Like if I'm being like super straight up, it's like if you can change the offer and the ad account could turn around overnight and you can push up more scale because now consumers are realizing, Oh, this is easier to understand or it's easier to unlock or whatever that might be.

There are exceptions to this, but most of the time they're a flash in the pan and they're not the people that are out there consistently doing the work.

And the other thing is all of these people that we all know that are well known in our industry, including us.

There are like multiple people under them that are also or with them that are also doing the work and that are really smart and potentially smarter than them and or than us.

I think for a while, people would be shocked to hear that you're spending 40% upwards of 40% more in some cases of your revenue on marketing.

I think people are really shocked by that.

And I think that's just like somewhat the reality unless you have a really unique, you know, you have strong LTV, you have some kind of like organic mode.

Like there's a lot of things that could factor into that, but, um, kind of the, kind of the barrier to entry at this point, you can still have other playbooks that can work.

I mean, these guys do crazy affiliate stuff.

They do a ton of stuff with tick tock shop driving traffic over to Amazon.

I mean, there's definitely no one size fits all playbook that everyone has to follow.

And if someone says like, this is how you grow a brand, like just know there's going to be a bunch of other ways that you probably can go about it.

I also think like you also just have to tap into what you're good at.

And now let's take a listen to the scalability school podcast.

First of all, big celebration, huge confetti emoji.

Like we're texting each other on an iPhone.

Congratulations to my co-hosts.

Good job.

Most people, this is like a restaurant.

Like you don't make it past the first six months or whatever.

Like look at this.

Most podcasts fail after the third episode, right?

We're here.

Not us.

Not us.

Hanging on.

We've continued to receive tens of emails from people about how great this podcast is.

So everybody actually people like that.

They said they actually, I've had three people comment this week.

Tell me that they love how informal, informal it is.

So it's not like too structured.

And we're like, that's just cause we are bad at planning and we don't.

All right.

All right.

Hold on.

I'm doing a decent job.

Of course.

But anyway, guys, we're anyway, guys and gals and everything in between.

We're glad you're here.

Thanks for being here.

We're excited to talk through questions that we got on our mostly Zach's Twitter profile in response to his tweet or sorry, X talking about everything from, Hey, you know, we want to answer your questions.

People ask us for this.

And so it's, it's, it's a whole bunch of stuff we're going to go through today.

A potpourri, if you will, a potpourri of questions, a lot of different things.

So we're going to go ahead and dive right in.

Hey, what's up?

This is Andrew from scalability.

School.

And we really believe in way flyer.

And the episode is actually brought to you by way flyer today.

If you ever run a brand or you work with brands, you know, the challenge isn't getting sales, right?

It's it's managing cashflow.

So you can actually grow.

There's things like inventory invoices that come due ad spend ramps up before big sales periods, and suddenly you're caught between waiting on revenue and needing money today.

And that's what way flyer helps with, right?

They help DTC founders get fast access to capital, usually within 48 to 72 hours.

And the repayment terms are designed around how e-commerce actually works.

Think flexible monthly caps, fixed repayment options, and even products built specifically for brands selling on Shopify and Amazon.

What makes them different is they actually understand the space.

They know the ups and downs of inventory cycles, the importance of timing, ad spend, and how seasonal swings can make or break a year.

Working with way flyer feels less like borrowing from a bank and more like having a partner who's invested in your growth.

So whether you're looking to cover inventory, smooth out cashflow, or give your marketing budget the fuel it needs before a big season, check them out at way flyer.com forward slash scalability.

First question.

You know, I think Zach, I've heard people ask you this and I think it's worth bringing up right away, which is when should an agency try to be a DTC brand?

Or like, when should people make that transition?

Cause that's something that we, I hear about literally all the time.

I talk about founder members bring it up.

Oh, I'm starting a brand like Zach stuck.

And I, it's a thing that a lot of people chat about.

So when and why should they ever do that?

And Brad, you have this as well.

So I'd be curious of your take.

Yeah.

I mean, I think I had the intention all along to do this.

So when I started Homestead, I was like, Hey, I want to do the agency thing.

And then I would go into brands.

Cause if I go way back, I actually started a brand and I was 19 in college and did like a Kickstarter and all that fun stuff for it.

And I always loved being on the brand side.

So I always knew I wanted to get back there at some point.

So like, that's the like forward answer.

But I think a lot of people, you know, are in this mode of like, okay, agency game is a grind, maybe I want to try the other side.

I think that it really comes down to like your time and energy and where you're getting energy from.

If you're getting energy from solving problems in businesses versus like agency problems, like people and staffing and leading and teaching people things.

You get a lot of energy from like teaching and stuff like that.

I'd say keep running your agency.

Like you're probably doing just fine.

And you should stick to that and keep focused on that.

But if you are in this quest of like, I want to go learn something new that I know nothing about, which is like product and ops and finance, really, like really going deep into all those things.

I think that's a great opportunity to do it.

I think that the biggest thing is it's a time suck, you know, where I've tried to run a bunch of different businesses at the same time, and it's really hard to do a lot of things at once.

So I think you just have to be cognizant of how much time it's going to eat up.

And I also think like the other thing is just like financially how much you're willing to like take a bet on.

So the first brand that we started with, like I dumped 150 K cash into, it was a lot of cash and I shouldn't have done that.

Should have started way smaller.

It should have launched a brand from scratch.

But yeah, I think that you kind of have to take those things into consideration.

If you're, if you're like debating it and you're like, Hey, I've got 50 grand to spare and I'm ready to take the risk.

And I feel like the team that I have in place at the agency allows me to step away for 10, 15 hours a week to go kind of get this thing rolling.

Um, I say do it, then give it a shot.

But I mean, definitely prepared to torch that entire 50 K.

Um, especially on the first one, like we are on technically brand number six right now in the portfolio.

Um, a few of the first ones didn't like pan out to be massive.

I mean, we got lucky.

How has been like chipping away and a little bit slower growth out of the gate.

But yeah, I mean, I think you just have to be prepared to on time side and financially and what you're really willing to risk on that front.

Yeah.

I think just to add on the financial piece of it, I don't have an opinion one way or another on what any individual person should do.

I think you covered that really well.

I think agency people think that running a brand is easier than it is because they get to do the marketing stuff.

Um, and I'm not saying this is this was just that said this, and I don't think just as extremely smart, so I don't, um, this is not a knock on him directly.

If you, if you haven't been involved in P and L conversations and ops conversations with clients and helping like guide some of that decision making, you're going to get slapped in the face.

The first time you have to do that now that you're not capable of doing it.

But I think people are under for a little bit of a rude awakening with that.

Uh, and then the cash flow consideration, it's extremely different.

It is just a fundamentally different business model from cash, a cash position and agency assuming you bill up front or with even reasonable 30 day terms, like you have way more cash in an agency business than you probably ever will, uh, or for several years in, in an e-com business.

So I think that just be cautious.

Yeah.

Just to be like very blunt, we got homestead to a million in annual revenue.

And I didn't know how to read a P and L at all, like zero, like that's not possible with the, with the DZ brand.

You need to know exactly where all your cash is and what you're losing money on and what you're spending it on.

Right.

It's just much easier to do in an agency space where it's like, here's how much money I have in my checking account and how much money is coming in based on what we just sent on QuickBooks invoices.

I usually get paid within X amount of period or a few days late, like let's go hire another person and keep pushing up.

So, I mean, again, that's like me saying how dumb I was when I started the agency, but like, it's very, it's much harder to do that properly.

Like Brad said on the brand side.

I mean, I would say that it's also two things.

One is, is like, what do you want to do?

Is that actually something you want to do?

Is it because you want to have a brand because it's cool to have a brand or is this actually something you want to do because you think it's interesting and it's going to add something unique to the world.

That's a big difference.

And it's going to show in the way that you go through and the way that you're working late at night for it.

If you really are like, this is a great product.

And I believe in this and I like this versus I want to launch this because it's a good idea.

The other thing that I would say is, you know, going through and allocating, like if you want to just do it from an agency to say, Hey, I want to have a brand.

I want to get it going, then like have a plan for how you will market it and how it will be part of the journey for you getting more leads in your agency.

That's a lot of people's like, it's like, Oh, I'm starting this brand.

But then it's like, well, what are you going to do with it?

It's like, well, we're not sure.

We're getting it off the ground.

It's like from day one, you'd be posting about it, right?

That's going to be a transparent thing that people identify with because brand owners that could be your potential customers are there or have been there.

And that's going to be a way that you can connect with them right away.

There was a bunch of questions that came in about, well, basically like scaling and how you scale.

And we've covered this in the last episode of like, how do you go through and scale and a little bit of the playbook?

That's a, it's a hot playbook, honestly.

And if you haven't listened to the episode, go back and listen to it.

Yeah.

So it's episode eight.

We're checking out for us to ask how to scale from zero to 10 K 10 K to 100 K.

I will ask what's needed to go from 50 K and spend to a hundred K a day and spend.

And then, you know, Garrett asked, Matt asked, how do you love your campaign structures you're using for scaling and testing and how it goes.

And we've talked about this a whole, you know, obviously a bunch, I would say predominantly it comes down to creative and your systems for getting creative.

Into the, into, you know, the, this into your workflow and not just creative, but personas as well and unlocking new personas and unlocking offer testing and landing page and, you know, CRO testing.

Other things you guys want to say about scaling from one level to another.

A lot of folks seem to be interested in sort of like the, the one K to five K or the 50 to a hundred.

And I don't know that actually they're that different.

Yeah.

I think the zero to one is pretty different than some of the scaling up stuff.

I think at the zero to one, you're just trying to find anything that works that you can lean into.

So generally what that looks like is going wide.

I think Zach has laid this out pretty nicely.

I think in episode eight, when we talked about kind of this, this playbook generally speaking and another podcast, I know he's been on, kind of like laying out, go wide with the messaging, use statics, because it's easier to crank statics out, you can be, if it focuses you to be clearer and more concise with the messaging that you're looking for.

So I think getting from zero to something is just trying to go wide with what can have the potential to work.

And then once you have any evidence of success in any of those things, it's like, in my opinion, it's kind of obsessively focusing on whatever that one thing is.

So if it's a specific persona, how can you get more out of that?

And what we talked about in that episode, just to give you a quick highlight is you kind of take that and diversify the messaging.

Like how can that, that same kind of thing be used across similar types of messaging for the same persona, but maybe slightly different angles of it.

How can you take the static, turn it into a video?

That's kind of how to expand that and get the creative flywheel rolling around that, whatever that is, that's working, match it up with a landing page that is consistent with the message.

Is there anything you could do with the offer that compounds it further?

Can you go into the whitelisting route?

Like there's, there's a bunch of different steps that you can take, but I think zero to one is starting wide.

It's like, maybe you have some opinions on that as well, but I think it'd be interesting for you to talk about the scale part of it.

Five to 10 to 10 to a hundred or whatever you want.

Yeah.

I mean, like we, just this last week, we ran into inventory stuff, uh, back half of June and then finally got in a better spot and we're prepping hauls for fourth of July sales.

So, I mean, when we were looking at the thirds, this was what the fourth was on Friday.

So this was Thursday and meta.

We were spending 32 K a day on that day on the fourth or on the third.

Sorry.

We had one, two, three, four, five, six, seven, eight, nine, 10 campaigns running in our ad account.

And of those, we have one, two, three, four that were just focused on sale campaigns that were basically sale creatives and everything else was evergreen.

We, we break up the campaign by partner whitelisting.

We break it out by product.

Like for us, we might break out like a compression sock versus like a trade sock or whatever.

And then we have our creative testing campaign.

All of those for the most part are ABOs that are kind of like our evergreen campaigns.

And then when it's time to scale them, we'll roll out like a CBO right now.

We're running lowest cost for the most part, almost entirely across our ad account, we had some issues getting cost controls to spend at the rates that we wanted to, but the point that I'm trying to make here is cool.

We have 10 campaigns on Thursday, spending 32 grand in meta on Sunday, the sixth, we spent 76 grand in meta and we killed one of those campaigns off.

So we literally had the same exact campaigns running.

All we did was push budget up.

So I think like in theory, what Andrew said is very right, which is you're going to do the same thing.

You're just going to see the performance that indicates that your new customer rise is so strong on a daily basis that even like in the morning, it's like, Oh my gosh, when your customer is above a two or above three, like we can definitely push here and that just allows you to like push into more spend.

I mean, I think even for Apple ovens or running Apple oven right now, we were at like five grand a day sale period comes around, we double budget from five to 10, nothing complicated.

We have one campaign in there, 20 assets running.

They're the best video, basically reels ads from Facebook and meta ads.

Copy them over to that.

Um, one campaign letter, it doubled it from five to 10, 10 to 15, 15 to 20 over the course of four days.

Again, it's like not that complicated to do.

It's more just about having the right tools in place that the performance is so strong that then you can push it.

It's really nothing more complicated than that from what I'm seeing.

So it's not like we're doing some crazy campaign structure.

It's not like we're doing anything wild there.

It's your normal standard playbook, creative testing in an ABO or in a CBO, let the best ads and the best ad sets pull up the spend and that's really it.

So I think like a lot of people overcomplicate it.

And I think a lot of it comes down to, do you have really good ads?

Do you have a really good offer?

Have you proven out landing pages and then have you killed off landing pages that are maybe pulling down your average row as, cause like that was something going into the sale, we had like eight landing pages running.

We cut it down to three.

So like, these are the top three.

Why would we even spend?

Even if we want to test something different during the sale period, get rid of the, get rid of the nuance, get rid of like the variables and just put it all, put all your chips in at once.

So to me, that's how we think about it.

Usually that's how we scale even over like a black Friday period.

I remember like we had maybe 10 campaigns going into the day.

Some of those budgets, we would just like X and just be like, okay, we're ready to spend, let's see what happens.

It wasn't anything more complicated than that.

So to me, it's more about having those right first variables before you can actually hit the gas than anything else.

Yeah.

I mean, we use the Frankenstein method.

Jizz.

No, I'm just kidding.

You bring things back from where we go near you.

You bring things back from the dead at 70.

Yeah.

That's there.

Yeah.

And they're all $1 different.

And then we use the bolt method.

Right.

The double up triple up method that people joke about on Twitter is real.

Like, yeah, that's the reality of it.

If things are working, you can literally double budgets and things right out.

It's totally fine.

So yeah.

I mean, that's not that exciting of an answer, but that's the truth of what we literally just did this last week.

So yeah.

Yeah.

I mean, to dig into the specifics of the campaign structure question from Matt, like Facebook actually has like some decent meta, Facebook, whatever, has it actually has some like recommendations around this and that Yoni on Twitter has called this out as like, you should have a specific business case for splitting out into new campaigns, just like that.

And that's how we look at it, the lens that we look at it through.

So what that looks like in practice is if you let's simplify it and say you have, you're a single SKU brand, you should probably have one campaign for a very long time until you start to introduce like more offers.

We were talking like you should be spending several thousand dollars a day before I think you need to be branching off into new campaigns and even ad sets in my opinion.

Personally, I'm not a huge fan of creative testing ad sets.

I think they're okay.

But I think at the end of the day, like you can keep it very simple and you start to add when you have a business case to do so, which is you need to hold the campaign to a specific target because it have different margins or it's a different product or it's a limited time sale thing where again, kind of a margin conversation, but have a specific business case for splitting it out.

In my opinion, one thing I was curious, you know, you guys looked like I do too about within and this is a scaling question is like as people are scaling and we got this, this is from, uh, from Garrett going through the bottlenecks that people face.

We all look at a lot of ad accounts and where the bottlenecks are and what you see looking at all these accounts of like, why can't we scale?

I'll just, I'll just go answer my own question first.

This is classic Andrew Foxwell.

But which is like the bottleneck generally that I see is that they keep doing the same thing and there hasn't been any innovation of the things that we've just aforementioned.

So it's like, there's, you know, over and over not trying anything new, hasn't been any new products has driven to the same landing page, you know, like it's, and it's like, why can't we keep turning up the budget?

It's like, well, you know, it's, goes back to what I taught in the scaling course that, you know, you guys took and Zach, the homestead, all your employees tell me that they go through, it's like the horizontal scaling method, which is like, you can't just take one thing, turn it up.

You have to have, it covers a broad base of who you're talking to, why reasoning creative, and then, you know, go that way.

I don't know what other like common bottlenecks do you guys see from scaling from a scaling standpoint?

Yeah.

I have a specific example of mine from a client recently.

Sometimes it manifests itself in different ways.

And I think if you go back to not to like, keep plugging in a previous episode, but like the point of that episode where we talked about the playbook was to give you a bunch of different options for things you can go change because it could, it could be several of them.

It could be one of them.

So I think you have to pick one and kind of commit to doing that.

So let me go into a specific example.

We had a client who basically had like one winning ad, like they had just kind of kicked off running ads founder video doing really well, but we run into a point where we increased budget and efficiency just drops.

And there's no marginal benefit of increasing the budget.

And at that point, it seemed to be the whole was that we needed some additional creative, right?

Like we have one video that's working.

If you look in your ad account right now and you are being carried by one video or one static or one piece of creative, there's likely some potential that you have the ability to diversify around away from that, you know, at a thousand to 2000, 3000 bucks a day, you can get away with one or two, but if you want to get, you know, higher than that, you need, you need a lot more that's making up a 10 plus percent of your spend than just one ad.

So for them, it was, okay, what's the messaging that's working for them?

I was speaking to a specific persona about the challenges that they face, which is very blank away of saying, like, I'll just use a random example.

That's not them old men with really bad eyesight.

Like they needed a solution for this thing.

So we dug into that a little bit more with launching some review.

We took, we took reviews, we turned them into like video versions of the review or it was like an AI voiceover reading the review.

Cool.

Now we've got another additional winner.

Now we have two ads making up 40 or 80% of the budget and the rest of the 20% made up by the rest of the ad account.

And we, we, we once again ran into this issue of we increased the budget.

All that happens is now row as degrades.

We don't actually get a marginal marginal win in revenue.

The next thing that we did was how do we make a landing page that is cohesive with the messaging of, um, uh, just made a five reasons why landing page that pretty much exactly mimicked the flow of the couple of top ads and that up unlocked an additional 40% of spent.

So I think like you'll know that it's happening because you can't push spend anymore without a massive degradation in row as, or you just get nothing additional and you just go, you know, I think you can kind of go chip away.

I'm not a big fan of like using benchmarks and ad accounts for those things, because I think they can be really easily, um, rinsed out, but there's, yeah, I have really no notes.

I think Brad nailed that.

I think it's go back to that episode, listen to it.

We gave like whatever seven different things that could be the issue.

And just pick one a week and try it and see if that can, can unlock it.

Cause yeah, I mean, it's usually offer.

Like if I'm, if I'm being like super straight up, it's like, if you can change the offer and the ad account could turn around overnight, um, and you could push up more scale because now consumers are realizing, Oh, this is easier to understand, or it's easier to unlock or whatever that might be.

So if I had to pick one thing, that's usually the biggest thing that has the most leverage.

We got multiple questions about how you use debt to grow and how do you advise brands to think about this?

Yeah.

I mean, for hollow specifically, um, we've used a lot of debt to get to where we're at now, I mean, we're bootstrap business, um, to go from one to eight to 21 to whatever we'll do this year, 40 something hopefully.

Yeah.

It just takes a lot of money to buy a lot of socks to sell them.

Right.

So I think usually brands are starting out.

They're looking at like Shopify capital, cause it's very easy and accessible.

There's a bunch of other lenders, which, you know, way flyers like our lender of choice, they've worked with us a lot.

There's great ones settled.

There's a handful of them that are there that are awesome, but way flyers been the one that's been kind of there to support us and always been there to like be there when things get a little tough, even some at some point.

So for us with our kind of cash conversion cycle for that business specifically, we buy all of our raw materials at front, which is pretty rare.

Sometimes you can buy a finished good material from your manufacturer because we're making socks out of alpaca.

It's just very unique.

And none of the manufacturers in the U S for one, take that big of a bet on buying millions of dollars of this alpaca yarn that they were like, I don't even know what this is, we had to find a way to do it.

And so that was really our option.

Usually how that works is you have to get to a certain size and scale out of the gate to kind of prove that you can produce profits.

So for us, it was like a million five, our first year, I think we did like 200, 300 K to the bottom line.

And at that rate, we were, we were basically saying, Hey, We can do this at more scale we're profitable in our first real year here.

We just need more dollars to go buy more product to keep growing.

And I'll be like, very honest, like it was definitely much easier in years past to get debt as consumer in general was just healthier.

The market was healthier.

Things like that.

A lot of these lenders were much more easy to just hand out dollars to say, yeah, go grow, go grow your business.

Now it's very profit driven.

You cannot not be profitable and go ask for debt.

You have to be profitable and have a path of continuous, continued profitability.

For us, I mean, it was in the beginning and it's kind of a little bit of Shopify capital, a little bit of money from way flyer, using credit cards to try and like work our way through, uh, pushing back payments on fulfillment costs or ad spend or whatever, but, um, I mean, for us, we absolutely needed it to grow to where we're at now.

I mean, we couldn't, we just couldn't have done it.

If we tried to just bootstrap our way, we'd probably be, you know, and maybe 8 million this year versus, you know, two, two and a half, three years ago.

And I mean, the truth of it is it's risk tolerance too.

I naturally have like pretty high risk tolerance.

And pretty high conviction in myself, Brad is, you know, I think Brad and Andrew can definitely confirm that, but that's where a lot of it comes.

Like you have to know where you're going to allocate those dollars and how you're going to pay those people back.

Otherwise, you know, you, you risk losing the business.

I definitely wouldn't be where we are either without like our head of finance.

Jacob, who's just been an absolute savage at this stuff, building incredible cashflow forecast, incredible like modeling, um, to help these lenders understand how we think about allocating their dollars and obviously returning capital back to them.

So yeah, I think risk tolerance is a huge part of it.

I totally agree.

Brad, any notes on that?

Hey, this is Andrew Foxville and I'll tell you one platform I'm testing now is Roku.

One thing I love about Roku is that it's the number one TV streaming platform accounting for 47% of all streaming time in the U S as of 2024 and reaches 125 million households from the Roku home screen each day.

It integrates with Shopify, which is pretty cool.

You can literally have someone shop.

On their TV using Roku with Shopify.

The targeting is on point.

You can use custom audiences has, you know, pretty legit demographic drill downs.

You can have a pixel as well to track success.

And if you spend a thousand dollars testing it, they give you a thousand dollars of credit using code Foxwell.

You know, it works like one D to C brand that I'm aware of increasing conversions by 25% using repurposed social video ads, which is pretty cool.

And another D to C brand saw a 3.3 time row as from Roku movie, you know, using a triple M to prove it.

You know, if you're not doing anything else, you can also just remark it to people on your list, using the custom audiences feature, taking pre-existing social content and putting it right on Roku and running it to make sure that you're in front of as many people as you can be, or as many of those customers as you can be in Q4 and Q3.

So hopefully you will give it a shot.

If you're interested, go to foxwelldigital.com forward slash Roku and go ahead and click to get started.

So we have some questions that came in about like starting out where, what would you do?

So I'll ask, uh, I'll ask you Brad right away.

If you, this is from Sean G Sean G.

If you were launching a new D to C brand from scratch, would you choose a product with tight seasonality windows with high first order value, but weaker LTV or be an evergreen product with lower first order value, but stronger LTV over one to two years?

Curious what you think is trade-offs.

I obviously have my answer for Brad.

Yeah.

I mean, I lean towards the better LTV just because you'll have more consistent cashflow throughout the year.

Like at the end of the day, though, like both have, I think Alex from Ozy says this, like all businesses have shit or something.

So like they all have it.

Like your acquisition costs are probably going to be tougher on the evergreen products because you're competing with a bunch of people throughout the entire year who probably have something similar with a tight, it's hard without like a specific product in mind, but a product with tight seasonality window, high, high first order value, meaning like what is high, you know, we work with clients who have a $5,000 first time AOV and like, yeah, that's great, but you know how much you have to spend in order to get that customer.

It's like you're spending $2,000 to know if an ad's going to work.

Whereas like a $40, a $40 AOV, you can, you can spend the same and you're out of learning and ripping really fast.

So I would lean towards the lower first order value if it's kind of something that you're just getting used to, unless you have a really compelling, unique advantage to for the higher AOV product, because it's probably more competitive, but you can learn substantially faster.

And I think the cashflow would probably be better as a result of that, not to get like super fluffy woo over a second, but like, I think there's important considerations for like having your like benchmarks for what is a good business, high margin, high LTV, whatever, depending on the category.

But it also helps like really enjoy the category or be somewhat involved in the category.

So you have some kind of unique advantage in that way of like how to talk to people, which is ironic coming from an agency where we work with the brands across a bunch of different things.

But yeah, that's, that's where my gut says is the latter of the, those two.

You know, what I'm doing is I'm going to start, I'm going to start a box subscription company.

I don't know if you guys have heard of these, but I'm bringing it back from 2010 when they were hot.

Hell yeah.

It's going to be incredible.

It's going to be a subscription brand curated goods.

Curated goods that you throw away after three months and it's going to be incredible.

Your 90 day LTV is great, but after that cooked, that's what I'm going for.

Yeah.

I mean, obviously we have brands now kind of that fit both of these categories.

And if I'm going to do it again in the future, it's definitely going to be number B, like it's going to be the higher LTV subscription, heavy business for the reason that you can like stack wins.

Right.

And I mean, like a lot of these brands that are one time purchase, getting someone back, you know, 30% of people back, even in the first year is like a good accomplishment, let alone can you get 50, 60% of people to buy again the next month with a subscription business, like pretty likely to do that.

So yeah, I think that's the move.

I think you just have to take into consideration the cashflow of that model, which is you're likely going to lose money on the first purchase and inquiring that customer, maybe not at a very small scale.

So you can be profitable on first customer acquisition of a low way of the high LTV product, but with more scale, that's definitely going to get inverted from any brand that we've ever worked with or own now in that ecosystem.

So you just have to kind of build that into your cashflow model of losing money on the front end and banking on the LTV.

So yeah, that's definitely the move though.

If I had to choose.

So let's get to like a market research kind of question about what percentage of revenue should be spent on total marketing costs at different revenue sizes.

What is a good profitability percentage goal at different stages?

We've talked about this on another podcast.

I know that this would be, you know, marketing spend includes marketing salaries, ad spend, subscriptions, free product, agency fees, et cetera.

What do you guys think about this?

I'm obviously looking at a lot of different brands.

Do you want me to go first, Brad?

I can go first.

Okay.

Let's just talk about a million a year business.

Then we can go 10 and then we can go like 50, right?

Million a year business.

I would think you're going to spend 400 grand on marketing.

I think you're going to probably put 300 grand.

So 30% to cost of goods slash cost of delivery, maybe even 40%.

So 400 K to that.

And you're maybe going to put 10% to the bottom line.

And that doesn't include like salaries, stuff like that.

A million a year business is really, really hard in Ecom.

It's just hard to make that work unless you're like a solopreneur or you have like a couple, maybe a freelancer or two at that scale, it's just very hard.

It sounds like, Oh, a million dollars.

It sounds great, but it really, in theory, it's very hard to back out once you start to factor everything else in.

I would imagine at that rate, you're probably going to spend, you know, 40% of your revenue.

That number can probably stay fairly consistent, even at 10 million a year.

If you're calling it marketing salaries, marketing budget, influencer, content, creative, all that stuff all included.

I think like the standard that we like to see in our clients and even like with our own brands is like running at like a three M E R.

So call it like somewhere in like the 30 to 35% range that kind of fluctuates on a monthly basis is what you're spending on ad dollars.

And then ideally you're in the 10% operating expenses range.

Like that's 10% of revenue is kind of the sweet spot of where you want to be.

Um, so it's 40% and then cost of delivery, probably still landing around 40% to get the, you know, products, the customer's door.

So in a sweet spot at 10 million a year, you're probably 15% that profit would be a great target to shoot for.

Um, 10 to 20 is probably like where we see a lot of brands sitting.

So one to 2 million of EBIT on 10 million of revenue would be a great business.

And then you push it up to 50 million.

It all depends on like, if there's retail distribution or not, that'll definitely factor into like your margin at that point, assuming you're all D to C shop for Amazon, even if you're like 70, 30 split 70 shop, 30 Amazon.

I mean, you're probably running still at like a three M E R at the end of the day.

You're probably still spending 30% of your budget on, on, on advertising, especially if you're trying to grow at a decent clip.

Um, so yeah, I don't think that really changes a ton.

I think it more depends on like how you're optimizing your operating expenses and not trying to scale those up.

Like if you can be below 10% OpEx at 50 million a year, you're doing great.

And if you're also spending less than 30% of your, your revenue on advertising at 50 million year, you're probably doing really great too.

So I would say that's kind of the baseline is kind of this like 10% OpEx, 30% to cost of ads.

That's 40%.

You're probably 40% cost of delivery, meaning like the cost of the COGS, your product land in the U S pick pack ship fees at the customer's door.

Maybe there's duties involved depending on if you're shipping international, that's where you're like 10 to 20% net profit kind of sits.

Anything below 10%, you're like too tight on cashflow.

Like you're not producing enough profit to even like cover cost of interest, things like that below 10% and then anything above 20%, you're likely not pushing enough growth unless your goal is like just kind of stabilize and just be really profitable.

But for most brands that are trying to grow at 50 to a hundred percent year over year, that's usually what we see.

Yeah.

I mean, I think you did a good job of going through the true cost.

I think there's an idea that a lot of people feel like they're, that number is different.

I mean, and let's just say that the one that we see often, right?

Which is the one to 10 million or the two to 10 million, right?

Which is, I think the most common one we see or in there are exposed to, which is that there's going to be more money at there at the end of the day.

And the reality is this is not the case today, especially if you're going to try to be a high growth brand.

So I think, I think the other thing that I'll just like hit on, which I think is an interesting point, Brad might have some notes here is like how much money you're actually taking home as the business owner at that rate.

Okay.

So 40% goes to taxes.

So there's 400 K boom gone.

Then we have investing money back in paying for interest.

Okay.

That comes out.

I mean, you're probably still only paying yourself like low six figures.

If that, you know, so it's, it's crazy how much you really have to do in profit and e-comm for it to really kick out.

And this is where like a lot of people talk about the agency model.

They just, it's great.

It's very high cashflow, much easier to take cash out of the business because you don't need to reinvest it back in to buy more things that often you can definitely grow, you know, your team and people at a steadier clip and a steady pace, but yeah, when it comes to e-comm, like that's probably the biggest misnumerators people are like, Oh wow.

They're doing 20 million a year in revenue and they're doing 2 million or 3 million in profit, like that owner must be killing it.

He has, he's got to have Ferraris and all sorts of crazy shit that owners at 20 million a year business doing 3 million in profit is probably making 300 K max.

Like max max, which is kind of a crazy concept to think of.

Yeah, which is still great on where you live.

Yeah, right.

You might be balling it up in Appleton, Wisconsin, you can kill it at 300 K in LA or in Foxwell's new home.

Santa Barbara, that is not, that's not going to go very far.

You're not getting guac on your Chipotle.

If you're in Santa Barbara, you are not, that is not going to work.

Yeah.

Anyways, I just think that's an interesting and important thing to call out to on that.

Yeah.

Just one small side note to just add is like, I think, um, I think for a while people would be shocked to hear that you're spending 40% upwards of 40% more in some cases of your revenue on marketing.

I think people are really shocked by that.

And I think that's just like somewhat the reality unless you have a really unique, you know, you have strong LTV, you have, um, some kind of like organic moat, like there, there's a lot of things that could factor into that, but, um, it's kind of the, kind of the barrier of entry at this point, get used to it.

And that's the thing I think that, that also, that number has changed significantly, okay?

Like, you know, it used to be a different ball game.

And I think that that that's the reality of today.

And so that's why it's important.

I think to talk about a Forex row as back in 2019 was a thing.

It was just like, yeah, we're ripping it.

We're at four.

Cool.

Sounds good.

I'm not even that excited.

Six, seven.

I get excited.

Now it's like seeing those numbers of four.

M E R like 25% ad spend of your revenue is like, wow, they're killing it.

Yeah.

If you, this is, I know we have an episode where we like pick fights with people or not an episode, but there's like a segment at the end.

So I'm going to pick a fight really quick.

Yes.

Be some of the pull beefs ahead a little bit.

If you see somebody post a screenshot on Twitter and they are running meta ads that higher than a 10 X they are full of shit or they're not spending enough money.

Like full stop.

There's basically zero argument against it.

Um, you should question that.

And if it's, if it's substantially higher than a 10 X, they are lying.

Pure like flat out, they're lying.

So just going to throw that out there.

My, that's my, that's my lead magnet for the founders membership is a 10 X screenshots.

50 X 50 X.

Yeah.

If I stopped there.

Yeah.

Yeah.

Yeah.

Remember back in the days when I ran all the paid media for, um, peer Vita bracelets.

And I remember they would get like, you know, 10 X it was like constantly.

Right.

And I remember they, there was a week period that they never responded to me with words, uh, it was only fire emojis.

And that's all it was back in the 10 X days.

So one person asked a question about financial realities of growing and the realities of growing a business super fast versus sort of bootstrapping it.

And I think one, this, there's another person that has kind of a related question, which makes me think about what are the realities of running a business as a brand owner or as an agency owner really, but as a brand owner, since this podcast is for seven eight figure brand donors, primarily that isn't talked about.

Like, what are the realities of this that people just don't talk about or get into?

And when you're in person with people, Zach, or you're in person with people, Brad, or like you're having an honest conversation that you're talking about with them, what are the realities of this that you guys see that feel like aren't discussed ever?

I think a lot of entrepreneurs are pretty broke until they have an exit.

I think it's like one of the biggest things that I've had a lot of conversations about with people, no matter what, whatever category they're in, specifically brand owners, though, they're not killing it until they sell a business.

Usually for the most part, especially if your business is under 10 million a year in revenue, it's really hard to like really put a lot of dollars in your own bank account.

So that's one thing.

The second thing is like, people see all these brands that raise VC money and they're like, man, the owner must be making millions a year.

Usually they have a board and usually that board is like, nope, you have a salary and it's capped and they don't like seeing the owners taking wild distributions out of those businesses.

So I think that's another thing that a lot of people have like a misnomer about of like, Hey, they raised all this VC money.

They must be, this owner must be making so much money.

Not always true.

I've definitely learned that by having conversations with brands that are, are VC backed and they're like, yeah, I'm going to set salary.

I actually like make more money on the side freelancing or some shit.

But, um, that's, those are kind of two unique things.

Brad, what do you got?

Yeah.

I mean, I think that we talked about it earlier.

It's like the, just the cashflow considerations, like you don't just get to pull out a bunch of money whenever you want in a lot of circumstances until you start to hit those, those thresholds that you mentioned.

I say this with a lot of love for everybody that does this is as somebody who's literally on a podcast right now, it was like, there's a reason a lot of brand people do podcasts, like their knowledge is extremely valuable.

And like it, if they can get sponsorships, great.

Like there's no, there's no cost associated with that other than their time.

And if they have the access time, like cool.

It's great to get a nice paycheck from, from a sponsorship thing, knowing that, um, like the brand, whether for growth reasons or because it's not big enough.

Yeah.

It's like, you just can't pull cash out.

And again, like I don't think there's anything wrong with that.

I have no shill sass all you want.

Like we'll probably be doing it.

So like, I have no concerns about it.

It's just like, there's a reason that it happens at the scale that it does.

And, um, I don't think it's, I don't think it's good or bad.

It's just this.

Yeah.

Yeah.

No, it's, it's rare to see.

I mean, like, I think the standard from what I've heard is like, at most people are pulling like 20% distributions of like monthly net profit.

If you got multiple, so here's another thing.

If you got multiple co-founders, you'd really got to break that number down.

Right.

I think a lot of people don't think about that.

They're like, Oh, I'm going to start this business.

We've got like four awesome co-founders with me.

It's like, you realize that how much profit you're going to have to do in a month to take a meaningful distribution is really going to get pretty small, especially with more cooks in the kitchen.

Yeah.

You said, are you going to be driving that use Prius in 10 years?

If you're going to do it.

Yeah.

I think a lot of it too is, um, obviously I think about the stuff a lot from a people angle, cause that's where I have a lot of, I think a lot of people that have a business that are in that phase is they're lonely.

They just don't have a lot of people to talk to that they can be really real with.

I think that's one.

And I also think that there's a degree to which momentum keeps them away from what they actually want to do.

So the momentum is, is leading them in a direction and they don't necessarily, don't take the time to assess and like look at their life and be like, is this what I want to be doing right now?

And if it is, I need to be innovating on the product or I need to be changing the way that we're thinking about the operation of this, right?

And they just kind of like keep it going in the momentum ads.

And then usually more, more workload gets added and then they find themselves really burnt out and upset and then they're just upset for a long period of time and, and feel like they don't have control.

So I think that's a big one that you have to go through when you're always thinking about that.

That I think is just like a good call out is Roman Khan, who runs like a old co absolute G killing it.

He shared with me that like one big thing that he's trying to do now is trying to find a way to take a bigger percentage distribution of his EBITDA.

He's like, I think a lot of business owners just go so full bore into like, gotta reinvest, gotta reinvest, gotta reinvest that they never take the time to say, what if this business falls apart one day and I'd not take enough money out of the company.

So I think like slowing down growth to focus on profitability and figure out how you can take more money out to actually like put some money aside.

I think a lot of brand owners get, like you said, kind of get stuck in that Hampshire wheel of like, gotta keep doing, gotta keep doing, gotta keep doing that.

They don't really actually slow down and say, Oh, I actually could take more out.

If I was meaningful with the dollars in the business a little bit more, if I spent a little bit less money on software, a little bit less money over here.

Maybe I hired off shore instead of domestic for my next three hires.

I could actually end up taking a little bit more money out of the business.

I think a lot of brand owners need to like pause, look at their cashflow P&L and try to do that because yeah, it's hard and not every brain gets that, gets an exit, right?

So if everyone's just waiting for that one day, I think it's, it can be pretty brutal.

So that's, I just thought it was like good advice.

He had a manager for like within the last week, probably a couple of weeks when this comes out and it's great.

Like he talked about some of those things exactly.

And somewhat specifically about how he's doing it.

So you should just check that out.

It's great.

Sweet, sweet.

Why don't we do that?

All right.

And final question is what's the biggest load of shit that you hear in DTC that, that, that you disagree with or agree with that you agree with that shit?

What do you guys think?

He started my beef.

So like I, I saw, maybe I should let you guys answer the beef's question.

Do you have one, Brad?

You have one?

Go for it.

No, I mean, I just think like one of the, one of the questions I was in here from, I'm sorry if I mispronounce your name, Danivir, but like he kind of, he kind of said this is like, what do you see on Twitter that you like is kind of full of shit.

It's like a lot of it.

It's like a lot of it.

Like a lot of people, a lot of people are trying to build a following on Twitter and they say things that are not like totally validated.

So you just need to be cautious.

Like I say that knowing full well that we're three dudes on a podcast, just like sharing what works for us within, you know, whatever.

So, um, I think it just, yeah, he'd be somewhat skeptical.

I think it's cool to get ideas from people, but you can't, you can't possibly test everything at all the time.

So just, uh, yeah, maybe, maybe just be a little bit more skeptical probably.

Yeah.

I think that one of the bigger things lately is like, obviously we focus so much on meta and it's like, you can only scale your business on meta.

Talk to a brand person the other day and they're, they're doing volume, like call it, what is this?

Tens of millions a month in revenue.

And they spend little to nothing on meta.

So it's like, you can still have other playbooks that can work.

I mean, these guys do crazy affiliate stuff.

They do a ton of stuff with tick tock shop, driving traffic over to Amazon.

I mean, there's definitely no one size fits all playbook that everyone has to follow.

And if someone says like, this is how you grow a brand, like just know there's going to be a bunch of other ways that you probably can go about it.

I also think like you also just have to tap into what you're good at.

If you're good at ads, cool, then build your business off of Facebook.

Like that's what, that's what we've done.

So I've been running Facebook ads for a long time.

That's what we know best.

We don't do anything on tick tock right now for any of our brands, but there's people that are putting up numbers, doing that stuff too.

So I think like one size fits all like takes like, that's the classic, like, that's smart.

Yeah.

So generally, I mean, that's kind of soft, but that was, that's the one thing I can get annoyed by.

That's true.

I mean, I think that's true.

You know, to me, I would say mine is a little bit related to what you, what you guys have both said, which is, you know, I think the people that are really successful that I learned from, and you know, I've been doing this work in DTC e-com for like, since it was invented.

So I'm old now.

I just turned 40.

You know, so like the people that I take inspiration from, you guys, of course, but other people, they are putting one foot in front of the other and like building brick by brick and that they have this mentality where they're planning the work and they're working the plan.

And I know that sounds like really, you know, out there, but there's so many people that pop up that they're, you know, trying to get leads and they're blowing things up and they're putting out this and that and whatever.

And it's like, there are exceptions to this, but most of the time they're a flash in the pan and they're not the people that are out there consistently doing the work.

And the other thing is all of these people that we all know that are well known in our industry, including us.

There are like multiple people under them that are also, or with them that are also doing the work and that are really smart and potentially smarter than them and, or than us, you know, like my team, right?

They are smarter than me.

And I love that about them.

Like they do, they put in incredible work.

They're great people and they're doing it consistently.

And that's what makes us great.

We're just stacking wins one thing after another.

This is the mission.

And I think that there's a lot to be said for that.

And I think if you read through, you know, successful businesses over time, you know, everybody loves a very unsexy business and I think that there's so much focus in ours on sexy businesses.

But like, that's not true.

There's a lot of these people that are out here just one thing at a time.

And I think that, that is the people that you're always trying to find, right?

That are like digging in and, um, you don't need to be a person.

You can't be a person that's out there giving advice and giving thoughts.

If you aren't hearing from people 70% of the time and listening 70% of the time.

And that's something that I've certainly learned as well.

Yeah, I think there's time.

Totally.

One other thing, one other thing.

And I'm just now kind of ranting about that.

Maybe we should start fights.

Yeah, the last thing I'll have to say is that when things are good, all the big dogs are talking, right?

When things are hard, they go away.

Um, and not calling myself a big dog by any means by saying this, but like we went through a really rough period last spring for hollow.

It was brutal.

Like I thought maybe we would lose the business even.

It was pretty scary.

We just over index.

We had a super like weather was completely set off like our sales and our velocity of what we were planning to sell and what we ordered versus what we didn't order of inventory.

It was definitely scary, but I like just got off of Twitter for like three months.

Cause I'm like, I just, I can't be out here talking about things being good when things are not good.

And I think when there's people that are always posting about things are good all the time, like you can usually, you know, call bullshit.

Cause it's not, it's not the truth.

Um, so that's just my other point is like give people kudos that share the L's also, um, versus just always out there flexing, which I'm, I do sometimes cause it's, you know, it's fun and it's, you know, I love to kind of like hype the people up a little bit, but, uh, yeah, yeah, it's, it's definitely the real thing though is, you know, it doesn't always have to be, that's what's always, that's what's always so funny is because everybody knows you as Zach from, from, from X, but in real life, you're like actually incredibly good friend and sweet person, which you're not like out here flexing like crazy.

Even though when we had dinner last week, I did notice that your license plate says D to C, which is pretty sick.

Yeah.

I mean, what else can I make though?

You know, there's three of us in Wisconsin that do this.

So you gotta, you gotta let the people know.

Gentlemen, good to be with you.

As always, you can feel free to email me, Andrew at foxaleligital.com or DM the guys, and they may look at their direct messages, but if you actually want somebody to read it, send it to me.

I'm happy to look at it and hear from you and please rate review, share this with friends who really appreciate everything you guys do by listening and keep questions coming.

Everyone have a good rest of your day.

Yeah.

Thanks guys.

See you.

This episode is brought to you by Homestead's email and SMS service.

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