Why Terms Can Limit an Ecom Brand's Growth — Transcript

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1. 0:00I sell
2. 0:01beef protein chips to athletes and
3. 0:04outdoor enthusiasts.
4. 0:06Uh we do about a million or in revenue.
5. 0:10We want to be at 12. Want to be doing
6. 0:12about a million a month.
7. 0:14Up until this point
8. 0:16>> Up until this point uh we've been
9. 0:18severely what I've identified as um
10. 0:21supply constrained. It's been we've been
11. 0:24in the supply chain purgatory for a
12. 0:27while. When I say a while
13. 0:29period of like 6 to 9 months trying to
14. 0:31find a manufacturer that's going to make
15. 0:33our stuff or because we de-commoditized
16. 0:36away from jerky. Didn't want to price
17. 0:38race to the bottom.
18. 0:39>> Mhm.
19. 0:40>> Um
20. 0:41changing their lineup a little bit
21. 0:43dissuaded so many of them. So we finally
22. 0:45found one and we're working through that
23. 0:47right now.
24. 0:47>> Okay.
25. 0:49So what else is distracting you?
26. 0:52>> Uh
27. 0:54the approach
28. 0:56um now that we've unlocked the volume uh
29. 0:58this new manufacturer can do about
30. 0:5920,000 units a month
31. 1:00>> Okay.
32. 1:01>> which will get us to about 280,000 a
33. 1:03month in revenue.
34. 1:04>> Okay.
35. 1:04>> At that point uh he has a proprietary
36. 1:07machine that can spit out a tray of our
37. 1:08product every 12 seconds.
38. 1:10>> Okay.
39. 1:10>> Um but that machine is too large for his
40. 1:12facility. So we would need to kind of
41. 1:15come together and find a solution and a
42. 1:17location to employ that or the
43. 1:19alternative option which I think is the
44. 1:21ultimate end state anyways
45. 1:23would be to stand up our own facility
46. 1:27>> Yeah.
47. 1:27>> understanding the timeline, the red tape
48. 1:30>> How much does the uh machine cost?
49. 1:32>> Uh the [clears throat] machine cost
50. 1:32about 400,000. I didn't think about
51. 1:34buying it from him.
52. 1:35>> What was that?
53. 1:35>> I didn't think about buying it from him.
54. 1:38>> Yeah. And you could buy it used. Um
55. 1:41Okay. So well basically how big are your
56. 1:44dreams for this business?
57. 1:46>> I mean
58. 1:47large.
59. 1:47>> to get to 12 but do you want to do
60. 1:49beyond that? Do you want this to be a
61. 1:50big brand?
62. 1:50>> Yeah, abso- absolutely.
63. 1:51>> Yeah. Well if you want it to be a big
64. 1:53brand then owning the manufacturing for
65. 1:54something that is novel or different is
66. 1:56probably a good idea.
67. 1:58The issue is obviously cash flow. Is it
68. 2:00your super constrained right now? I'm
69. 2:01guessing.
70. 2:02>> Mhm.
71. 2:02>> Um so
72. 2:05a couple things. Um
73. 2:07if I were to like one, there's probably
74. 2:09a renegotiation of ter- terms if I
75. 2:10absolutely could to just increase my my
76. 2:12payment. So, like can I be net 30? Can I
77. 2:13be net 60? Et cetera. That'd be the
78. 2:15first thing I would look at. We had a
79. 2:17company I was looking at investing in.
80. 2:18Um just taking term like we just really
81. 2:20hardcore negotiated. Went from uh net
82. 2:23zero to net 90.
83. 2:25And then the company went from
84. 2:262 million a year to 5 million a month in
85. 2:2918 months.
86. 2:29>> Mhm.
87. 2:30>> Not a promise or guarantee, just saying.
88. 2:32Um the second thing, okay, so one is uh
89. 2:35cash flow from a terms basis. Um the
90. 2:37next one is what's your influencer game?
91. 2:42>> Uh well, right now we're heavy in the
92. 2:44CrossFit space. Um
93. 2:45very heavy and we were able to secure
94. 2:47his name's Austin Hatfield. He's he has
95. 2:50a a high high likelihood of podium at
96. 2:52the CrossFit Games and uh you know, a
97. 2:54shot at winning. And so, we contracted
98. 2:57his head.
99. 2:58And so, he's he's our primary influencer
100. 3:00right now. So, we're kind of hoping
101. 3:01everything into him. And we got a couple
102. 3:03more athletes like that. And then we do
103. 3:04everything else through podcasts. And uh
104. 3:07on uh unscripted live reads.
105. 3:09>> Got it. Um
106. 3:12do you run You don't run any ads then?
107. 3:14It's all organic.
108. 3:14>> No. Yeah, we just kept hitting the
109. 3:16inventory ceiling.
110. 3:17>> Mhm.
111. 3:18>> Um trying to solve for that and
112. 3:20>> Okay. So, right now you have a double
113. 3:22sitting in front of you that you think
114. 3:23you can hit with the guy's existing
115. 3:25capacity.
116. 3:25>> Yeah.
117. 3:27>> How many months of that do you need in
118. 3:29order to save up enough to buy the
119. 3:30machine with terms and lending?
120. 3:34>> Ooh, I mean, not that.
121. 3:35>> Not that many?
122. 3:36>> Not that many.
123. 3:37>> Okay. So, I mean, I think that you're
124. 3:39spelling out kind of the plan. So, meet
125. 3:41existing volume uh requirements. I also
126. 3:44it might be worth leaning into selling
127. 3:47out. Um because then you can just kind
128. 3:49of pent up some demand um in the in the
129. 3:51meantime.
130. 3:53That's number one. Um You can also do
131. 3:55pre-orders. Do you do that?
132. 3:57>> We did before, but we just we ended up
133. 4:00letting go of another manufacturer just
134. 4:02a couple weeks ago
135. 4:03because they there's the whole nightmare
136. 4:05QA dropped.
137. 4:07Everything wasn't on time. So we were
138. 4:09technically sold out for this last month
139. 4:12and we I got the team together rented we
140. 4:14just kind of flew by the seat of our
141. 4:15pants
142. 4:16and solved the problem. So we did the
143. 4:18sold out play.
144. 4:20Um
145. 4:20But I'm sorry I forget if that addressed
146. 4:22your question there.
147. 4:22>> You're good. I was just trying to pull
148. 4:23cash forward.
149. 4:25Okay, so we have we have our terms. I
150. 4:26think you can use pre-orders as a
151. 4:28mechanism. You have your existing volume
152. 4:29that you think you can hit.
153. 4:31These new volume caps that are twice as
154. 4:33big. Cool. So that So the three of those
155. 4:35things bring you cash flow forward. Then
156. 4:38it's
157. 4:39where are you based out of?
158. 4:41>> San Diego and the manufacturer is in LA.
159. 4:44>> Interesting. Okay. Well, yeah, ideally
160. 4:46you'd be central so then you could get
161. 4:47easy shipping everywhere.
162. 4:48>> our 3PL is in Georgia. So that doesn't
163. 4:50>> Okay. Okay. So yeah, then you can I mean
164. 4:54I still just hate California is tough.
165. 4:56Um
166. 4:57but yeah, you can then you could
167. 4:58basically open up the facility there. Um
168. 5:01I'd still hate that, but you
169. 5:04but you do live there.
170. 5:05>> Right. Originally from Montana, so
171. 5:08that's probably more appetizing
172. 5:09location, but if we
173. 5:10>> Much more appetizing.
174. 5:11>> It sounds like if we you know scale into
175. 5:13this this guy's volume we're able to
176. 5:16acquire the machine from him then we
177. 5:18>> Or just from whoever makes the machine.
178. 5:20>> Right. It was a proprietary. He
179. 5:21assembled a bunch of things together. At
180. 5:22least he said so.
181. 5:23>> Yeah.
182. 5:24>> Um and then grab the old the the new
183. 5:27facility that we would own and then
184. 5:28inject that machine to a lot
185. 5:29>> Yeah, be interesting like
186. 5:31I the machine is a big question mark for
187. 5:34me. Like I would call up a couple of
188. 5:36really good machine guys and um say that
189. 5:40this is my partner of marketing and roll
190. 5:42in
191. 5:43and check the machine out
192. 5:45>> [laughter]
193. 5:45>> and be like all right, how proprietary
194. 5:47is this?
195. 5:47>> Yeah, he doesn't want me to see it.
196. 5:48>> Um cuz we might find out it's like, you
197. 5:50know, a $75,000 machine that has, you
198. 5:52know, $25,000 add-on that they're
199. 5:54pretending is $400,000. A good friend of
200. 5:56mine was in the machine business,
201. 5:57murdered it. Um
202. 6:00they were do you know, they're doing 70
203. 6:01million a year selling machines. Uh the
204. 6:03average cost they'd sell machines for
205. 6:05was like 400 grand, cost them 17.
206. 6:07>> Mhm.
207. 6:08>> Yeah. So like printed, destroyed. So I
208. 6:10say this because like again, I mean a
209. 6:12smart machine uh builder prices off of
210. 6:15value, which is if I were you know, I
211. 6:17replace your entire workforce that cost
212. 6:19you 2 million for 400 grand, it's a
213. 6:21steal. And if it just happens to cost me
214. 6:2320 grand to build,
215. 6:25>> Mhm.
216. 6:27Right.
217. 6:27>> More for everybody, right? So I would I
218. 6:29would really lean on that cuz there's
219. 6:31there's probably a big delta there.
220. 6:33Because the core of your business, if it
221. 6:35really is this proprietary thing, that
222. 6:37machine right now is the core
223. 6:39defensibility that you have.
224. 6:41>> Mhm.
225. 6:41>> So knowing everything about how that
226. 6:43thing works is everything.
227. 6:46Because if you're again, like we we have
228. 6:47to take this to a natural extreme. Let's
229. 6:48say we hit that. Okay, then we have this
230. 6:49machine and then we build it out. It's
231. 6:51like we're going to need more machines.
232. 6:52And that's the only thing that
233. 6:53differentiates us from everybody else,
234. 6:54then it's like that actually is a huge
235. 6:56point of leverage for the business. And
236. 6:57so getting as much intel as you possibly
237. 6:59can on that so that you can ultimately
238. 7:02grow.
239. 7:03>> Got it.
240. 7:04Thank you.
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