The Most Expensive Mistake You Can Make With Fresh Capital And What to Do Instead

(upbeat music) - Hello, and thank you for joining. I am Melissa Travers, Director of Community here at BevNet and NOSH, and I am excited to welcome you to the NAMBASE podcast. A podcast built to help CPG owners and operators navigate growth challenges and build more profitable businesses. Be sure to check out NAMBASE.com, BevNet's platform, built for the CPG community, where you can find this episode and so much more. Scaling a food brand is rarely about one big decision. It's about a series of complex choices around channels, operations, and capital that all start to intersect as the business grows, knowing when to expand, where to invest, and how to fund that growth without losing control of your company can be some of the hardest challenges founders face. Today we are addressing exactly those questions through the lens of an early stage brand in motion. From operational scaling to fundraising realities, this conversation is all about building the right financial and operational foundation before things get too complicated. Joining me is Becky Dairy, founder of Day Out Smacks, who is in the middle of scaling her business, and has just wrapped up in Angel Round. Phil Trauler, who now provides strategic financial support for CPG brands, and was the former finance partner for OliPOP, will provide some experience based insight. Together, they'll explore how foundational financial metrics like burn rate and contribution margin show up in real decisions, why discipline compounds over time, and how early fundraising choices can impact a business long after the first dollars are raised. Becky and Phil, thank you so much for joining us today on the non-based podcast. We've been talking about this for a while, so I'm so glad we're finally recording this and putting it into a podcast form. Becky, let's start with you. I think I met you at Expo West a year ago. It's so funny that it's almost time for Expo again, and I was just so incredibly impressed by your product. There are these little nuggets of deliciousness packed with energy. I think I tried the blueberry lemon flavor. Can you tell our audience all about Day Out Snacks, what the product is, and why you decided to bring it to market? So Day Out Snacks, I always like to say we really exist to combine the best of both worlds when it comes to snacking, which for me, who has a huge suite tooth is indulgence and protein, of course. So we make these dessert inspired protein balls. They are sweetened with dates. They're made with wholesome plant-based ingredients. They have 12 grams of protein per serving. And really, the idea behind them is to be exactly what you said, like just a satisfying treat, but also energizing and giving your body the nutrients that you need throughout the day. And yeah, when I first started this company, I'm a pharmacist by background. So this was really born out of a real life need that I had. I was eating the majority of my meals and snacks out of airports and convenience stores and finding something that was satisfying, but also had protein and clean ingredients. I was always kind of like faced with that problem of buying things that had a bunch of fillers and oils and just gums that I didn't really want to be consuming every single day. So I literally just started making these in my kitchen. And before I knew it, friends and family were asking about them. And this is-- I mean, I'm going back. This is like five, almost six years ago. So it's been a journey. Like any company, it started out as a little side hustle. And we've been lucky enough to have great people supporting us, a great team that we're building out and the support of a great community. So we've been seeing some exciting momentum lately, which is what is leading to this conversation today. Yeah, wrapping up your angel round is big news. We're going to get into that a little bit more later. But how do you feel now that you have that under your belt? You know, I would like to say I feel-- I thought I was going to feel so relieved and be like celebrating and like we made it. And I felt that way, but for maybe like 30 seconds. And then I think the reality set in, I was like, OK, now let's get to work. So it feels great. It feels exhilarating because I know how much opportunity is out there. And I know we have so many plans to be able to deploy this capital strategically. So it's exciting and terrifying at the same time if I can describe it that way. I think every other founder in the audience is nodding their heads emphatically. Yes. Thanks for that, Becky. Phil, let's introduce you to the audience. So you have-- your background has always been in financial planning from what I could see on your LinkedIn. Or at least for a good long time. Was Oli Pop the first CPG brand you worked for? It was. Yeah, I actually kind of got into financial planning sort of fairly soon after qualifying as a CPA, because I just preferred like the forward-looking part of finance. I spent about 15 years actually in sports betting, believe it or not, and looking at the planning for that. But yeah, back in around about 2018, Oli Pop was my first CPG client. Sports betting in CPG to me seem like two very different areas of business. Is there anything that carries over? Ultimately managing risk. I mean, from a sports betting perspective, you look at how players and betters, particularly, they manage the cash that they have and the risks that they're willing to take. And the best ones aren't really betters at all. They're investors. And they know where they're going to place their money for the best returns. And there is an overlap. And you learn to take risks, but take the right risks, and manage your cash. So I did manage to find an overlap. It's certainly rare that I talk to somebody with that kind of background. I'm just curious, are there any just mind-blowing facts about how sports betting works? If you think about CPG, I think one of the most surprising things for folks who don't come from this industry is exactly how much net profit you're left with after you pay your distributors, your retailers. Is there anything crazy about sports betting that most people may not know about? I mean, the numbers are enormous. So even if somebody's talking about making $1 or $2 million of revenue, usually that's $1 or $2 billion that's being turned over in terms of betting, because a lot of the betting goes from one person to another as opposed to the actual company. So the amount of turnover of actual bets just for them to make money is huge. Well, now I know something about sports betting that I didn't know before. But let's get back to CPG. Becky, you had some really, really fantastic questions that really drove this episode. So I'm going to hand them a mic right over to you so you can ask all of the questions that you have. I'm sure leading up to your angel round but everything that you're left after with. So please take it away. Yeah, thank you. And I have to say that this couldn't have come at a better time because you think you're sort of somewhat becoming an expert and learning more about this fundraising landscape, which by the way I know everybody says it's literally a full-time job and it is. It's like full-time plus. So I think what was very surprising to me was I ended up with a lot more questions than answers as I was starting to move through this early phase of fundraising here. And I think at the end of the day, once everything was kind of sign sealed and delivered, I-- your mind, even though like I said, you celebrate that for a quick second, but your mind immediately jumps to the future. And I know for me as a founder, like many of these early companies, your mind is sort of, what does the next five years look like? Is the goal to have a strategic exit, which I think a lot of us that is the ultimate goal, right? Because we're trying to bring these better food sources to people and then have it be able to be readily available everywhere. So that is the goal, ultimately. So for me, after I finished this first fundraising round, I was like, OK, what does this next five-year landscape look like for me? Because this is from what I've heard a continuous thing. That I mean, hopefully it's not a continuous thing. But I'd love to understand a little bit more for me, Phil, maybe just about what that landscape looks like for an early stage company that is now ready to start fundraising. There's obviously lots of strategic areas to deploy this working capital. But I would love a more in-depth understanding of what that journey looks like. And then ultimately, what that means for me at the end of the day as a founder. It's a very loaded question. But how can I make sure I'm maintaining the amount of ownership that is appropriate and not getting completely deluded? So there's a lot of directions we can go here. But maybe I'll just start there. Well, I'll say, I've started to many founders now over the last couple of years. And I just admire the grit and the determination and what it takes to actually start one of these companies. But you touched on it. I hate to say this, but you've closed around. You've got the money in the bank. and the next thing is, okay. we need to prepare for the next round. And it's unfortunately like, it's that kind of the way it is. Now obviously, you don't have to be like all guns head right now, but it is. I can clearly see from your question, that's like, that is part of like what you're already thinking. And then I think, you know, just to also put it perspective, I think a lot of times, people always ask like, you know, how long should it last? Or when should the next one be? And it's not really a matter of time. I think, you know, it's more about milestones. I guess to that end, you know, if you, you know, if you talk your money and you hit your revenue goal in six months time, you're gonna raise again. But if it takes you two years, then the question becomes how you're managing the burn to get you to the two years. So no one is the same, no journey is the same. But yeah, I mean, we can go into some of these details, but I would say that really it's about identifying what those milestones are and usually they're gonna be revenue milestones because that's what's gonna improve your valuation and then also your, your unit economics. And then, you know, there's gonna come a point when you forecast that when you're gonna run out of cash and then probably sort of six months before that, you need to be thinking about like, what does the valuation look like? How much money do I need and taking it from there really? That's exactly kind of like the, I guess, the art, right? Of fundraising, it really is. It's just figuring out, it's, I feel like it's all about timing and projections, which can be so difficult because from what I've been seeing, it's kind of like, okay, you have a best case scenario, you have what most likely will happen and then like, what happens if it's a little bit slower than expected? So it's such a range, but it can be such a swing to your point in terms of how quickly you need access to capital or, you know, to get moving on your next round. But you had mentioned before and I'd love to just understand this a little bit more, just the ratio that you were talking about with like, burn rate to your revenue and, but like how, so maybe with that concept and then other key metrics, like what are some things that founders really need to be focused on that will give them, you know, kind of inklings of how much money I need to raise and maybe how soon that's going to be happening. - So yeah, I'll start with the ratio because it's not, I don't think it's usually common, but it's something that I would look at. And what your founder is, I kind of look at like, what the revenue run rate is and I divide that by how much money you've burnt since you started. So as an example, you know, if you're, if you're doing 20,000, or I'd say better, that example, 200,000 a month right now, then that's 2.4 million sort of roughly in your run rate. And then you look at how much you've actually burnt since you started. If that's also 2.4 million, then your ratio is one. But that's actually pretty good. By most companies, you know, they're, they're burning much, much quicker than they run rate to begin with because they're actually having to invest capital to get up to speed. And so, you know, normally that might be between a half and a half and one. And not to try to overcome the edit. But the reason I look at that is you can take your revenue run rate and if you multiply that by three or by four, that can give you a rough guide to what evaluation might be. You know, so if your run rate is 240, you might sort of be able to say your valuations between one, you know, three or a million to a million. And so then you want to just make sure that your valuations always staying out of the money that you've taken in and significantly. So that's kind of the, that's what I look at. But, you know, that is something you kind of have as a goal as you're growing through your series, your seed and your series A to begin with. That ratio is kind of like it's a little bit all over the place because you're just investing money to get started. Can you explain the relationship between burn rate, revenue run rate and profitability? - So burn rate is just, I mean, it's a cash flow. So it's essentially like how much money that you've spent to date. And then you look at that on a monthly basis, you know, revenue run rate. That is a little tricky yet. The simplest way is to say, you know, we did $100,000 this month. So our revenue run rate is 12 times that. Obviously, the seasonality can play a big impact in some businesses. And so it might be wise to take the last three months and multiply it by four. But whatever your business is as an area where you can kind of roughly gauge what you think your run rate is at that point in time. - And how do those two relate to profitability? - Your burn rate over time will equal, pretty much equal your profitability. But where it does not is, for example, you know, you're, especially in CPG where you're creating products. You're going to be investing cash up front. And so you might be burning more cash that's, you know, you're using more cash. That's going to be sort of meant in building out inventory or it's going to be sat on your counter receivable because, you know, you're with these big distributors that aren't paying you. So, you know, you do have to be more focused on cash. Over time, they will sort of even out. But to begin with, certainly for smaller brands, you really want to focus on cash. - Is there a ratio that you see that's like a good inclination of like, okay, this brand definitely has some traction or they're using their capital the right way and it's balanced the right way with the revenue? Is that, I know you said one is really good, but, you know, like you said, as you're expanding in your retail journey here, it's a lot of cash up front just to either. Start these relationships with retailers. So, is there sort of like a ratio that you see that seems to have good signals? - I mean, I think above, I mean, above a half is good because, you know, because if your, if your valuation is three or four times, then that means you can afford to be a quarter to a third to be at least on par, but you want to be ahead of that, because you want to be growing value. So, I mean, above a half is good. But in terms of just going back to the cash as well, it's hard to, that's one ratio, it's hard to have a ratio of like cash to profitability because different brands have to operate differently and so some brands might have to produce all their inventory upfront because of like crop yields and things like that. Whereas others can produce a small amount every single month, that's much easier business to manage because it's more consistent, whereas if you're starting off a business that relies on a coffee or a strawberry crop somewhere, then you, you know, and you have to buy it in bulk, then that's a different story. - As you're going through this journey of expanding and growing, what is, what I guess, what are other metrics that founders should be able to really like rattle off, you know, I think in a lot of these early conversations for this round at least with potential investors and investors, there was a lot of focus on margin. So that's a big one. I know we also kind of touched on contribution margin a little bit, but are there any other things, I guess, that, you know, as we start to think about our next round that we want to have in the forefront and make sure that we can show that effectively? - First and foremost, always know what your cash is, always know where you feel like your sales are and I think it's also a good idea to understand your velocity because that's such a key part of how well you're doing and how well you're going to do. As you're talking to investors or your, you know, like having done an angel round, like really, you're now at the point where you really want to lock in your, your unique economics, you know, and that gross margin. That does become important. There's where you're at, but there's also where you would be if you had more volume. And I differentiate that because there are some things that you can, you put in an alpha contract that says when you hit this amount of volume, the price will be X. And so you already know that your unit economics are getting better and that's always good to know. But then there are other parts where you don't know, you know the golden proof that you don't know how and that's things that you need to work on. But yet, that's crucial. And then the other side, I always like to like with the brands that I work with. We always have what we call the product margin. So that's just the, how much you're spending to produce the product, which is typically cogs. But there's also another line. I actually like to call it. It's like the O shaped line. Like it's the line where, you know, you've, you've just produced a whole load of sleeves and there's a spelling error. Or, you know, and you've got to do it more. And you've opened like some too many like barrels of juice and you've got to throw forward them away. It's not really, it doesn't really impact your true margin. But it is called good, it is something that you did at that point in time. But I'll always separate those two because you can put them together and just make sure you explain it into other story. I just think it's handy outside. And so what you want to do is you, you're obviously slightly improving your product margin by getting these volume discounts and by renegotiating. And then you want to improve by not making mistakes. There's other one. So that one needs to, you know, there's always going to be an element there, but you just kind of want to let that sort of go down. So I think at the stage, you're at that's the now. stages to is to get that gross margin, you know, as high as you can and get those unit economics really tight. I can go on for the contribution margin. I'd almost say that's almost like a stage two. So contribution margin is now we're adding in our freight out and our warehousing, basically the cost of fulfilling the goods, which is still variable. So for example, you know, if you're shipping out cases of product, you might be spending five or six dollars like at that high end for every case you ship, which is crazy amount. It's probably, you know, it's eating in. It's mean you're not getting any margin whatsoever. But that one, you know that when you start to get bigger and you start to fill trucks and you start to have like more efficiencies in a warehouse, then you're going to that is going to lower down to sort of under a dollar a case. And so I put that in the ones where, okay, we need to, you need to track it, you need to follow it because you need it to come down. But also don't waste huge amounts of energy trying to get your freight down from five dollars, 50 a case to five, 35. Because it's like, you know, you just focus on the sales because that'll take care of itself once you get those sales. So that's, you know, so that's really the, that's how I get down to sort of the contribution margin and think of it like that. And then where in that when you start to think about, maybe it's like the next level or the next layer, but marketing costs and like associated marketing for the money that you're bringing in, where does that kind of come into play when you talk about contribution margin? So that will come into your, your, your, your, your, your margin at the end of the day, your profit. Contribution is, is, is just the variable cost that, you know, you need to spend to get your product, get your product on the shelf and out and sold. Marketing, even though it'd be crazy to run a business with no marketing, it's still kind of discretionary. You know, you're still choosing, there's probably a base amount that you want to spend, you know, these days, these days it's going to be probably on social, could be on Amazon if you're there. You know, you're going to have that, you're not always going to get, be able to just look at it and say, I got an ROI of X on this spend. So that just comes with, got feel and experience and also how you want your brand to be seen and perceive. So it's very, very difficult at that point to know, to know what, what you should spend on marketing, it's going to be more of a more of a got feel and, and make that, make that with your, with one eye on how much cash you have, how long does it, how long you've got to spend that to hit your revenue for the next raise, you know, so don't, don't be too, you know, don't be too flippant with the, with the spend. I think the, you know, marketing costs in itself, and like you said, like that ROI is just so hard sometimes to figure out, I think for us, you know, a lot of what we look at is our customer acquisition costs, but again, you know, with, with so many different e-commerce channels right now, where people can kind of like go to, you know, if you're running an ad on Instagram or, or TikTok, maybe they're not clicking right on that ad, but they're going on Amazon, or maybe they're already subscribed to your newsletters and then they buy through your website, like it's just, it's very, I guess tough to kind of quantify some of those efforts sometimes. It's much harder to quantify the stuff you're spending that's brand and that's going to, it's going to impact the shelf. It's certainly for my, for my online gaming experience as well, like there is an element you can go quite deep, you know, into, into getting a, you know, cost acquisition costs for online, whether it's a fate, whether it's Facebook, Instagram, all these different things. It's that just becomes, but what you mentioned also is true. It's like attribution, like we used to, you know, we'd spend money when I was in gaming and we'd spend it on Facebook, we'd spend it on Instagram, we'd spend it, I know, just online, with different like companies and every time we got a report back from every one of them, they'd all be taking credit for the one person that signed up, you know, and it's the attribution, you know, it's like, it's like, and the reality is, these people do, they go on a journey when you're online. So you do have data and you can do your best to try to get to a number, but again, I'll always say don't over, don't overcompliate it, don't go over into the details because you'll just drive yourself crazy. And you'll end up making assumptions that really, to get you to an answer that really just kind of like make the whole thing, rather than anyway. It can kind of be a huge drain on resources if you really start trying to nail down those numbers there. And I guess, you know, as long as things are moving in the right direction, I feel like that's, you know, you're actually increasing your revenue, that's probably the most important thing overall. Yeah, I always start, always start macro, like look at your total spend and look at the total revenue. And, you know, and then, you know, if you can, and you've got the support to look at things by channels, then that's the next, you know, that's the next stage. But yeah, you just have to, you know, you, you're a founder with limited resources and you have to figure out where the best focus for your energy is. And kind of to that point, you know, a big part of the race that we did, like if you look at a bucket of where this, most of the capital will be allocated, it is towards like marketing initiatives or, you know, you can also, I guess, expand that into like promotions or, or, you know, things that you're doing to help drive velocities on retail shelves, but kind of through that lens, if, you know, you were me and you just raised, you know, a good amount of money, it can be, you know, general. We're right now, we're in roughly around 800 retail doors, like the goal is to expand that significantly over this next year. You know, our other goals are just increasing our Amazon presence, website presence, you know, so there, we have all of those buckets that need attention, but where would you kind of look to deploy capital in the next 90 days? I think I'd go back to like, you know, every time you do around, like, there's a certain, like, there's certain things you want to hit with that money. So, you know, angel round or seed round, I think what you want to do now is you want to prove velocity and you want to tighten your, your, your, your unit economics, because the next round, I, is where I think you would get a big series A, that's when you deploy capital to go maybe nationwide and you need to do that with economics that are going to make you money and not spending money to lose your money. So, so your focus right now is velocity. So you're right. So that, that's the marketing efforts that maybe demos and just trial, like getting people to, to, to get the product in hand and then following that up with, with data to show that actually you're getting repeat purchases and more people are coming into the same locations that you were in, but you're actually getting more velocity through them. And then I would also, yeah, I do some of this money to just, you know, look at your, your co-man and your, your distribution network and just look at, you know, the ingredients, like, can you, can you, can you tighten those or can you at least start to come up with agreements where you're going to get better economics with more volume? I think, I think that's really where I would, I'd certainly focus that, that money and save the next check for going, for going wider. So when, when you say you want to expand out, I would, you know, I wouldn't, I wouldn't want to be expanding, like, across the nation right now. I would be, I would be picking carefully picking the regions you think are doing well and just really going deep there. If you have the chance to either gain a boatload of more stores or just really execute and kill it in the, in the stores that you're in, you know, which path would you go down and yet it sounds pretty clear that velocity is really the main signal here for, for how well received your brand is and the potential that it has. So really focusing and honing in on those stores and, and increasing the velocity seems like the right path. You want to look at see if you've made mistakes the way that you're explaining something is working and you want to find that out now locally or in the region you're in, then, then spread it nationwide and be like, I'll down like that doesn't work, that doesn't resonate. So you're almost, you know, you're almost want to be finding the problems with your brand, this money so that you can fix them before it goes bigger. It's a lot more expensive to fix national mistakes. On the flip side of that, what would be the worst use of any new funding or capital that a brand has and maybe, maybe even like anything that you've seen like you were, you're like, oh my gosh, that's, you know, you really just like shot yourself in the foot by doing it that way. But like, what are, what are some mistakes there to avoid? The worst mistake, you know, again, is, is just going to national distribution or going, going really wide. Probably, you know, over spending on too early on a big agency to help you with stuff like I still think you, you know, you're probably slightly beyond scrappy, but you certainly know that like we want a big agency to come in and do a branding campaign for us like us or, you know, something like that. And, you know, an expensive hire, it's very tempting to think we've got like to get like now a VP of sales or VP of ops or whatever that, top level hire is, you probably need to be going in at managers and directors and getting people that are kind of like possibly also still learning that you can work with. Because you, you know, I've seen it where you go for a big big pay. and they're like, right, I'm getting a need, like, two directors, I need three managers, you know, and it's like, well, I was certainly thinking you're just doing one hire, but that hire actually needs another three before. So, you know, so that's not the right. And the time to spend that money is a series, eh? When you're like, now we're going national, we're going to get money for that, we're going to get money for people, you know, that's when you spend that kind of cash. You're kind of like rooting my mind, I think, with the direction of these questions, because it is very tempting, I think, when you get to these different stages where you start to feel the growing pains a little bit, and there's, I think there's definitely a real reason to bring on, maybe not, like, you know, expand headcount, like, crazy, but just really figure out, like, the support that you need to make sure that you're making the most out of the capital that you have and, you know, the partnerships that you have. And it can be a little bit challenging as a solo founder, kind of like wearing all of those hats there. You mentioned, like, bringing on headcount, because now I'm starting to see as we get into more retail doors and we're trying to, like, go deeper with those relationships at, at store level and figure out promotions and what's the right track for us to go down. I'm like, I definitely need, like, ops help. Um, so that, like, that's something, but to your point, it's not like, I need to bring on a head of operations. It wouldn't be a good use of funds that way to have somebody just solely focusing on that. It's almost like, can I find someone that is fractional or, you know, just, just other ways to assist in those, those growing pains, I guess. It might even be investing in a system. You've seen more and more of that, you know, especially these days with, you know, the, I'm not even going to say, I just, just the, the simplicity of bringing in automation tools. Like, you know, I'm working with a brand where we're, we're trying to set it up so that every time we get an email with a purchase order, like, instead of all the manual work, like, there's automations, I just look at it, they know it's an order and they'll drop it into a table. The table will then tell the three P L, the three P L send it out, you know, and it all talks to each other before you even get anybody. I mean, that takes time too, but, but yeah, systems are, systems are like, um, you know, definitely going to be on the up, um, over the next year or two, I think, and really helping certainly, like, early stage companies. It really depends on the founder. Like, if you were, if you basically came into this, there's, like, head of ops for Diagio and, and you started your own brand, you clearly not only opt up. Um, so, you know, you just have to fill the, fill the gaps that, that you have. Like, I found that most people are like, they're either the, the, the, the product developer or the marketing. Um, and so that's where I kind of like, find a lot of, it's very rare you get somebody from finance going, hey, I'm going to start a CBG brand. So they nearly all need finance help, which is great for me. But, you know, you just have to, you just have to kind of supplement the, the, you know, the gaps that you have in, in what you can do, but you, you know, you, whatever you can do. Like, I've, I've, I've spoken to people that are that are vast though, like, you know, for my help. And they've actually been more finance literate. And I kind of say, no, like, like, I mean, obviously, like, I would help them. But I'm like, that's not a good use of your money. You know what you're doing, at least for like a year or two. So just, you know, go spend that money on somebody that knows marketing or, or, or, or, or, or, or, or what have you. Yeah. It's really refreshing. Because so many times, you know, I listen to a lot of podcasts around, you know, when you're, you're building a company and it's like, okay, it's almost like a checklist. Like, okay, you need a marketing person and you need an ops person and you need to find the answer. And it's almost like, to your point, though, it doesn't necessarily need to follow that structure and trajectory, like, based on the strengths that, like, maybe the founding team has. I guess is there anything else that emerging companies can kind of look to to really figure out what we were talking about earlier in the episode, even with like, unit economics by channel or, um, just, I don't know, anything that you find that's been a big help for founders. First of all, I, I, I encourage anybody to get a bookkeeper as soon as they, as soon as they feel like they can, because I think that's just, just having the fundamentals in place is, you know, is so important. Most of the bookkeepers are like, they're really good firms and most of them, they will help bring on, um, whether it's an automation tool or something, they'll help you process all your bills, like, like, send out your invoices and, you know, there's all these now that where they can manage your tradespin, which is becoming more and more important. And there's some really good companies out there that are like helping automate that, like, that's something that you probably want to get in, in place as well. Unit economics is a, is a slightly different one. I would have somebody that's, I'd call them FPNA, which is financial planning and analysis, which is, which is the forward looking. I'd always, I'd always lean on trying to have somebody that you know and trust, whether it's fractional, um, or, you know, internal, I would, I would, you know, have sort of somebody in the company if, if I could. And, you know, so, so at some point, the first, I would have an outsource book, even my first finance hire would be a manager or a director of FPNA. There probably are only a few hats, but they will be really focused on, on that kind of like forward looking, unit economics, fulfillment costs, anything like that. You know, that's, that's, that's the first hire I'd make in finance internally. I think it's so important as you start to think about your next fundraising round too, because that's the first thing that everybody is going to ask for is what do your projections look like? And going back to what you said, like, what's the path to, you know, increasing your margins and, and hopefully decreasing that, like, rainy day fund that you, that you add in there for any mistakes on packaging and stuff like that. So, yeah, I can definitely see that being a key hire. And you might be able to, if you kind of fold the higher just yet, like, it might be that you, you just get someone that you, that's a good referral, that's someone that you trust and actually use them, use them for sprints. And what I mean is, like, you don't necessarily, you don't want them on the books when you don't need them, but probably every quarter, there's, there's stuff you're doing a fundraising round, you need to read up your economics, whatever, like, that's when I, you know, maybe get them in and just use them for like, small pockets of time like that. Where would somebody look for somebody like that? Like, is that the sort of thing you do? Is there, is that a fractional CFO? What is that? It's funny. So, there's a lot of fractional CFOs. And I would say that that is probably a little too, too senior, but I think there's probably people that, that might sort of overlap and, and that path to do that work. Because maybe, you know, maybe they've kind of like been an FTA person historically, and that's really, really what they are or what they do. You know, bookkeeping firms, often, will have a, an arm that will, you know, which, where you can just pay by hour for just some extra work. You know, so, and certainly, certainly start there. Say you are a profitable company. And I know everything's going to come back to, you know, what you're looking at in terms of growth, right? If all of a sudden you take on like, 5,000 doors, yeah, sure, I'm, that's like a no-brainer that you're going to need to raise capital. But, I guess, how, how do you think about if a company is profitable and, you know, they're growing at a steady rate? At that point, is it still something where your series A is going to be like on the close horizon? Because you are, you know, growing steadily and you know, you're going to, there's just going to be like a bubble where you're going to need a huge, you know, cash influx there. And, I guess, is there, are there any other levers that founders can pull that are maybe non-deludive from that standpoint? So kind of like a loaded question, but it may be going in the same direction. Yeah. Well, I will say, you know, profit, profit is amazing. Like, if you do want to grow and you realize you need capital, profit just gives you more leverage. So we always used to say there's, there's three kind of variables to a project. There's like time, quality, and price, and they were kind of like interlinked. So if you needed a project done really, really quickly, like you had to do it today, then, and you wanted it cheap, then quality was going to be pretty poor as well. But you could, you could overpay and then you get quality up, but it's all because you need, you need it done now. Now, what profit really does it means that you don't have that time constraint, you could, you don't have to, you don't have to like raise today, you can pick one or raise. So what that doesn't gives you leverage with your raise. So you can pick the investors you want. You might pay people that are strategic or you've had good referrals from, they've been helpful in the past. You can go and find those investors and you'll get about a price, i.e. valuation, because you're not in any, you're not like under any pressure to raise the money. You can, you can set the time line to what you want. So, so profitability is really helpful and you then decide, you know, who you want and how much when you want to grow. So it also does open the door to debt, which obviously is non-dilusive. You know, sometimes, I do it just good because you might get somebody on the cat table, like we just said, who's very, very helpful, whose strategic can open doors. But if you don't want that, you know, there's a lot of great, you know, like ABL's asset-based lending firms, you know, where you can basically, you can just borrow money based on what you're accounts receivable as and how much inventory you have, you know, whatever you spend today, how long does that take if you get that money back when when a customer pays you and you're just trying to eliminate that by using debt. And it just, and it just, as you grow, that kind of cycle's up and up. But it's a really effective way of not getting to take on more. Do you need to scale your team faster without compromising on talent? Join oceans for a live webinar. are on April 20th and learn how leading companies are hiring top global professionals who are ready to grow with your business. Register for the webinar now at tastradio.com/oceans. That's tastradio.com/oceans. Well, Kaustle and Tyler, see yourself. Do you see brands taking on or I guess using like debt financing too early or is that is there, I guess like a right point in time where it's like, okay, this is definitely the right angle to go for the type of business. Yeah, I mean, the social sophisticated that is hard to say they take them too early because they were just looking at your books and go, your revenues too small, your gross margins terrible, you lose money like you're choosing your basically. Yeah, exactly. You choose a good risk. I've had a lot of those conversations and I've kind of heard the answer before I had the conversation. Yeah, yeah. You know, you do it. So, you know, it's kind of almost impossible to be too early and then the only way it might be is if you get some crazy like sharp, it's just charging you like a ridiculous interest rate so you wouldn't want that anyway. So, you know, so the only thing is once you've, once your revenues are starting to get into the millions over the annual revenues, it's starting to get to millions, then you can really start to look at using these sort of facilities. Also, the economics, the unique economics comes into play because what they're looking for is like, they want to fund that top of the Pay and L, the unique economics and make sure that that's okay. They don't want to be funding your, you know, $3 million brand campaign because that's not going to work for them. So, so yeah, once you can, once you have that, once you're, let's say, a few million in revenue, then it just becomes a bit more of this is what you might need the finance support as well, but it comes with discipline to make sure that you're using that money for inventory and it just and the cycle just keeps rolling over the money comes in, you know, you pay them off, then you can draw down more money for inventory again and it just keeps rotating around. I heard that like if a founder retains like 30% of their company at exit, that's like a huge win. Is that like the real, like I guess trajectory of most companies or, you know, maybe ones that you've seen? It's very high reward and high risk. You know, CPG companies really sell for a lot of money or they go bust, you know, it's not, unfortunately, there's not really much in between and so, you know, 30% of, you know, $100 million exit is better than 80% of like half a million dollar exit, you know, so that's really what it is and you could you need so much cash to keep this thing moving and going. I would always think of it like every time you do around, you're probably going to lose 20%. Now the reality is depending on whether you get the valuation you want or how much money you need, it might be 15, it might be 25, but if you kind of think of it as 20%, then your first round you're going to be at 80, you're going to have 80 left. In second round you're going to have 64% left, your third round around 50, your fourth round around 40. So then your fifth round around 30, which is what you just said. So that assumes that you basically have like five funding rounds. So it's not, that's not, that's not uncommon. I'm actually, you know, see companies go lower because the valuation just keep going up and up so it makes it makes sense. 30 to 40 from a CPG brand if you existed. I would imagine that's pretty, pretty standard. That's the goal, right? That's the venture. Yeah, yeah, it really is and you know, it's, it actually is quite critical early on to not, it's a fine line between trying to get the highest valuation you can, but then getting yourself stuck when you go for the next round because you're, you can't get any money and because your valuation's too high. So you also do have to be careful not to overvalue yourself and that's because it all forms part of this, all forms part of this equation. And even like raising more money than you need, you know, I, the, like, some, you know, sometimes I think the approach is like, oh, I'll just, you know, raises much money as I can in this one round, but not really have it tied to these like concrete milestones as you said there. And you, you think it's good in theory and then all of a sudden, if you blow through that and what you have, what have you really accomplished with it? I feel like that's not really setting yourself up at a good starting point. You know, let's, like, you just finish your range around like, see around. And who knows how much money you need, you know, you've just guessed, which is, you've just, you know, which you have to. But, you know, maybe you, maybe you are detaining these economics up and your revenues got great traction, but it's not there yet. Then you, that's where you look at something like a safe note and, and you're just trying to bridge that, that gap to your series A. So you're giving them a real deal on what your series A is going to look like when you hope that you're in target and warm up and cost it or whatever, you know, because because you've got everything. So you're just buying time, but they're getting maybe a 20% discount on what that series A will be, but it's still not as good a discount as what you just done your seed round on. And so, you know, there's always, you know, if you're growing your revenues, you'll always, you should always be able to find a way to raise money, whether it's a safe or around. The biggest killer really is just lack of momentum. If, if you're, if your revenues are static, month after month after month, that's, that's when it becomes really difficult to, to, to, to drag yourself out of that. Yeah, God, to do everything you can to keep the momentum going, right? Well, Becky and Phil, that was fantastic. Becky, you had such great questions. And I think their questions that, you know, other founders certainly have at the moment or have had. So, it really was so helpful to see this through your eyes and think about it through your brain to see how some of these concepts really apply to a CPG brand in real time. So, thank you so much for, you know, having this idea and for joining the podcast and for asking such amazing questions. Phil, we can't thank you enough for knowing what you know and for sharing it with us and with our audience. I think that some of these concepts, no matter how many times you hear them, it's always helpful to hear them discussed again because they're a little bit more esoteric than, you know, some of the marketing or, or sales concepts that people are familiar with. So, thank you so much for being so generous with your time and information. Becky, dairy founder of day out snacks. Thank you again. Phil, trial, strategic financial support for CPG brands. Phil, if folks want to get in touch with you, what's the best way for them to reach out? Just through my website, actually, it's Phil, trial.com. It's a, it's a link there. Becky and Phil, thank you so much for everyone in our audience. Thank you so much for tuning into the NAMBASE podcast and we will see you next time. That concludes another episode of the NAMBASE podcast. If you enjoyed the show, please leave us a review and follow us on your listening platform of choice. You can also watch and listen to past episodes on NAMBASE.com and don't forget to join our NAMBASE Slack. It's slackedupbevnet.com for company updates, industry networking, and community discussions. See you next time.