Your guided tour of the world of growth, performance marketing, customer acquisition, paid media, and affiliate marketing.
We talk with industry experts and discuss experiments and their learnings in growth, marketing, and life.
Time to nerd out, check your biases at the door, and have some fun talking about data-driven growth and lessons learned!
Welcome to another edition of the Always Be Testing podcast with your
host, Ty DeGrange. Get a guided tour of the world of growth, performance
marketing, customer acquisition, paid media, and affiliate marketing.
We talk with industry experts and discuss experiments and their learnings in growth,
marketing, and life. Time to nerd out, check your biases at the door, and
have some fun talking about data driven growth and lessons learned.
Hello. Welcome Testing podcast. I'm your host, Ty
DeGrange, and I'm really excited to talk to John Blair today. What's going on,
John? Hey. What's happening, Ty? It's, yeah, it's not too often that
I get to talk to someone who's not that far away from me physically, but virtually.
Right? Yeah. I'm usually talking to people on the other side of the country, but it's always nice to talk to someone local in the Austin
area. Absolutely. We got a couple of, Austin Texans here.
And as also, we got we got a performance marketer, and, John brings with us a ton
of CFO and finance experience. So all things D2C
finance, we're going to dive in, we're going to talk about it. It's going to be fun. For those of you who don't know John,
just want to give a bit of an intro. So he's the CEO of Free to Grow
CFO. Did I get that right? It's a tongue twister. Yep. Free to Grow CFO.
But he's been CFO, chief operating officer at a number of D2C brands.
You've seen a ton of reps in d two c. So maybe you can kinda just kick off by
giving us your background from your perspective and what you how you kind of got into things.
Yeah. Absolutely. So I actually started originally going to business school in a place
in Central California called Cal Poly San Luis Obispo. And, yeah, I I
went to school to get an an accounting degree, but I always wanted to become an entrepreneur, which is funny because
the accounting departments and the business schools around the country, they're all geared to become a
big four public accountant, right? Go work for one of the big four CPA firms. And
so every all my business school cohorts were like, well, what are you doing here in the accounting program if you're
gonna be an entrepreneur? And I'm like, I get it. I understand it. I
enjoy it. And I like the finance and accounting piece of of the house. And so
right when I graduated, I immediately went against the grain and I went to
go work for honestly a crappy paying job, fifteen bucks an hour
to be the accounting manager and all things right hand man of
a local entrepreneur. So I was depending on who I was talking to, I was the accounting manager, the
logistics manager, the marketing manager, the customer service manager. But I was the right hand
of the serial entrepreneur who at the time, this was back in two thousand nine, he was selling
product d to c. He had a an electrical background and he he
would go out there, find these little white spaces in these niche
markets in consumer electronics. He would engineer the product, go to a factory
in China, get them to make it, import containers, and sell them direct to consumer on his
website. And back then, 3PLs weren't what they are today, and we did we did a lot of the pick packing
shipping ourselves out of the storage unit. It was like the early heydays of
like small time, like, D2C shops, right? And so working for
him, his name was Ron Merritt, like,
founders of Guardian Bikes, the most recent d two c brand that I was on the founding team
of. They had, the original founder, Brian Riley, he invented
a bicycle brake that prevents you from flipping over the handlebars. We graduated business school the
same year, and he launched the business back in two thousand nine, and he
needed a moonlighting, like, finance accounting guy. And so, like, nights and weekends while I went
on and worked at other early stage fast growing consumer brands, I
was always Guardian Bikes, moonlighting accountant and finance guy. And the dream was
like, eventually Guardian Bikes is gonna make enough money that we can hire John away from his full time
role to come on board full time. And so fast forward actually six years. It
took six years to get the break from an R and D perspective, like commercializable
and actually retrofittable on existing bike brands that like Schwinn and
Huffy and those big names. And what we found was the company was actually
kind of getting like blocked from being mass adopted by these big bike brands
because we had pricing power. We had patents on this break, and
everyone else in the bike supply chain has no pricing power. And Walmart and Target grind
the margins down of these bike brands to like nothing. And so, they were scared to death
that the word would get out about our brakes, and they would get forced to, like, eat
one dollars to two dollars in their bill of materials. And they didn't have one dollars to two dollars in their
margin, believe it or not. And we decided like, hey, we gotta go direct to consumer
and we have to launch our own brand and we have to tell the story about our brakes and why
they're safer. And so we launched Guardian Bikes back in twenty
sixteen as a direct to consumer brand selling the safest kids bikes direct to
your door featuring our SureStop brake system. During that time, I still had a
full time job elsewhere, again, working at other early stage fast growing companies, But
we were working on raising capital and the, founder Brian decided,
hey, I'm gonna go on Shark Tank. And so he ended up took a year of diligence. I had
to manage all the diligence in the background and everything, but he got on stage, did a deal with
Mark Cuban, and the plan was like, hey, we closed Mark's money. It was five
hundred dollars k. John, you come on board full time, CFO and COO and run all things
operations and finance. So it actually took a year of negotiating to close that deal. A year
later in twenty seventeen, closed the deal, quit my full time job, jumped
on board full time at Guardian. And from twenty seventeen to twenty
twenty one, we had a crazy scaling journey where we took this e commerce kids
bike brand from zero dollars pre revenue to really healthy eight
figures in just about three and a half, four years. And during that time, being
COO and CFO running all things like inventory planning, supply chain
management, fulfillment, and then on the CFO side of the house, projections, forecasting,
budgeting, cash management, debt fundraising, accounting. I had
basically built this playbook of, like, what is the underlying structure and
tools that you need to scale a fast growing e commerce brand with intelligence
and with confidence. And as you know, coming out of like year four, I just
really was ready for like the next thing. And so I talked to the the other people on the founding team
and said, hey, I'm ready to move on to something else and I wanna start my own thing. And so I
replaced myself and, you know, still part owner in the company, but just
resigned as an employee. And at the beginning of twenty twenty one, I was doing
some soul searching after taking a couple months off. And I was like, you know, where my heart lies, my heart
lies at that beginning earlier stage where you're like early stage of an
emerging brand where things are growing really fast and they're kind of chaotic. You don't have all the systems and
processes in place. You're like building the plane while you're flying it, right? And so
many brands in that situation, they don't have a CFO. Their bookkeeper
cannot provide the forward looking insights and recommendations that are
needed to help the CEOs and founders fly the plane, right? But the the
other challenge is you don't need one full time, and nor can you afford one full time
at that stage. And so I decided to found Free to Grow CFO. And what we are is we're
an outsource finance firm that works exclusively with growing e commerce
brands. And our e commerce fractional CFO and bookkeeping services, what we do
is we give e commerce brands the finance expertise that they need to
scale alongside healthy profit, cash flow and confident
decision making, but without all the full time overhead of having a full time in house finance
team. And so fast forward to today, it's a little over a year and a half later. Since I
started Free2grow CFO, it's been a huge blessing that it's caught on like
wildfire. I now have two more CFOs on the team, a co founder and
business partners, one of them and a third. And then a lot of my accounting team from Guardian Bikes
has since followed me here. And we have a whole back office e commerce
accounting team. And what we're just finding is, we've just found a really
fun place to come alongside visionary leaning
founders who are usually product oriented, marketing oriented, sales oriented.
And we can give them all the insights and the visibility that they need to make those scaling
decisions with confidence instead of, like, out of fear, not having numbers
and insights to really help guide where they go. So that's a little bit about where I I came from and where I'm at
today. That's awesome. Very cool. I love that. There's a ton in there to kind of
unpack and talk about, ton of directions we can go. So, congratulations. And I
love just hearing the journey. It's really impressive. Maybe reeling
back the clock a little here and thinking back to the genesis,
starting out in accounting, When did you know even before that
that entrepreneurship was just, like, your jam? How did you kind of uncover that even
before college? I always had a crazy idea.
I had started t shirt companies. I'm born and raised in Southern California, so
huge skateboarding culture in the when I was an adolescent. And so
I started skateboard companies. I made my own decks by buying blank. I
sourced blank decks and I literally created stencils and spray painted our logos on them.
I figured out how to make stickers by like printing our logo on Avery
labels and literally taping over them. My lamination was like clear packaging
tape, but then like cutting them out with stencils, right? And like none of those things ever made
money, but, you fast forward a little bit further. I'm also a musician. I played in
bands my whole life and I actually when I a year after I graduated from
business school, my band that I started, actually a thrash metal band, we got signed
to a record label. And I took six months off from even working for Guardian nights
and weekends to record a record and go on tour. And there's nothing more
entrepreneurial than trying to make a living in a band. You're just a marketing company. You're a content
company. Right? You're a content marketing company and your content is your
music. Right? And then you're an apparel brand. That's all you and so
I've always been an entrepreneur and, like, the the how I always knew, like, in my
heart that I needed to be an entrepreneur is, like, one, I always hated working for other people. I
love working with teams and on teams, but I I hate being boxed in,
my creativity being boxed in. It drives me insane. And I hate
being told I can't we can't do that. Right? I'm like, no, we can. It's possible.
And I've always just gravitated towards being a leader. I was the one who like,
hey guys, let's go play baseball at the park. There's no baseball stadium. Well, let's get four
things that could be bases, and let's get this and let's get that. Like, I was always the one rounding
people up to go do something or get something done. I love it. That's
really cool. That's really cool. Now, in your story there with the Mark Cuban
funding of Guardian Bikes, you had a really good comment that the
negotiation took a year. Now was that for you or is that for Mark Cuban?
So, I mean, look, Mark was a fantastic partner to Guardian
Bikes. I still to this day feel very grateful. When I wasn't on the show,
but the other two guys on the founding team who were full time were on the show, but I worked for the
company. Was a part of all the diligence and like the strategy and going into the show, Mark was
our first choice. Like, we wanted Mark if we had the choice. Right? The other
two founders did a lot of research on, like, who the best sharks are and why and,
like so he's been a was and has been a fantastic partner, but he's
also a very sophisticated investor and businessman, and he has a team that
is incredibly sophisticated. You're not negotiating with
some guys that are just gonna make it a walk in the park, right? And to be truth be told,
they were pretty transparent with us. They told us like, hey, listen. Most we already had
raised a couple million dollars. The company had been around for six years. So,
we'd already raised a couple million dollars in seed funding and already had sophisticated investors on the cap table.
And so,
had put seven figures in the business that And so, like, we definitely had to
do right by them. And Mark's team told us most of the
people that we work with that come from the show, they have nothing. They maybe have put their own money in.
They're just they'll take whatever we give them and they don't they're not sophisticated enough to,
to negotiate this stuff. And so, like, they're not trying to take advantage of you, but they're
also doing what an investor would do, which is put an investor friendly deal in
front of you, right? And so, we were backed by a really solid legal
firm, Cooley, out of and, their emerging businesses
division and had already raised money from sophisticated investors. And so we had to come
at it. And the truth be told, Brian Riley, the CEO and
founder from Guardian Bikes, like, he is an incredibly intelligent person, and
I consider myself a pretty good negotiator now. But, I'm really good at negotiating debt
deals. That's my specialty. But he taught me a lot about how to think about equity
deals. And, like, there's just a lot of stuff to go through and a lot of little
gotchas like they have they can approve this, and if this happens, they have that right.
And, I mean, the documents are no joke. When they delivered them to us, there was four different
agreements. It was well over a hundred pages of language. So, like,
that's why it took a year. Of course. No. I love that background. Now
looking back, seeing the path of Guardian Bikes, do you think that the team
would have gone through the Shark Tank experience again if they had their their
choice? Yeah. I think so. What's interesting is that, like, the Shark
Tank experience is vastly different depending on I will
say, not the Shark Tank experience. I will say, what the Shark Tank if you think about the
episode as like a top of funnel, like, marketing event, right, which is really what it is.
And there's reruns and the Mhmm. Episodes get sold to another network and they rerun years later.
Like, we still have reruns today of the original episode and sometimes in other countries.
So, like, there's this recurring top of funnel awareness campaign basically
going on. It's always been fantastic. But in terms of like every time one of those goes off,
what kind of sales impact is there? For Guardian Bikes, very little because the AOV is
03:50 bucks, right? But when you have like Squatty Potty probably
crushed it because you buy it for nineteen point nine nine. What we learned is like when you have a low
AOV impulse buy product, every time it airs, you'll see a huge spike in sales,
right? And we would always see a huge spike in traffic. Sometimes we wouldn't even know a
rerun was happening, and we go log into Shopify and we're like, woah. Why did so many
people hit the site yesterday and not that many bought conversion rates down, but a bunch of people went to the
site and you would Google it and lo and behold, there was some obscure network in another country
rerunning our episode. And so, like Yeah. There's a lot of awareness. A lot of
people, it forced us to figure out how to do email capture because, like, at the beginning,
we really sucked at email capture. We didn't even know we didn't get the value of that.
And all these people go to our site from from the episode, but then they're gone. Right? Like, if I don't
get their email, they're gone. It's like they don't exist. And it's like, no. What you sold is what you sold, and you
hope they come back. And so we started figuring out, like, hey, we gotta capture people's emails. We
gotta get email flows built out, and we've gotta email them regularly so that we're top of mind.
And then all of a sudden, q four holiday season, we get a bunch of
purchases. They do our exit survey, and lo and behold, all these people found us on Shark Tank, right?
So, in one respect, it's a challenge because it's like this it's like this ghost
segment of traffic that you have like no visibility into and they just show up to your website
and like pass through. And you're like, they either buy or they don't, and you're like, damn it.
But it really forced us to figure out like, how do we get people to give us their
email and provide value to them? Because the other thing about our product, a
03:50 dollars bike is a premium bike. And you know from being a parent,
like, you buy some really high priced premium stuff for your kids, but then there's other stuff that you're
like, I'm buying the cheapest thing because they're gonna destroy this, right? And
so, a 03:50 dollars bike is not something that people just go impulse buy.
You have to sell them on the value, right, over time and go like, Hey, it's this
much because your kid's safety and the brakes and this and how much is their
safety worth. But you don't get that point across on one website visit. And so it
really taught us a lot about how to build a capture an email and build a relationship
and prove out the value of our product over time. So that when there is
that birthday or that whatever like bar mitzvah or that Christmas,
then bam, the purchase gets made and and they buy a Guardian bike. You're sounding like
a marketer, as well as a finance guy, which I like to hear. I mean, honestly, in
the e commerce world, if your finance people don't understand something about
marketing, that you're it's a huge impediment to the business because
advertising is the lifeblood of your margin as you're scaling.
And in the D2C ecom world, you have immediate data feedback. And,
like, so you can't make decisions only from a financial lens, or you'll trick
yourself into making decisions that are actually suboptimal in the long run.
Nice to hear from a finance person. I think it it's gonna blend perfectly into
our conversation around that collaboration between finance and marketing. Before we get there, I'd
love to dive into you know, you've seen so many interesting reps, you know, from
Guardian Bikes to Free to Grow CFO with all the D2C brands that you see and work
with. What are some of the learnings? Obviously, always be testing and learning is a
huge theme for us in this discussion in this pod. What are some of the learnings you've seen that
are that you really wanna share with the audience? Yeah. So, there's a lot, but
the the ones that come to mind immediately like, the first one is something that I didn't coin this
actually a prospect I was talking to, that I'm still nurturing to this day. And I actually
I used this in a LinkedIn post, and someone was like, that's an amazing analogy. And I actually tagged him.
I said, no, this comes from this guy. But it's this concept of the LTV piggy
bank, right? And like what the LTV piggy bank is, is that you can trick
yourself into making your margins thinking your margins are getting better by
just shutting off ad spend. And if you have people already in your funnel
and you have some sort of recurring purchases, your margins all of a sudden look super
fat because you're not spending any more on new customer acquisition. And you're still getting
purchases because you're ringing in, you're cashing in the LTV piggy bank. Meaning that the
LTV piggy bank has a finite amount of money in it. Right? You're taking out like a quarter at a time
as your existing customer base is repurchasing from you. But if you don't fill
that piggy bank back up with ad spend that acquires new customers, eventually, your
LTV piggy bank will run dry. And you won't care that your margin looks really
great because revenue will dive so incredibly fast that you're
gonna be out of business. And so the learning there is you have to dial in.
I would even say that like, new customer acquisition isn't more important than
LTV and vice versa. They are equally important, and you
will always, as you're scaling an ecom brand, have to work on balancing the two of
those. And there's gonna be be periods where your new customer acquisition is
going to be more of your revenue, and then there's gonna be periods where LTV
driven repeat purchases are more of your revenue. It's never gonna be in perfect balance. But you're almost like
as you're scaling, you're always fighting to keep those things in balance. Right? And as soon as
they're in equilibrium, you reach a ceiling on a channel or a ceiling on a product
line or you reach some sort of a ceiling in your marketing mix, and then you have to
recalibrate the balance between new customer acquisition and LTV. And unfortunately,
in the wake of like in the aftermath of the iOS fourteen updates, so many
brands are like Facebook doesn't work. And you know how I know it doesn't work?
I cut my ad spend and my profit soared. But six months
later, those brands were like, dude, we gotta figure out how to start spending on Facebook
again because like sales dried up and it's because they just rang in their LTV
piggy bank for six months. And the problem is you get back on
spending for new customer acquisition, going from zero to where you were six months
ago can't be done overnight. Right? You have to build it up a little bit at a time, and
you've gotta have fresh creative ready to go. You gotta have the whole process ready to go. People think that ad
buying, this kinda leads me to another trap or learning that people think ad buying is just
hiring someone who's like understands how to use the platform and understands
the bidding system and understands top mid and lower funnel metrics. Like, that couldn't
be further from the truth. I actually it drives me insane
and it it hurts my heart because I have some clients I love who, like,
have been burned by agencies in the past. And so they think the only way to go is to just save
money on a single ad buying freelancer. And I'm like, Guys,
we can't do that. Like, someone's gotta be working on the landing pages. Someone's
gotta And iterating and learning and going like, hey, this change didn't work.
Someone's gotta be iterating on the creative. Someone's gotta be sitting there
not working on any of that stuff and saying, the audience I'm trying to talk
to, what is the hook in the ad that's
even gonna get them to click, right? And then once they get to the landing page,
how do we expand upon that hook and get them to a CTA where they'll land somewhere where they
can buy something? And so the point is that like, I think there's this trap out there. No,
there is this trap out there that like, that ad buying isn't holistic.
It's not a whole process and a system. It's just either a talented ad buyer
or a crappy ad buyer. And the reality is marketing is a
system. And it's a system that unfortunately, whether you like it or not, it's
always freaking changing. As soon as like you think you're at cruising altitude,
something shifts. And you've got to be on your toes ready to go, and you better have new creative ready to go,
and you better have resources ready to start iterating on your landing pages or whatever.
And so, it's a process and and it's a system and there are multiple players that have to
kill it and it never stops. It is a feedback loop and it never ever ends.
I think a lot of brands think like, Hey, we updated the site, we updated these landing
pages, we put fresh creative out autopilot now. But while that
stuff is being tested and you're killing the losers and scaling up the winners, you literally have to
be working on the next round of creative and landing pages and everything that you're gonna
launch months from now. And so I've seen even very talented brands scale up to
like fifty, sixty million and get comfortable with their marketing mix. And then
all of a sudden it stops working. And they were not ready with the next
round of fresh stuff that they were gonna pull in fresh channels, fresh fresh
creative, fresh landing pages. And so they actually revenue took a dive for a couple
months. It took them two to three months to get all that stuff built back up and then deployed. And so you
just can't ever stop, and it's a system. Yeah. So it's a reminder and a
essentially a a call to action for really diversification and
just having some things ready and teed up and having some of those experiments. And I I couldn't agree
more. The system is what we live and breathe every day, and we've seen the movie
so many times with brands. It sounds like we've seen a lot of similar things. In
terms of, like, the metrics, right, you know, from the CFO's view of a
DTC brand that's growing and trying to figure things out, what are some of those
really core metrics that you wanna keep a pulse on and making sure that
they're healthy and headed in the right direction? So more and more, we are
focusing from a P and L perspective. More and more, we are focusing on two things.
And these aren't the only two things that we work on, but these are the two that don't lie.
You might have to double click into sub metrics of this if they're heading in the wrong
direction. But how is ROAS or marketing efficiency
ratio, which we like to call MRR, some people don't call it that, but marketing efficiency ratio takes
forever to say. So how ROAS or MER are moving
in correlation or not with contribution margin dollars.
Because and the reason why you have to look at both of those is because ROAS can go down
and contribution margin dollars can go up. And contribution margin dollars from a
profitability standpoint is what you should be optimizing for. If you get zeroed in on
only ROAS or MER, you can actually make decisions
that hurt your profitability. Oftentimes, when MER and ROAS
are going up, so is contribution margin dollars. But there's a point where
mer starts coming down as you're scaling ad spend. And if you're
able to scale revenue volume higher than your
MRR or ROAS drops, you actually can generate more contribution
margin dollars. And and what a lot of people don't understand contribution margin dollars are,
they're the dollars that are left over after fulfilling
and paying for marketing to fulfill an order and get it to the end customer. It's the dollars that are
left to pay for your fixed operating costs. And then once once contribution margin
dollars pays for your fixed operating costs, every dollar of contribution margin dollars goes
directly to your bottom line profitability. And so I have seen brands
successfully scale up ad spend so fast that, yeah, their mer
and ROAS comes down, but they scale revenue so much faster through
scaling ad spend. It generates more contribution margin dollars. And the thing is
contribution margin dollars are going like this. Your fixed overhead is staying like this. And so what are you seeing?
That delta is a bigger, bigger, bigger and bigger gap, and that's your
profitability. That's your bottom line profit dollars. And so it's we watch
those two like a hawk because if they're going in the wrong direction, then we get into the metrics that are behind
those to figure out why they're going in the wrong direction. I'd say the other one on the p and
l, obviously, we're looking at fixed overhead trends as well. Because if you see
fixed overhead stair stepping up with contribution margin dollars, then that gap between the
two is staying the same, and your profit isn't going up. You're scaling margin dollars, but
your profit's staying the same. And so, like, MER and ROAS contribution
margin dollars and fixed overhead tell the story that we need told from
the CFO perspective. And we do something kind of unique on contribution margin. It's actually
really unique. Other CFO firms don't do this. We split out contribution margin
into two different sections actually three. We look at gross
margin, which is gross margin is just product
costs. So what's your margin after just product costs? Then we look at what we call contribution margin
before marketing, which is what is your margin after product costs and fulfillment
and credit card fees. And then we look at contribution margin after marketing.
And because we have those three different metrics, we can time series each of those
out. And when I look at those graphs, we build dashboards for our clients that graph those. When I look
at those graphs, I immediately can say contribution margin went down and you have a
fulfillment problem. Or marketing's doing great, fulfillment's great. It's it is
your product cost that's killing you. Or product cost of fulfillment, fantastic, Marketing
is killing you. And so, we're able to diagnose that really fast with the way that we break out contribution
margin into those three different segments. And then on the other side of the
financials, on the balance sheet cash flow side, we're always looking at what's called the cash conversion
cycle. And the cash conversion cycle basically measures
how efficiently you're managing inventory, receivables, if you have receivables,
and then payables. And basically, the higher the more
days of inventory you have on hand, or the more days it takes to collect your receivables,
or the less days it takes to pay your vendors, your cash is not sitting in
your bank account. It's sitting on warehouse shelves or in your customers' bank accounts or in your
vendors' bank accounts. And so we have time series graphs in the dashboards that we build and connect to
our clients' accounting system that shows how inventory days are going up or down,
AR days are going up or down, and AP days are going up and down. And what we can do is say, Hey, look,
we're profitable, but you know why you have no cash? Because we just keep stocking more and more and more and
more inventory, and so all our profit is sitting at our three PL. Or, guys, we're
paying our vendors in three days. Is there any way we can get payment terms and pay them in thirty days?
Because that means the cash sits in our bank account for longer. And so we look at a lot of things,
but the major things we look at are contribution margin, fixed overhead, MRR
and ROAS, and the cash conversion cycle. Love that. It's it's,
similar to kind of some of the macro metrics that we look like look at as an
agency. And a lot of times, we're we're getting into some of this counsel with
clients ourselves talking about measuring MRR and ROAS over time,
measuring contribution margin, and seeing what that impact is. So it's really great to
hear. It's really great to understand how you're counseling
D2C brands on ways to be more financially healthy, which is huge. It
helps us. We're we're speaking a similar language and everything we do, we want to
be profitable. We see a lot of brands that are doing things incorrectly
in the finance vertical. So this is really helpful. Maybe a good segue into kind
of what we talked about previously into the importance of kind of developing that
partnership between performance marketing in particular and finance. Obviously, some
of those key metrics that you're looking at are part of it. I'm curious
to know, in particular, like around running tests, like
elasticity tests on have you reached a ceiling in a channel or not, getting a
correct attribution set up, running an incrementality test, something we've talked about a
lot on this pod. I would love to maybe hear some learnings that you've had
around areas like that of performance marketing. And we can get into other ways that
finance and marketing can kind of partner together. But I'd love to hear maybe some
other learnings you've had in in some of those other areas. It doesn't have to be
those exactly, but curious to learn more. For sure. We so one
is thinking about omnichannel pricing and testing
omnichannel pricing. And specifically, there's a lot of, like, brands we work with that are
Amazon and Shopify or Amazon and direct. Right? And maybe you have a little bit
of wholesale, but putting that aside, just looking at shop looking at your Shopify or d to c
store and looking at Amazon, worked with a lot of brands that do testing of, like, what
happens when we offer different prices on the two different channels. Right?
And also, what happens if we scale up? This is kind of like
an incrementality test. We've done a lot of incrementality testing on Amazon
where it's like, hey, we're spending two million a month on Facebook.
Certainly, there's cross channel bleed over. Right? Not every single one of those people is buying
from our dot com store. And, you know, we most brands tend to
allocate their top of funnel spend to the d to c p and l. And so
the d to c p and l looks much crappier than Amazon does. But you can do you know, done
incrementally tests where, like, cut spend for a period, top of funnel, scale it
back up, and see what happens on Amazon. It's very clear that they're connected. Right? And so,
like, you need to look at both channels p and l's, which we help
them set up and maintain from, as their fractional CFOs. But
also keep in mind that, like, you need to look at the blended margin as well
because there's one hundred percent bleed over from that top of funnel spend. Right? And
so it comes back to attribution too. Is that like attribution obviously is a super
huge problem depending on who you talk to. I've got a bunch of different marketing
resources who would tell us they have the perfect attribution stack. I tend to think
there's doesn't exist a perfect one. And honestly, like, I don't think you have to have a
perfect one. I think you have to have a way to look at attribution from multiple
perspectives and ultimately be able to tie it back to the p and l and see what's
happening with contribution margin dollars at the end of the day. That is what matters.
Contribution margin dollars, end of story, that is what hits your bottom line p and l.
So, like, nothing else really matters. That is the result from a marketing
standpoint. Contribution margin dollars is the bottom line from a marketing standpoint. And,
like, I would say like in terms of learnings, one, make sure you have channel P and
L's. Like, if you have an Amazon store and a dot com store,
you cannot run your business looking at one aggregated P and L. You should look at aggregated P and L
and you need to look at the blended results, but you have to have separate p and l's and you do your
best to allocate ad spend to the right, you know, to the channel that
it's directly driving. But realize, go test it yourself.
Do an incrementality test scaling up and down spend and look at it look at the channel
that you're not attributing that ad spend to. It's going up and down also, right? And so,
there are also some other things to I think there are some people who, like, really hate the thought
of, like, looking at Like, some people hate the concept of
mer. They're like, it's just lazy. And I agree. Like, you have to still look at platform.
I people complain all the time about platform attribution. And, like, is it imperfect?
A thousand percent it's imperfect. Right? But if I see platform
attribution telling us that certain ad sets are killing it
and I'm seeing revenue increase on the site and contribution
margin dollars are going up, it's still pointing me in the right direction. Right? And at the
end of the day, contribution margin dollars and mer are telling me really how
efficient I am at the company level. And so I really and some people don't
agree with this, but I think about using the platforms for directional call it
tactical moves. Right? Tactical moves on a particular ad or ad set or
campaign and, like, that tells you the story of whether you should keep, kill, or scale something.
But then you have to go back and look at, like, your
entire marketing mix and calculate MER and contribution margin dollars and
see if that directional indicator from the platform is showing
up in your financials. And I can tell you right now, I rarely see those things two
things diverge. Now if the Facebook platform says I'm getting a five ROAS,
my MER might only be three. And so it's not giving me the right number,
but it's it is when I see that five go to a five and a half,
the MER on the MER for the entire company is going up also. So it is directionally
accurate. You just have to take a step back and look at your whole marketing mix to to assess how
it's actually impacting your your margin. Yeah. I love that. And there's so many,
you know, margin, mer, ROAS conversations that we're having. So to
hear you speaking similar languages, counseling clients that really need
help in D2C e comm is super helpful. And kind of just building on
that, what have you seen that really you love to see from performance
marketing teams and the right types of in house marketers and agencies and CMOs and VP of
marketing and head of growth? Like, what's really worked well? Obviously, there are some things that you and I
have gone through and experienced, but we'd love to get your take on how do you build
that appropriate partnership between finance and marketing, and and maybe identify when it when it's
not optimal and what can be improved and and and fixed. I I'm gonna sound
like a broken record, but step one like, the most important thing is I consider
myself someone to as as fractional c m CFOs for ecommerce
brands, one of our primary jobs is to be the connective tissue
between marketers and bottom line profitability. And to not,
here's what doesn't work, but I will tell you most CFOs do. Like, cross their arms,
hit this ROAS target. If you don't hit this ROAS target, cut spend back. That's not what we do. We try
to get the marketers to understand the connection between what they do and increasing
contribution margin dollars. And so when a marketer asked me, hey, John, is this
ROAS okay? What is my next question always? Well, how much can you
spend at that ROAS? Because if you can only spend ten thousand dollars a day, like that's
not okay. But if you can spend if you can spend fifty thousand dollars a day,
yeah, please, That ROAS is fantastic. We're gonna crush it bottom line profitability.
So, like, I spend a lot of time connecting what the marketers are doing their
metrics, their funnel metrics that they're looking at back to contribution margin dollars.
And that just has to be the North Star, unless there are some
exceptions. It's that like, hey, we're willing to take a contribution margin
dollar hit, but in service of more contribution margin dollars later. So
like when I've I've had some ad buyers who are like some of the best out there that I've worked with that come to me and say, hey,
John. I want to break even in October, but here's what I'm gonna do in November
to make that all back. And like that is actually a very
sophisticated strategy and it's not a bad one. And there's a number of reasons why that that
is a good idea. Let's spend into the the holiday and let's be at an
elevated level of spend so that when the the holiday buying, you know,
frenzy starts, you're already up here. You don't have to scale up starting November first from down
here. Right? And so when I hear guys who also come to me and say,
hey, look. When they're actually talking to me about the difference between first order profitability
and LTV payback period, That again, I love to
hear because that is a real strategy that
if you know how to do it well, crushes it. And and if you understand it,
you actually start thinking about how to build your product line around it. Like, some people don't have a product
line that that will even work. Right? But, like, hey, how could I potentially break
even on my first order and get to a fifty percent margin two months
in through repeat purchases? What products would I have to would I have to launch to
make that possible? Right? And so, like, what I hate to hear, look, everyone else in the
market's gonna be discounting. Let's do a steep discount and let's just try to spend one hundred thousand dollars
I'm not against discounting at all, but the in service
of what, right? And to generate what? And so, anyways,
the classic just -Yep. Oh, yeah. I can spend I can spend whatever you want. You just gotta tell
me what ROAS you're okay with, but I can spend whatever you want. When I hear that, that's just a
lazy ad buyer. Yeah. A hundred percent. We see that a lot and I feel
like that dogmatic, overly simplistic view is
what what is not the right way to do it. What you're you're saying there needs to be, you know, a method to
the madness, to the surge or the pullback or the approach to hit a particular
ROAS or MER and the volume goals? And is that
tied to product line? Is there some strategy around when your competitors are doing it? Is there
some seasonality approach to it? I think that that excites me to hear
and I think that there's just an opportunity to be more nuanced about
it. There's there's too many brands and and folks that think about it in a very like, I think
overly simplistic way as you said. Absolutely. Absolutely. That's amazing.
What are some things that you you know, looking ahead, you know, with with holiday wrap up of
year, plans for next year, planning from a finance view from DTC, are
there other kind of things that you're counseling clients on or maybe trends that
you're seeing in in finance and in in general in d two c? What are some
of the maybe headwinds and tailwinds to be to be considered in this, in this space?
I think a lot of what I'm
is is that we're heading October is a terrible month,
just generally speaking. I have one client who's killing it, but it's because they sell goth clothing, and October is, like, their Christmas. Right? But they are the only one.
Because people are saving up for the holidays. Right? There's and they're starting to
look. That's probably why Amazon did a second Prime Day in October. Right? Like, they
they wanna try to flatten. They wanna try to like bring that valley up a
little bit. And I've seen it for years and years and years and across a bunch of brands. And here's the
challenge, you have big goals for November and December. You've already committed to your inventory
for it. It's not all here yet, but it's on its way. And you already have to start thinking about
Q1 and Q2. You haven't even sold through all of that inventory, and
Q1 and Q2 is right around the corner. And depending on your manufacturing lead times, you might have to start committing
to orders with your vendors, and you don't even know if you're gonna hit your goals for
November or December or not. And it is hands down, it's the most stressful
time of the year, every single year in the e com world when you're growing.
Because if you wanna hit your goals in q one and q two, you probably you have to purchase even more than
you did last year, and you don't even have the data yet from q four of this year to tell you
whether or not you're on that trajectory. And so I'm counseling my clients a lot on, like, what
are some risk mitigation strategies? Because scaling a brand is placing risk
adjusted bets, and a CFO should be an expert at placing bets
that have that don't have unlimited downside. That's what a day trader does. A
fantastic day trader doesn't just go make trades. They have stop limits that limit their downside.
There's, like, unlimited upside, but limited downside. Right? And that's a risk adjusted
bet. Poker players do the same exact thing. Right? And a CFO should help
you place bets that, yes, have risk, but
always help you minimize or stop the downside risk. And so things that you can do,
from this inventory planning dilemma perspective, make sure you have the right lender in place
with the right debt that has the right payback period that you can stock up a little bit extra,
and you can pay it back next year once you get done with Q1 and Q2. And if you get a little bit
overstocked, you just hold on future purchase orders while you sell through that
inventory, pay back the loan, and then place your next orders. Other things you can do, you can
split the difference of risk and go, I'm gonna buy fifty percent of what I want to,
and I'm gonna tell my vendor like, Hey, I might buy up to fifty percent
more. And when's the last possible day I can place that order? And just keep them in the
loop and maybe release small incremental orders if you start seeing the data go in
the right direction. But you're committing to the smallest possible purchase
that you feel comfortable with instead of just placing an order for the home run all at one time and you're
stuck with it. Right? Also, working with Yeah. Brands to think about, Hey, actually,
you might want to air freight that stuff in. And, yeah, air freight is freaking expensive, but your lead
time can be reduced by, you know, four weeks. And so you're
gonna take a lower gross margin, but you're gonna reduce the risk of getting having all your cash
tied up in too much inventory. And so let's place a ocean order for some amount that
we feel comfortable with that it optimizes our margin. And then let's place small air
orders if we're beating our forecast. And, yeah, our margin's gonna go down,
but we're not getting too heavy on inventory, and we're still driving
inventory but limit your downside. And I'm doing a lot of that right now from an
inventory planning standpoint. Love that. Love the limiting of downside concept. I mean, John,
this was jam packed with information, so much to talk about in the
CFO realm, in the performance marketing realm for g two c. I think there's just
I think we could almost do like a a monthly or quarterly, like that's how deep dive we what you
went and just went off. This was awesome. So so thank you. I I do have one last personal question
before we wrap up. What instrument did you play in your band? So I played
guitar and sang. I still right over here to my left, I still have my recording studio. I still
record, write and record metal. I'm not in a band, but I write and
record and, and still sing. And, it's just a hobby I've had since
I was five, and and I don't I think I'll do it till the day I die even if I never step foot on a
stage ever again. That's amazing. That's so cool. What what are some any any good metal,
influences that should be considered or any any metal that inspired you? Yeah. I mean, I
I come all the classic thrash bands like early Metallica,
Anthrax, and, even some like there are some newer bands. Yep. Or even
like Pantera, newer bands like, Killswitch Engage, and,
even a little bit of Slayer. I'm not quite so much into, like, their spiritual
ideology, but their music is incredible and just was way ahead of their time. And
so I'm just a sucker for really fast, heavy, but at the same
time melodic music. And so I I don't think I'll ever Yeah, I was originally a piano player,
classically trained, and classical piano is very metal in terms of, like, the the
underlying music theory. And so I think I just never came off that thread as I became a guitar player.
That's amazing. Love that. Love that. Music's come up a number of occasions on this on
this pod and, love to hear your your background and all your inspiration in
in music. And I love to hear that you're still doing it. So thanks so much for joining us, man. This was chock
full of tons of information. For those interested to follow you and and and
learn more about what you're working on, where would you suggest they go? Yeah. So you can follow me
on LinkedIn, John Blair. You can also follow our firm on LinkedIn, Free to
Grow CFO. Our website, free to grow c f o dot com. And and you also follow us on
YouTube. All of our video content makes it on the YouTube. Tons of helpful tips. And
you can find us, under free to grow c f o on YouTube. So, yeah. And I'm honestly
I'm even the kind of guy that throws out there. If you wanna email me, j o n, John, at free to grow c f o dot
com. Happy to be of service. Excellent, John. It's so awesome to see you
chat, get into detail on all this fun stuff and a lot more to talk about. We'll we'll see you
on the next one. Sounds great. Thanks for having me, man. Thank you.