he figured it out, not me. And, yeah, they made so much more money, and they didn't.

Matt Putra (00:36:42) - Their sales, their sales decreased. Yeah, but they made so much more money.

Josh Hadley (00:36:47) - Yeah. Matt, at the end of the day, the gist is this, you know, revenue is vanity and profit is sanity and cash is king. Right. And that's the saying. And for an e-commerce brand owner, you've got to make sure that you understand the ins and outs of your cash flow. you've got to be getting that cash flow statement on a monthly basis from your bookkeeper, and you need to understand what's impacting your cash flow the most. Is it the inventory you're purchasing? Is it the advertising that you're purchasing? Because any little change that you can make here can make a dramatic effect, a dramatic effect in terms of bringing in additional capital that you could then use to fund the growth of the business. And again, everybody loves to, you know, shout out how big their top line revenue is. But good grief, if you've taken on a bunch of debt and you're not really bringing home a salary, like, what's this all for? Like it is, it's just very challenging.

Josh Hadley (00:37:35) - So, Matt, as we wrap up this episode, I love to leave each episode with three actionable takeaways for our audience. So here are the actionable takeaways that I've noted. Let me know if I'm missing anything here. Action item number one is going to be to get very lean with your business operations as a whole, which means do not hire for who you want to become. You know, three years from now I want to be a $100 million brand, that doesn't mean you start or start hiring VP level individuals that are working for other hundred million dollar brands. Okay, so that's action item number one. In addition to that, I'm also going to layer on the operational aspect of cutting your SKUs that are not helping you. Right. So look at the bottom 20% of SKUs and decide if you can cut them because it will free up some mental capacity for your team. It will free up inventory and cash that you're investing into that inventory and allow you to then again, double down on the areas where you're winning better.

Josh Hadley (00:38:30) - So that's action item number one. Action item number two is going to be getting creative with your supplier. So I can't tell you the number of times we've talked about finance and cash flow for any e-commerce businesses. Guess what? It all comes down to your relationship with your supplier. That's the end all. Be all. And so if you're listening to this and you've already heard some of the other financial related podcasts that I've recorded about this topic, start taking action on this. And I love what you talked about. Kind of the nibble strategy, which is don't ask for next 90 days today, right? If you're at 5050 right now, 50 up front, 51 it ships. You've got a long way to go. It doesn't mean you can't get there. but it also is like you need to have a relationship with that supplier, which means going and meeting with them in person. Yeah, it means you need to have a track record of doing what you say you're going to do and you actually doing it right.

Josh Hadley (00:39:24) - Keep your word, pay your bills on time. The only way you're able to ever get to net 30, net 60, net 90 is if you have always paid your bills on time and you have a long standing relationship with the supplier. And this is like you guys see this as a partnership together, that truly is you're a, your cheapest and your best financing partner that you can have. Because the alternatives, as you mentioned, kick further with the 40% Apr. That's your alternative. If you want to go the lazy man route, then you're paying for it in terms of those interest rates. Okay. Action item number three is going to be getting creative with how you can stack different either credit cards together or financing options. And I love that you laid out a lot of new ones that I hadn't heard before. So, between Kickfurther, Settle, the Parker card, the Amex Plum card, there are some very creative strategies where if you can delay the payment of your inventory, you're still paying your supplier on time.

Josh Hadley (00:40:16) - Don't get me wrong, you pay them on time, but the cash doesn't actually leave your bank account until you actually start making money, right? That inventory is already on Amazon. You've actually already been receiving, you know, your two-week delay payment terms from Amazon for that money. And then that amount leaves your bank account. Now you're off to scale to the moon. So now those are my three actionable takeaways from our episode today. Anything I missed.

Matt Putra (00:40:42) - No, no, I think you got it. I mean, you could I mean, people could think of this kind of thing, but again, you'll send them the tool on that. So. Yeah.

Josh Hadley (00:40:48) - Well, and I think the contribution dollar thing I think is very valuable. Right. But it all kind of stems around the same thing as, like how much are you paying on ads and how quickly is, you know, money leaving your bank account. Right. All of it comes full circle. So, we'll drop that in the show notes.

Josh Hadley (00:41:03) - So cool. Thanks again for sending that template. Of course, Matt, here's the best part of the episode. Three questions I love to ask each guest. Number one, let's spend the most influential book that you've read and why.

Matt Putra (00:41:15) - Has this changed just this past year? The book by Gino Wickman, I think, is what attracted us. I sort of read it. And then I had a client using it, and then we started using it. And we've grown our business, like from five staff. Now we're 22. Revenues are like triple they were last year, and there's no way I'd be able to handle it without iOS.

Josh Hadley (00:41:35) - Yeah, that is a solid book. Definitely. And definitely something I would recommend. We are actually the last episode, go back and listen to that one that is all about how to implement an operating system into your business. So, when we talk about iOS. So go back, look at the very last episode. You'll hear all about it. All right. Question number two here, Matt.

Josh Hadley (00:41:53) - What is your favorite productivity tool or a new software tool that you think many people don't know about, but you think is a game changer?

Matt Putra (00:41:59) - Oh, I don't know about. Oh, here's one OfficeVibe. OfficeVibe is like an employee NPS. So net promoter score book for your staff. If you have more than 8 to 10 people, I would recommend using this tool. It's fairly cheap and it helps you keep a read on how people are feeling and how they're doing it surfaces. Anonymous comments. And every time I've implemented that in a business I owned or for somebody else, we've been able to do better with engagement with our staff.

Josh Hadley (00:42:30) - I love that I have not heard of that tool before, so I am a big fan. Awesome. All right, Matt, final question. Who is somebody that you admire or respect the most in the e-commerce space that other people should be following and why?

Matt Putra (00:42:41) - Yeah. I would say if I could do two right now, one is Taylor Holliday from Common Thread Collective.

Matt Putra (00:42:49) - he is writing a lot right now about bridging finance and marketing and growth and marrying the two together for cash flow. Preston Rutherford is the other person I want people to follow. And the reason why is he's talking a lot lately about building the brand, building a stable and growing base of repeat, organic traffic and visibility and, and his sort of, he learned through time, which is that most of the growth and profit came from their focus on building that, sort of recognition and organic base. And so, he's obviously more eloquent about it. And he's beginning to start discussing how do you measure the effect of that indirect spend. Because, again, you can measure direct acquisition, but how do you understand how to spend money on this other stuff? He's beginning to figure that out for folks and talk about that. So, these guys don't agree with each other on this at all. But they're both really, really smart. and I love the interplay. Yeah. They don't argue.

Matt Putra (00:43:42) - They don't argue publicly actually, which I wish they would. But anyway.

Josh Hadley (00:43:45) - Awesome, awesome recommendations and some people to follow. Now, Matt, this has been an awesome episode. If people want to learn more, they want to follow you. They want to reach out. Where could people follow you?

Matt Putra (00:43:54) - Yeah, my LinkedIn, connect. And I answer basically every single DM and most comments. And then you can check out my site EightX.co. you can book meetings with me there. Sometimes it's my sales team, to be honest. No, but, but yeah, if you want one to ones like LinkedIn and DM and stuff, I see, I see and respond to almost all of those. Unless it's like, hey, if I get a coffee like, no, I don't, I don't respond to those. But if they ask me, interesting question, I'll respond. Yeah.

Josh Hadley (00:44:18) - Awesome. Love that. Well, Matt, thanks again for joining us today and sharing your wisdom with us all.

Matt Putra (00:44:22) - This was so nice. Thank you so much for having me. I'm kind of like, I am pretty stoked to get to meet you now after seeing you a year ago.

Josh Hadley (00:44:27) - Well thanks again Matt.