Fix These 5 Things Before Going From $30K To $100K Months

0:00 Fix Foundations to Escape the 30K Trench In this episode, Dylan and I dive really deep into the trenches, talking about what it takes to go from 30 to $100,000 plus months and what you actually need to fix before you do that so you don't find yourself in a really bad position and broke, burned out, or just quite frankly risking it for the biscuit. 0:17 Enjoy the episode, I love talking tips from the trenches. 0:26 Speaker 2 From the trenches. 0:27 Speaker 1 From the trenches. 0:28 Speaker 2 Makes it sound so much more dramatic. 0:31 Speaker 1 Tips from the trenches and I like alliteration too, man you know I was reflecting back. We've been doing this for in this month marks six years since I decided to go into coaching and education away from the agency world of doing stuff. 0:50 And as I'm kind of looking back like, man, that's six years. That's pretty crazy to think that six years ago I went on this trip and then it took about a year to fully start diving in and saying I actually want to teach and coach and start a podcast and all this stuff. And as I kind of look back, we worked with over 700 companies and found when I say companies, we mean e-commerce businesses, founders, not like these large corporations. 1:14 Now we've consulted bigger companies, but for the most part, we work with everyday average business owners that are e-commerce business owners primarily Shopify is. We learn a lot of stuff through that. And I want to talk about today, I want to share 5 things to make sure that anyone listening or watching gets a locked down if you're stuck in the 30K trench in order to get or in order to get past $100,000 a month if you're stuck there. 1:42 And 30,000 is actually such an interesting spot it because it's like you've grown big enough to have a serious business and proof of concept, but you're not quite big enough to be able to have any help. And if you do have help, the help eats all of your profit margin and you're completely broke. 1:58 And so if you're in that 30 ish 1000 ± a little bit range, I really want to talk through what are 5 things you need to fix and do before you climb past $100,000 months? Because we've had clients climb past $100,000 months using meta ads and some, you know, some stuff we teach and they don't have these and then they get in really bad, bad shape later. 2:18 Like some crank past it, do multi 6 figures, something crazy in no time. And then before and and they're doing that and they have no money. 2:25 Speaker 2 Or more importantly, they they they aren't our clients. They get to that point. They come in and we essentially start over with them. They have to fix. Hold on, let me let me reteach you the foundations of this because you basically lucked out and got here, which congratulations, but you locked down. 2:41 Now let me ask you before we get into this, do you feel like this is the magic button? Like like is this framework that you're about to walk through the magic button to get past 30K? And and if, if it is, then you know, why haven't you shared this with us before? 2:57 And secondly, if it isn't or like how is it not the magic button? The way the way that I'm thinking about it is like, is it as easy as just doing these things to get past 30K? I think that's, that's what might be in someone's mind is like, can I just do these things and and get there? 3:15 What's the difference? 3:16 Speaker 1 These are 5 things you need to fix before you go to $100,000 months. This is not AI mean. If you do these things and you're at 30,000, the probability of you growing $200,000 months and well beyond is very high and being profitable every step of the way is guaranteed. 3:34 Yeah, I'm saying fix the you can go has 100,000 not do these. You can do two of them. Many people come in and they do one or two or three of these that are that we see and then they get really hot water because they don't do the other two that I'm going to talk about. And then like they're completely broke. They have no profit. They're doing $200,000 and they have -5% profit margin. 3:50 They're literally losing like $20,000 a month or $10,000 a month. And then when listening, that's like I wish I did $200,000 in a year or I wish I was even doing a, a fraction of that. And and I'm less and I'm more profitable. So if you do these, you will be profitable on the way and you will build a solid foundation of a business. 4:10 It kind of goes back to like the Three Little Pigs, I kind of think. 4:14 Speaker 2 About OK. 4:16 Speaker 1 Like some people like build their house with like sticks in the big bad wolf comes in, huffs and puffs and blows. 4:21 Speaker 2 Down This is the big bad wolf in this scenario. 4:23 Speaker 1 It could be a lot of things. It could be it's just, it's just the big bad wolf could be mental, right? Big bad wolf could be most of the time is mental, honestly, like business is more mental, I believe than practical stuff to do. Like if you look at the decisions we make, it's like 10 to 20% head knowledge in like 80 to 90% behavior. 4:45 And in the behavior when things don't go according to the when the outcome doesn't meet the expectation, that's when we become our worst enemy and we decide to quit. 4:53 Speaker 2 Yeah. And I think it's it's when people probably decide to quit these things. You're not building that foundation to actually get to where you need to go. 5:00 Speaker 1 Yes, all right. 5:01 Speaker 2 Cool, cool, let's get it. 5:02 Master 5 Non-Negotiable Ecommerce Economics Going Yep, all right, number one, you have to understand your economics. There are a couple economics you you really need to be. I want to give some just rules of thumb of kind of what we see #1 gross profit margin #2 is average order value #3 within that economic is your break even in your target cost per acquisition row, as #4 is your ad spend percentage and #5 is your net profit margin. 5:27 You have to understand all of these economics, what they are and what is good for you and what your what your non negotiables are for each of those metrics. And this has been a really common conversation in coaching recently. It's like just the idea of non negotiables. 5:44 I every single coaching session somebody is things are going really well and they just want to scale and scale and scale. And I was like, OK, yeah, yeah, you could do that as long as you're within the parameters of the non negotiables. So for example, if your break even row as is 1.8 and you're at a 1.8, should you scale? 6:05 Probably not. If your target row as is a 2.5 and you're at a three, should you scale? Well, let's go to the other non negotiable. What's your what's your target ad spend percentage? If it's 30% and you're at 32, no, you should not scale. You will scale and lose money at the end of the day. So like non negotiables around these metrics. 6:21 So we're going to go through these metrics and then I want to share what I believe the good, like good ranges are for these. And then you should create non negotiables around the economics in your business that if we have to flex on this, then we just don't do it #1 is gross profit margin. 6:38 Now I'm going to give a range. Here's what we see. If you are under 50% gross profit margin on your product, you have to raise the bar. You have to raise the standard over 50%. I don't know almost anybody under 50% gross profit margin that is scaling and doing really well short of short of a beef company that we work with that does delivery. 7:03 OK. Yeah, they're doing just fine. They have like 3040% network profit margin, but but they're doing just fine. They're doing. 7:09 Speaker 2 Just fine. High LTV is that subscription. 7:11 Speaker 1 This subscription as well, yeah. So like you can weather slightly lower than 50% gross profit margin on your products if you have really high LTV now their LTV. 7:21 Speaker 2 Yeah, 'cause then you acquire, you acquire the customer and you have no, literally you're, you're going in the hole to acquire a customer if your margin isn't. 7:30 Speaker 1 Yeah. So the the simple math to get to a which is the another metric here is your break even return on ad spent or cost per acquisition. I'm going to give you the simple math on ROAS. So break even CP cost per acquisition is really easy. It's like well you just take whatever your if you sell $100 product and you have $50.00 in COGS and your 50% margin then you have a $50 break even if you return announcement. 7:52 People get confused by this. It's 1 divided by your gross profit margin. So if I have a 50% gross profit margin, 1 / .5 = 2. Your break even is 2 return announcement if you get a two row as you are breaking even on a customer. So it's like you don't pay anything, you don't make anything, you just got the customer. 8:07 Which if you have a high LTV business, that's a great right. If you're a .3 1 / .3, you literally need a 3.33 return on ad spend to be break even. No, no, no, you're not going to get that. You're not going to get that at any degree of scale. Maybe for like 25 bucks a day. 8:23 Yeah, maybe for a little while. We've and. 8:24 Speaker 2 Especially if that's your break even because if that's your break you're not going to scale at all, I thought. 8:29 Speaker 1 Yeah. So like that's why 30% gross profit margin does not work. 50% should be your minimum 50 to 60 is considered a really healthy. If you're over 60%, that's considered excellent. The second metric within here you need to understand is your average order value and you need to fight to get this. Well actually before I say my number, you are in also, you've been like 1000 coaching seconds in a gazillion accounts. 8:50 What's a good AOVT on meta? 8:51 Speaker 2 Well, I, I have a little bit of a different perspective on this. Yes, I'm in coaching, so I know exactly what that looks like. But actually in our software Breezeway, we have a, a tool called Benchmarks and Benchmarks actually, yeah, Benchmarks is a, is essentially it takes all of what we consider successful businesses in Breezeway spending a substantial amount of money on ads. 9:12 That's how we consider successful 'cause if they're spending a lot, they're probably doing it well. And that says the panel median, we use median to to eliminate the outliers I believe is like 80 to 88 dollars. 9:25 Speaker 1 8585. 9:26 Speaker 2 Right now, so, so that's the math. I can tell you what I think from coaching. I would say I would be happy if people are 65 on the lowest, on the lowest and $65. I would say it's kind of hard to get above 85. 9:45 I know it's the median. I think that's skewed by some, you know, hundreds, 100, fifteens, hundred 20s. I would say you need to be between 65 and 85. The. 9:55 Speaker 1 The range, the median range of the high performing companies in here are between 52 dollars and 277, so obviously. 10:01 Speaker 2 It's skewed up a little bit. 10:02 Speaker 1 And and that meat company is probably one of those skewing it up and some clients we have with like $1000 AOVS or some accounts in here, that $1000 Aovs clients are in here and many others. But if it depends on the time of the year, if actually float back a little bit, it's more like 75, 77 depending on the time of the year. This is like back in May, June, July. 10:19 So like the median AOV is lowered just depending on the time of the. 10:22 Speaker 2 Year and by the way, I want to say something real fast on this. The number of times that a, a business comes in starts working with us and I look at their ads and they have a $20 CPA because if you look, the median CPA is $22.00. That's like the the median CPA. 10:39 That's what a majority of people have. 10:41 Speaker 1 20, yeah. Is it 222323? OK. 10:44 Speaker 2 So the median is 23. So the number of times that I see people come in with a $23 CPA and the CPA is lit up green on breezeway, it's like, hey, this is good. You're you're at Target, you're you're above break even and the ROAS is bad. The ROAS is yellow or red. 11:00 The ROAS is like a 1.4. Go fix your AOV if you are advertising on meta you it's not even a like you should try. You have to have an AOV of $50 up minimum of $50. 11:15 There really should be 60. 11:16 Speaker 1 To 60, here's I'm going to give, here's our observation, CPA. When you're dialed in, you can see the median here is 23. I was going to say the observation I have is anyone who's performing really well, you're going to get stuck in 25 to 30. Here's why you will not get lower than a certain number of dollars per click. 11:32 So like most people are not going to get $30 a dollar per click, a dollar $20. The median cost per click, let me just show you right here is $1.32. The lowest is $0.67. The highest is 232 in this entire panel of high performing companies. So you're not going to get lower than $1.32 cost per click. 11:49 So if you had a $13 AOV, I'm using a simple math here, you need a 10% conversion rate. This is not going to happen. Nope. So mathematically, if you get a $50 AOV, divide that by the typical what you would expect 25 ish dollars to $30 to acquire a customer and you're going to literally be at A2 return on ad spend. 12:07 And so that's why we're saying 60 to 70 is probably a really good sweet spot. Obviously over 70 is really good if you're listening and you're like, I'm sub fifty, I'm sub 60. Work on getting your AOV up. It's gonna make a big difference. You can only pay so little to acquire to get a click, but you can make infinitely more money if you can increase the perceived value and all kinds of stuff. 12:27 So we have to go deeper in that. But you have to understand AOV try to go. I mean, this says 8080 something. Yeah, 85 or whatever. 12:35 Speaker 2 That's why I gave a range. Let's let's do 55 minimum, minimum, minimum to I would even say 85, yeah. 12:41 Speaker 1 60, probably 60 of it, probably 80 is a good spot if you can get in there. You need to understand your break even when you add spend target percentage, we recommend between 15 and 30% of your top line net sales in Shopify is called net sales. Your net sales going into advertising to acquire new business. 13:00 And the last thing is you need a net profit margin of 15 to 20%. So on your profit and loss, if you were less than 15 to 20%, you're going to really, really struggle. 15 to 20 is considered really great over 20 is considered excellent, but you don't want it too high if you have like 35% profit margin. 13:15 What's happen is you're going to plateau because you're not investing enough in advertising and you're not able to. You're going to plateau a lot faster than if you're investing more. And so we just find 15 to 20 is a really healthy net profit margin. 13:27 Build Creative Systems and Optimize Welcome Offers All right, the second thing you need to fix is you need to build so #1 understand your economics, lock them in, know them like the back of your hand and make them non negotiables. Second thing is building a repeatable system for producing and testing new creative. There is like there's no way around this. 13:45 If you're in the 30,000 plus range, Meta is going to be the largest contributor of your sales. I have not seen almost any company short of some unique outliers meet that case. People like, well, organic, no, Meta will beat organic. 14:02 Meta will beat organic. Some people are not going to like that. I say that it's the lifeblood of scaling. It's your highest leverage point I can spend. If you spend 10 hours a week on Meta and you're making and you're spending $1000 a day, you can still spend 10 hours a week and spend $3000 a day. 14:17 It's really not it, it's really scales and this is like 10 hours a week. If you're really building a lot of creative and you should not be outsourcing this. Agencies are going to bleed you dry and they're not going to give a crap #3 you got to fix this. Get your welcome pop up offer to convert at. 14:34 I upped my typical, I tell people 5 to 10%, I'm actually upping this like 8 to 10%. You should be in that range. If you're under 8% of, of that welcome offer pop up, which I recommend. Generally we'll put it like 10 seconds and then it comes up. If you're under 8%, your offer sucks for your audience. 14:50 If you're over 10%, you're giving away too much. And there are two tools I really love for this. We use a tool called Optimunk. I think you can go to ecommercesalary.com/opti like OPTI monk and if you go there it's R. 15:05 Speaker 2 Is that MUNK or MONK? 15:08 Speaker 1 Like opti. Like opti So opti. 15:11 Speaker 2 But what's the monk? 15:12 Speaker 1 MONKMONK, like the monks, you know, monkey. No, no, not Monk. Oh, I don't know. When I hear monk, I think of like, you know, those guys that have like the bowl cuts or whatever and they have like, but no, those are fryers. Those are fryers. 15:24 Speaker 2 The logo though, is it a monkey? 15:27 Speaker 1 It might be a monkey, I literally have no idea. 15:28 Speaker 2 I I feel like it's an optimized monkey optimonk. 15:32 Speaker 1 I don't, I don't know, I might need to now it's going to get the best me. I just all right, it's all right. Everybody go check out Optimonk. I think it's like it's $29.00 a month. The second one is called Aaliyah ALIA. Aaliyah is beautiful. 15:48 The only thing about Aaliyah is, is it's definitely more expensive and price point wise and and you could get 8 to 10% without Aaliyah. I mean, we so anyway, so just kind of my my thoughts on it, but get your welcome offer pop up, converting it 8 to 10% of people. And this is 8 to 10% of people opting in. 16:06 If you're sitting at like sub 5%, your front end offer just sucks. Now you can do discount like if you go from like a 10% discount to a 5 percent, 15% discount, you're like, well, I'm giving away more margin, but it could literally lower your cost per acquisition by 25%. People don't think about that. 16:21 They're like, well, I don't want to give away more. It's like, hey, you're just giving more to meta because less people are taking you up on the offer. Also, you don't have to always discount. You can do a discount. You could also do free gift with purchase. You could do like, hey, enter our giveaway. It doesn't matter what it is. We need to capture 8 to 10% of people coming to your website. 16:37 If you're having 1000 website visitors a day, we can get 80 to 100 people on your list today. 16:42 Drive 20-30% Revenue with Email Flows If this is just locked in, which leads me to #4 you have to fix this. Your list is going to start growing as a result of this. The fourth thing you have to do is you have to get e-mail producing at least 20 to 30% of your revenue between automations and campaigns. 16:57 And there are 5 core flows you need to set up right out of the gate. You're welcome flow, your post purchase, your check out abandoned, your browse abandoned and your sunset flow. And those are going to make sure that the welcome flow as people are joining the pop up, we're nurturing them, getting them to buy and take us up on whatever that welcome pop up offer was. 17:13 And then of course when someone buys post purchase, we need to get them in that flow, check out abandoned. If someone's going to like check out and then they ditch, we want to get them back. That's a high ROI thing to set up one time and it'll convert forever. And then browse abandoned is if somebody is clicking on an e-mail and they go to your website and Clayview or Omni send, whatever tool you use knows that they're there. 17:33 And so it could do a check out. It could literally send them an abandoned cart e-mail because it knows what they were looking at. And then a sunset flow is going to cleanse everybody that's been on your list for 120 days and has not been active. e-mail should be 20 to 30% of your revenue. The reason we have to fix this before you get much bigger is we have some clients like recently, I forget who was, I'm not gonna drop their name. 17:55 Anyway, I was talking to them and they haven't even talked like they literally, oh, this client grew really, really, really fast and so fast that his acquisition channel with Meta is crazy, like just crazy. He's one of those ones that had like 100 X growth and no time like insane numbers. 18:11 And then he backlog for film and they got constrained on fulfilment and got constrained on time. I was talking to him this week in a coaching session and I was like, he's like, I'm not even sending a weekly e-mail. I can't even send do a promo Sprint. I'm I can't even like like he can't, He doesn't even have the capacity to do that because their ads are performing that great, that many people coming in, which is amazing, right? 18:33 But you can get, if you get past there in all, every customer from ads cost you dollars in ads. So if we can get 20 to 30% of people buying from e-mail, that's going to that's just pure profit you're going to get back. So if you're paying, you know, $30 cost per acquisition and you get an extra 100 customers a month from e-mail, well, great, you just made yourself another 2500 or $3000 a month in profit because you didn't have to give that to ads. 18:58 Speaker 2 And if your, if your ad performance on platform looks good, but you can't get your ad spend percentage down and you're not leveraging e-mail, that's an easy way to bring your ad spend percentage down into the range that you want it to be. Because if just like what you're saying, if you're relying on Meta to acquire every single customer, you are directly tied to your ad spend percentage. 19:19 But if you produce customers in a different way, then your ad spend percentage is actually a more flexible. Because the only way you can move your ad spend percentage if you're not using e-mail is improving your ads, which is a really hard thing to do if you're already performing decent or good on Meta. 19:36 Speaker 1 So here's a simple way to look at. This is like if you were only running ads, 100% of sales are coming from ads and and you're getting A2 return on ad spend. I'm just going to use two because it makes my math easier here. And then you start using e-mail and then you're you start producing 30% of your revenue from e-mail. 19:53 Then you could literally just add 30% to your meta performance. It'd be the same thing as if you're able to go from like a A2 row as to a 2.6 just by literally sending e-mail. 20:01 Speaker 2 Now when it comes to campaigns and flows, is that revenue split 5050 between them or does one carry more than another? 20:09 Speaker 1 Rule of thumb like 6041 way or another or 5050 give or take a few 10% each way or another. If you're like 60% campaigns, 40% flows, doesn't matter if you're like 10% campaigns, 90% flows. It just tells you where you need to get good. So if you if your if your campaigns are like sub 40% of your total e-mail revenue, you're either not sending enough of them or you just kind of suck at campaigns and just go get better. 20:31 Just go lift your skill set. 5th and final thing that you need to fix. 20:36 Implement Cash Management and Smart Debt Principles This is really big. This is probably the most I was in his. I was meeting with some clients earlier this week and this is a really, really hard one. But this will destroy you if you don't have a system for this, and that is number 5. You have to have a system for cash management. 20:52 Cash management is very different than your profit and loss. Profit and loss can show you something depending on if you're using cash basis or accrual basis. Profit and loss will show you one thing, but sometimes you go look at your bank again, you're like, I don't feel like I have that much profit in the business. 21:07 And it's because their cash moves differently than your than paper. So we would consider profit and loss paper and then you have actual cash. And the problem here is if you're not doing cash basis accounting and many E com businesses are doing accrual based accounting. 21:24 If you're not doing that, you might show hey I made I made 20,000 in profit this month or what? For 30K probably 1920 thousand in profit. Let's say I mean like $10,000 in profit this month. If I made $10,000 in profit this month, it accrual does not take into consideration all the purchase orders for all of the inventory that you had to buy. 21:42 So you may have that this month. You may have had a $50,000 outflow or 20 or $30,000 outflow of inventory purchase. So your cash is got depleted. But the paper looks really good. And the best way to do this, we have an internal entire training system, spreadsheets that we give all of our give our clients in our mentorship program. 22:01 But it I call it the money management system, the e-commerce money management system, but you need to have a system of where your cash goes. I'm a huge fan of Profit First. If anyone's listening and you haven't heard of Profit First, Mike Mccalla, which wrote this book called Profit 1st. And it was eye opening for me where all of the cash that comes in, it comes into an income account. 22:19 You have all these different bank accounts comes into an income account. And then every week you distribute percentages like you'd say, hey, I'd transfer all my sales tax out, which by the way is very dangerous if you're not collecting sales tax and you don't know sales tax law. That's something else you have to consider. I transfer to sales tax and then whatever is remaining, I then put this percentage in inventory, this percentage in the profit account, this much in the taxes account, this much in the owner's comp account, in this much in the treasure chest account. 22:45 That's what we like to call it. And so you need to have a system for cash management. And when it comes to buying inventory, I'm a huge fan of using a profit first ish methodology where you say, hey, my, if my gross profit margin or my COGS, like if my COGS and gross or my gross profit margin is 60% and I would say on my product, then I would transfer 40% of my income every week into the inventory account. 23:13 So when I have to go buy new inventory, that is my non negotiable amount. It's like I have to work within what I have here. I can't go buy more than that because that means I may need to go into debt or I'll I'll crunch all my cash position in doing so. 23:30 And so you need to have a system for cash management and you need to have some principles on debt in my opinion. How do you feel about that? Just so you know, my principles on debt, I have worked with a lot of businesses that have almost gone under or have gone under because of debt. And so they're different types of debt. 23:46 If you're talking like a Shopify loan that they take a percentage off the top, highly, highly, highly advise against that. Credit card debt carrying that very, very expensive, don't advise that lines of credit. I see value in that, especially in the e-commerce space. So when it comes to your cash, you need to have a system for it. 24:02 So let me go ahead and recap here. Number one, if you if you want to go from 30 to 100K plus months, fix these. Or if you're over 30K and any of these are not fixed, you're yourself in a bad position, right? You might be a 70K be like, oh crap, I got like three of these or two of these. Let me recap these for you #1 understand your economics. 24:18 This is gross profit margin, AOV, break even return on ad spend or CPA. Your ad spend percentage and your net profit margin #2 is to build a repeatable system for producing and testing new creative #3 is to get your welcome offer pop up to convert it 8 to 10%. 24:33 We love Optimunk or Aaliyah #4 is to have e-mail producing at least 20 to 30% of your revenue. And #5 you need to have a system for cash management management and not get into the trap of saying I will take my profit later and sake of scale now because we know million plus dollar businesses that are totally broke, don't be broke into over $1,000,000 a year. 24:56 Well, hey, if you enjoyed this episode, please do us a favor, drop a comment. Which of these do you need to go kind of tighten up inside of your business? If you're watching on YouTube and if you're listening on Apple or Spotify or whatever the heck other ones are out there, I don't think there are any. Other than that. Then please do us a favor and give this a simple rating. 25:14 Takes 22 seconds as we're on a quest to become the number 1 e-commerce business podcast on the planet. We love you. We'll see you in the next episode.