We Just Paid Off $1,000,000 In Personally Guaranteed Debt
Sorry guys, I meant to send this last night but some homeless guy cut the fiberoptic cord outside of my apartment building which led to the internet being shut down on the entire block from 3PM to midnight last night.
Kinda crazy and sad how life is without internet. Remember being a kid and being bored? Like sitting on the couch, having absolutely nothing to do, and just being stuck with your thoughts. Not aimlessly scrolling to fill every empty second. Yah that was me last night.
Anyways, I’m starting this week’s newsletter with MASSIVE NEWS.
The Founder’s Club:
We are officially starting the Founder’s Club. We’re building an online and in-person community for founders, created by founders. No sales people, no people trying to sell your services, a place for founders & industry leaders to meet, connect, and share knowledge.
What will be involved?
🥂 Exclusive access to in-person events
🖥️ Slack community broken down by cities to meet new local friends
🎤 Monthly mentorship and speaker sessions
🔥 Much more that I can’t announce yet
Want to be involved? Take 60 seconds and fill out the link below.
Why Did We Get into $1M of Debt?
About a year and a half ago CROSSNET was dealing with some crazy growth that we honestly had no idea how to navigate. Sales were looking good, employee costs were rising, and Walmart came to us with a million-dollar order. We thought we were crushing it but tons of bad things were eating our margins behind the scenes: acquisition cost doubled, retailers started stealing our DTC sales, container costs shot up to $22,000, and inventory got more expensive.
So what did we do?
We took on a $1,000,000 personally guaranteed loan from JP Morgan.
For those of you that don’t know a personal guarantee is when you have a principal obligation to pay the bank back regardless if your business goes bankrupt or not. This means that even if CROSSNET failed, JP Morgan could still come after me personally for all my cash, all my assets, and essentially force me to file personal bankruptcy if it got that bad.
I’m proud to announce that this week we have officially paid off JP Morgan and the debt has been canceled, leaving no more personal guarantees on the company. I’m sleeping a bit better knowing my french bulldog won’t be put up for auction on Facebook marketplace.
So What Would I Do Differently?
Good Sport is growing fast. Very fast and I’m so excited. Last month I was scared we were going to run into the same growth issues as CROSSNET, as we’re producing 10,000+ units at a time and this requires cold hard cash.
I’ve learned the hard way that its better to have liquidity options avaialble to you before you need them. When you’re desperate and in need of cash, nobody wants to help, and if they do they are coming with some crazy interest rates.
Always raise when you’re in a position of power & strength.
Here’s what we did:
Find 2-3 trustworthy credit card vendors. Our stack is Rho, Divvy, and Parker. We have a rep at each company that we can personally work with to scale up our credit lines, better understand rewards, and strategize when to use each card.
Apply for as many inventory & supply chain financing options as possible. Some that we’ve used in the past include Kickfurther, Rosenthal, Dwight, and a few others. These tend to be much cheaper than Shopify or Amazon capital.
Short term debt is expensive. Don’t get caught up in the lingo of 6% interest for 90 days. That’s actually 24% APR and actually more expensive than putting shit on your credit card
Do yourself a favor and go follow this Bi guy. I don’t know him personally but he’s way smarter than me at business finance and is always posting gold like this.
How to Keep Over 2,000 People Happy
If you haven’t seen we dropped a new game called SmashNet a few months ago. It’s dope and people love it. It’s actually my favorite game we’ve ever put out, maybe cause I suck at volleyball.
Sales have been incredible and we’re projecting to sell 100+ a day in just a few days. Not bad momentum for a brand that just launched. Not to mention we’re doing it profitably at a 4 ROAS.
Sounds great right? Well here’s the problem. We have way oversold and now have over two thousand customers are back ordered. It’s an angry mob, that grows by nearly one hundred people every day.
So how are we slowing the mob? We’re using Wonderment and it’s been a game changer from a clarity perspective perspective for our customers.
After they place their order they now have this beautiful post purchase page that shows them what they ordered, their expected order status, and also a section for us to incorporate upsells & FAQS. For the past 30 days we’ve been showcasing our games, but I just saw an awesome idea to offer some discounted upsells here post purchase since you’ve already paid the acquistion cost of the customer.
Back in peak COVID, we had over 45,000 customers backordered and wish a tool like Wonderment existed. Sure we made alot of money, but I’d say its pretty safe to say that 95% of those customers never bought from us again due to shitty customer service.
I read a stat that said 82% of customers say they wont buy again from a shitty experience (we can thank Amazon for this). This week we’re finally getting back in stock and I can proudly say we only have had 32 cancelled orders out of the 2000+ that are sitting in the que. Yes, $2500 of lost revenue sucks but without Wonderment I bet this would have been $20,000+.
It’s taken me almost five years of building and $30M+ of revenue to realize that investing in the customer experience is a strategic advantage and it will lead to less returns, less tickets, and less support costs, all things that lead to a more profitable business and more money in my pocket eventually.
Numbers Don’t Lie
Yesterday I got off a consulting call and it truly shocked me at how many people are running a business completely in the dark. If you don’t fully understand your product costs, warehousing, and overhead, then how could you possibly ever be able to grow your company in the right direction?
Here are some things that are important for those living in the past:
We are now in 2023. What worked in 2019 & 2020 probably doesn’t work anymore, so longing for the glory years or trying to bring back that magic is just a waste of your time. CROSSNET had $2M+ in the bank account back then, I should have bought myself a mansion instead of inventory. I didn’t, shame on me, but I gotta keep it moving.
Influencer marketing is not going to save you. Our best content almost always comes organically from super fans and customers. Gambling thousands on some influencer was a strategy for the old days. I’d much rather spread my chips out across some young Tik Tok creators hoping that one of those videos will go viral for a fraction of the cost.
Your company is doomed from the start if you aren’t pricing your products correctly. Obviously, it depends on each industry, but you should strive to have your retail cost to be between 4-6x what your cost of goods actually are. If you’re bringing in a $20 product and selling it for $40, you’re never going to make a dollar.
Gone are the days of having multiple agencies. We used to spend $5K a month on an email agency, facebook agency, PR company, and Amazon agency. We’ve brought the majority of that all in house for 75% less. More attention, more hourly work, and working with 1-2 people who actually care and want you to grow.
Free Workshop Call - Next Thursday
Thanks for tuning in for this week’s version. Wherever you are in the world, please say some prayers for my New York Knicks tomorrow night. We desperately need to pull out a game 6 win to keep our season alive.
As a way to pay it forward to now over 15,000 subscribers, I want to host a free workshop call next Thursday at 3PM EST. For one hour lets get together, ask anything you want and rip me with as many questions as possible. I’ll be doing these more frequently and bringing on guest speakers from all different industries.
Want to join? I’ll be capping this session at 25 people so send a response back here and I’ll send you the Google Meeting link.
Have a great weekend and don’t forget Mother’s Day is on Sunday!
See you next week,