- CROSSED Commerce
- Painful Lessons from 4x'ing The Business in One Year
Painful Lessons from 4x'ing The Business in One Year
Oh, baby it’s almost the end of the week! If you’re like me you’re itching for Christmas and the holiday shut down to come. I’m taking Friday off to head to an AirBNB in Marco Island, Florida. This year we’re shutting down the office from the 22nd until the 3rd.
2023’s been a good year, so I’m taking the family (my wife’s & my own) to this big ass house right on the beach to unwind for four days.
Going to be sick. First time the twelve of us have all been in a house together for that long. Wish us luck and send me board game ideas I can go buy at Target today!
The concept of this week’s newsletter is GETTING BETTER.
If you’ve been following along week over week you know this year we turned our shit around.
We got profitable. Not by much. But we did.
We leaned the team out and adjusted the work balance from having 25 employees to just five.
We stopped spending money in months that we know historically didn’t work.
2024 will be the year of rebuilding our financial model and spending more time on strategy.
I loved this tweet from Matt Bertulli, one of the smartest minds in our little ecommerce bubble. He’s so right. If you have a shitty strategy that doesn’t allow for profitability, then all the hard work, brain power and good systems are essentially useless as your fighting an uphill battle.
My personal 2024 financial goal for CROSSNET is to chop our debt in half while finding ways for all three owners to take meaningful owner’s draws. If this means reducing topline revenue by 30% and making more per order, Im completely cool with that. We’re building out the model now and will tag you in with some live sessions as we do it.
So how do we get better? Let’s get into it.
Want to ship more winning Facebook & TikTok ads?
This year is about stepping away from the computer screen and strategizing. Like my mom always said “think before you speak”, the same should be true but 10x when putting anything in motion or spending the company’s money.
I’ve been reading the DTC newsletter, Thumbstop, to learn new creative and analytical skills every Sunday.
For the first half of this year, CROSSNET had one large problem. We weren’t shipping enough winning creatives to scale our ad account. We legit relied on 1-2 top performers and scaled them up until they lost efficiency.
The solution: Get your team to subscribe to Thumbstop, a new weekly newsletter covering everything creative strategy.
Every Sunday, you’ll learn how to bridge the gap between media buying and creative, helping you ship more winning TikTok, Facebook, and YouTube ads.
My guy Daniel Murray, the Founder @ The Marketing Millennials says it’s “A must-read newsletter if you work in advertising.”
⚡️ The Art: creativity cheat codes, trending ad formats backed by Motion data, and how to build creative performance teams the right way.
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Past issues include:
⚡The Barry Hott Ugly Ads Edition which revealed the science of getting past people’s subconscious ad blockers.
⚡ The Sarah Levinger Psychology-Based Creative Edition showing how to properly use psychological cues in your advertising.
⚡The Alex Cooper A-to-Z of Ad Production Edition giving teams a relentlessly practical guide to ideation and iteration.
I was on my weekly Founders Club catchup call and was talking to my guy Dan from Coldture yesterday and he mentioned that their 2024 goal was to 5x revenue. Good or bad idea? Your call.
We then got into it and he told me exactly how he was going to achieve it. New revenue streams, cracking into wholesale, massive partnerships and new products.
He then asked our goals and I told him about our bottoms up plan on how we work backwards from desired profit, operational expenses and then build out a plan on how many units we need to sell at what profit ratio to see if the goals are achievable and realistic or not. It's awesome to wake up, look in the mirror and say fuck yes we’re increasing 5x but is it actually worth it and are you prepared to do it.
Here’s how we’re doing it this year. We have a master spreadsheet called 2024 Master OpEx which breaks down our monthly spend for the following divisions. I’m also adding examples below so you can start to visualize.
Marketing: Shopify, Sendlane, Amazon Agency, Product Giveaways
Operations: Cin7, SPS Commerce, 3PL Labor, GS1
Events & Promos: Trade Shows, Flights, Travel, Volleyball Events
Sales: Dicks Line Review, Flights, Hotels, SPS Analytics
Product: Product Development, Patents, Samples, Product Testing
Finance & Compliance: Finaloop, Quickbooks, Numeral
Other G&A: G-Suite, Slack, Legal
For some reason, we didn’t have our employee salaries & deb in this calculation last year so we’ve decided to add it to this report so we get a full understanding of what our monthly burdened costs are.
From there we have a full understanding of how much money the business needs to bring in each month in PROFIT to cover our overhead. One of my biggest mistakes we ever made was justifying agencies or marketing spends saying “oh this thing cost me $3k and we brought in $3k in sales, so we broke even.” No you didn’t dumbass. The $3k in sales, probably only yielded $750-1000 in profit so we’re actually out $2k from this experiment. Do too many of these science experiences and you’re out tens of thousands a month!
Evaluate Your Savings & Potential
Perfect. Now that you have all your expenses broken out its time to ask yourself three questions:
1) Can we meet our overhead every month if nothing changes right now?
2) Going through the op ex stack is there anything that you can cut, negotiate, or flex on and off based on the seasonality? We turn agencies on and off based on the summer, downgrade tech (Shopify Premium to basic), etc.
Your goal should be to reduce your operational expenses as low as possible while not impacting the company’s revenue and productivity. Sure you could delete a software that costs $500 a month but if it means your employee that runs that software now has to work an extra 20 hours a week thats a pretty stupid idea and costly for the business. This is an exercise to cut fat.
3) Alternatively, your goal in 2024 is to grow the business. With that comes new expenses. What are they going to be? Headcount? Product creation? Advertising? For us, our #1 line item is money allocated to content creation & creators. Can you even afford these growth levers?
What’s a Good Rule for Growth?
Back to my conversation with Dan, everybody will grow at a different rate. Everyone wants to 5x and that’s 100% possible with the correct amount of focus, planning, and strategy. For us, we had a year where we jumped from $2M to $9M in revenue and it was the most wild feeling of all time.
The growth was incredible, profits were nuts and we should have sold the business a few months later. Instead we had to learn how to run the business when the “COVID effect” slowed down and we had all these fat operational expenses we couldn’t afford when revenue slowed down.
It’s kinda like that saying “with great power comes great responsibility”… with more revenue & more growth comes more areas for mess up and if you grow to fast you’ll get caught over your skis. Not only did we 4x growth, but we had NO IDEA how to move a unit at a retail store and constantly fell for retailers trying to pressure us to spend more money on ads. All while increasing salaries to over $1M/year. The joys of being young.
Slow and steady.
I’ve been sharing these mistakes and lessons weekly with the squad over at The Founders Club. We’d love to have you when we start doing new member interviews in January.
That’s a Wrap 🎁
That’s all for this week! Got about 24 hours left of productivity in me before I’m floating on a raft with my mom and tipping her over. For everyone who’s been asking to send me a Christmas gift, I’ve been enjoying LEGO sets so just send them over here… hahah nobody has asked but if you wanna pay it forward :)
On a serious note, go check out Thumpstop and subscribe to the newsletter. It’s badass. As a salesperson in a marketer’s body, it’s been very helpful in learning more about ads, making creative that works, and improving next year.
Hope you and your family have the best holiday ever.
Thanks for reading every week. You’ve made my year.
Ps. I just joined a private entrepreneurs club that Alibaba is hosting. It’s 100% free and gives you direct access to better reps at Alibaba, exclusive events, better manufacturers, and opportunities to keynote at events to get your brand out there. Let me know if you want an invite.