Greenhouse Business Advisors

For those who have not heard: Evolve Bank & Trust has been hacked and banking information was released on the dark web. Evolve partners with several fintech platforms including Mercury. (Link to Evolve Bank & Trust's official statement in the comments.)

This cash management concept has been vital to my clients: 𝗕𝗿𝗶𝗱𝗴𝗲𝘀 𝘃𝘀. 𝗕𝗿𝗲𝗮𝗸𝘁𝗵𝗿𝗼𝘂𝗴𝗵𝘀 Too many founders don't decipher between the two. Bridges are temporary. Breakthroughs last. Bridges are often easier to access. Breakthroughs are tougher to acheive. Bridges serve to take you from a bad place... (𝘤𝘢𝘴𝘩 𝘧𝘭𝘰𝘸 𝘯𝘦𝘨𝘢𝘵𝘪𝘷𝘦 𝘢𝘯𝘥 𝘶𝘯𝘱𝘳𝘰𝘧𝘪𝘵𝘢𝘣𝘭𝘦) to a better place. (𝘤𝘢𝘴𝘩 𝘧𝘭𝘰𝘸 𝘱𝘰𝘴𝘪𝘵𝘪𝘷𝘦 𝘢𝘯𝘥 𝘱𝘳𝘰𝘧𝘪𝘵𝘢𝘣𝘭𝘦) Breakthroughs are what create the "better place". Bridges are temporary changes to inflows and outflows, like: - delaying vendor/supplier payments - pausing work on new important (but not urgent) initiatives - selling down excess inventory - etc. Breakthroughs are lasting changes to inflows and outflows, like: - lowering production costs via changing suppliers - dramatically improving production times - upgrading website to improving CRO - growing revenue by launching new product line - hitting a home run with an influencer partner - etc. Founders, if our time is mostly spent on bridges, there's a chance we are overlooking the need for a breakthrough. . . . #dtc #cfo #cashflowmanagement #cashflow #leadership #management #entrepreneurship #startups #ecommerce #growth #coaching

How to 𝘢𝘤𝘤𝘪𝘥𝘦𝘯𝘵𝘢𝘭𝘭𝘺 wreck your business... (As a friend of business owners, I promise I don't take this lightly.) 𝗦𝗲𝘃𝗲𝗻 𝘀𝗻𝗲𝗮𝗸𝘆-𝗱𝗲𝗮𝗱𝗹𝘆 𝘀𝘁𝗲𝗽𝘀: 1 - consistently avoid that one hard conversation/topic, hoping it will resolve itself. 2 - stay "too busy" to set a clear identity, vision, financial plan, and tracking rhythm. 3 - maintain only a "general idea" of your unit economics and cash cycle. 4 - isolate and ignore experienced perspectives b/c "we're different, we're innovative". 5 - keep a comfortable distance from customer feedback. 6 - say "yes" to every opportunity because it feels good to be wanted. 7 - make excuses for why you or your team mistreat one another. This is not a comprehensive list, but I have seen these things lead businesses to the brink. In the interest of serving other leaders/founders... 𝗪𝗼𝘂𝗹𝗱 𝘆𝗼𝘂 𝘀𝗵𝗮𝗿𝗲 𝗼𝗻𝗲 𝘀𝗻𝗲𝗮𝗸𝘆-𝗱𝗲𝗮𝗱𝗹𝘆 𝘁𝗿𝗮𝗽 𝗳𝗼𝘂𝗻𝗱𝗲𝗿𝘀 𝗳𝗮𝗹𝗹 𝗶𝗻𝘁𝗼? . . . #leadership #management #entrepreneurship #startups #ecommerce #growth #coaching #dtc

This is too common: 7 figure+ DTC businesses with cash books. For DTC inventory businesses especially, Accrual books > Cash books 𝗪𝗵𝘆? Investors, lenders, and acquirers ask for accrual books... But more importantly, without accrual books, the P&L doesn't show REAL profit. 𝗣𝗿𝗶𝗺𝗮𝗿𝘆 𝗰𝘂𝗹𝗽𝗿𝗶𝘁: COGS. With cash basis books, COGS is wrong, and Gross Profit is wrong. With cash books, COGS = inventory purchases in that period With accrual, COGS = cost of items sold in that period 𝗢𝘃𝗲𝗿-𝘀𝗶𝗺𝗽𝗹𝗶𝗳𝗶𝗲𝗱 𝗖𝗮𝘀𝗵 𝗖𝗢𝗚𝗦 𝗲𝘅𝗮𝗺𝗽𝗹𝗲: I sell $300 of product each month, and buy $300 of inventory each quarter. In that quarter, Two months will show $300 gross profit. One month will show $0 gross profit. (Add 10 more products, and 2 more suppliers, and 1000x sales... it becomes impossible to determine profitability.) 𝗢𝘃𝗲𝗿-𝘀𝗶𝗺𝗽𝗹𝗶𝗳𝗶𝗲𝗱 𝗔𝗰𝗰𝗿𝘂𝗮𝗹 𝗖𝗢𝗚𝗦 𝗲𝘅𝗮𝗺𝗽𝗹𝗲: I sell $300 of product each month, and buy $300 of inventory each quarter, 𝙗𝙪𝙩 I proportionally spread costs over 3 mos. In that quarter, All three months show $100 of gross profit. (Add 10 more products, and 2 more suppliers, and 1000x sales... the profit calculation still holds true) 𝙎𝙤, 𝙬𝙝𝙮 𝙙𝙤 𝙘𝙤𝙢𝙥𝙖𝙣𝙞𝙚𝙨 𝙝𝙤𝙡𝙙 𝙤𝙣 𝙩𝙤 𝙘𝙖𝙨𝙝 𝙗𝙤𝙤𝙠𝙨 𝙛𝙤𝙧 𝙨𝙤 𝙡𝙤𝙣𝙜? In my experience, it's: (1) uncertainty about the benefits, and (2) inexperience in the process. I shared a little bit about the benefits, but regarding process: A good bookkeeping firm will lead this process. A good CFO will vet it, fine-tune it, and help you realize the value from it. Make the jump. There are so many great resources to help. If you have questions, DM me. . . . . #ecommerce #dtc #COGS #inventory #growth #accounting #finance #founders

Befriend ugly truths. They unlock growth. If we have no rhythm for finding and facing ugly truths, there’s a good chance we aren’t growing (or something worse). Why? Bottlenecks hide behind our fear of ugly truths. And, bottlenecks are what prevent growth. Bottlenecks in: - the sales funnel. - the hiring funnel. - the supply chain. - the leadership team. - ways of thinking. - daily habits. Improvements to "non-bottlenecks are a mirage" (Eliyahu Goldratt, Author of 𝙏𝙝𝙚 𝙂𝙤𝙖𝙡) This applies organizationally, professionally, and personally. Good analysis and reflection celebrates wins, and asks the question: "𝙒𝙝𝙖𝙩 𝙞𝙨 𝙩𝙝𝙚 𝙪𝙜𝙡𝙮 𝙩𝙧𝙪𝙩𝙝 𝙝𝙚𝙧𝙚?" Good planning and strategy focuses effort on alleviating the bottleneck, not on optimizing secondary issues.... That's my experience, but I'd love to hear from you: 𝗛𝗼𝘄 𝗱𝗼 𝘆𝗼𝘂 𝗳𝗶𝗻𝗱 𝘁𝗵𝗲 𝘂𝗴𝗹𝘆 𝘁𝗿𝘂𝘁𝗵𝘀? #finance #growth #coaching #dtc #ecommerce #startup #CPG #D2C #CFO

If you're in a cash bind, do this exercise before seeking outside capital... 𝗙𝗶𝘃𝗲 𝗦𝘁𝗲𝗽𝘀 Let's dive in... 𝟭. 𝗟𝗶𝘀𝘁 𝗼𝘂𝘁 𝘁𝗵𝗲 𝘁𝗼𝗽 𝟴𝟬% 𝗼𝗳 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗶𝗻𝗳𝗹𝗼𝘄 𝗮𝗻𝗱 𝗼𝘂𝘁𝗳𝗹𝗼𝘄𝘀. In your current operations, where does the majority of $$ come from and go? As a founder, you know these off the top of your head. Just work vomit them down on paper. (Do this before looking for new inflows like a loan.) 𝟮. 𝗪𝗿𝗶𝘁𝗲 𝗱𝗼𝘄𝗻 𝘆𝗼𝘂𝗿 𝗶𝗻𝗳𝗹𝗼𝘄 𝗮𝗻𝗱 𝗼𝘂𝘁𝗳𝗹𝗼𝘄 𝗹𝗲𝘃𝗲𝗿𝘀. Label two columns: "Inflow Levers" & "Outflow Levers" Using the list you made above, ask yourself: "What inflows can I increase or accelerate?" "What outflows can I decrease or delay?" Write those down in the respective columns Then, really grill yourself. "If I absolutely had to.... what could I do?" Again, we aren't talking outside capital (yet). Get ideas from your team. 𝟯. 𝗔𝘀𝗸: 𝗜𝘀 𝗶𝘁 𝗮 𝗕𝗿𝗶𝗱𝗴𝗲 𝗼𝗿 𝗕𝗿𝗲𝗮𝗸𝘁𝗵𝗿𝗼𝘂𝗴𝗵? Bridges are temporary. Breakthroughs last. Bridges serve to take you from a bad place... (𝘤𝘢𝘴𝘩 𝘧𝘭𝘰𝘸 𝘯𝘦𝘨𝘢𝘵𝘪𝘷𝘦 𝘢𝘯𝘥 𝘶𝘯𝘱𝘳𝘰𝘧𝘪𝘵𝘢𝘣𝘭𝘦) to a better place. (𝘤𝘢𝘴𝘩 𝘧𝘭𝘰𝘸 𝘱𝘰𝘴𝘪𝘵𝘪𝘷𝘦 𝘢𝘯𝘥 𝘱𝘳𝘰𝘧𝘪𝘵𝘢𝘣𝘭𝘦) Breakthroughs are what create the "better place". Bridges are temporary changes to inflows and outflows, like: - delay vendor/supplier payments - pause work on new important (but not urgent) initiatives - sell down excess inventory via promo - etc. Breakthroughs are changes to inflows and outflows that last, like: - lower production costs via changing suppliers - upgrade website to improving CRO - grow revenue by launching new product line - etc. Underline the bridges. Star the breakthroughs. Quantifying these levers and asking for help can make this step much smoother. 𝟰. 𝗣𝗿𝗶𝗼𝗿𝗶𝘁𝗲 𝗹𝗲𝘃𝗲𝗿𝘀 𝗯𝘆 𝗜𝗺𝗽𝗮𝗰𝘁 𝗮𝗻𝗱 𝗜𝗺𝗺𝗲𝗱𝗶𝗮𝗰𝘆 Big impact is good, but in cash pinches immediacy matters. How fast can it take effect? Label the levers A-Z for impact. (A is more, Z is less) Label the levers 1-10 for immediacy. (1 is faster effect, 10 slower effect) 𝟱. 𝗘𝘅𝗲𝗰𝘂𝘁𝗲 𝘆𝗼𝘂𝗿 𝗽𝗹𝗮𝗻 After doing steps 1-4, you will have a plan in mind for how to bridge to a better place. It will be prioritized by impact and immediacy. You will know what changes are temporary and have a vision for the future sustainable state. You will have sought help for quantifying this and getting ideas/feedback for how to improve it. Now its time to track against your plan. Write down the action plan and revisit it weekly (or daily). ... If this is you and you have questions, DM me. This isn't always the easiest position to be in. #cashflow #ecommerce #dtc #founders #startups #turnaround #strategy #leadership

Every DTC client I've worked with asks me this question: "How much should we discount?" Three steps: #1 - Determine contribution margin #2 - Consider: "why are we discounting?" #3 - Solve for target discount 𝗦𝘁𝗲𝗽 𝟭: 𝗗𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲 𝗼𝘂𝗿 𝗰𝗼𝗻𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻 𝗺𝗮𝗿𝗴𝗶𝗻 Here's the formula... Gross Sales (-) Returns/Refunds (+) Shipping Income (-) __?___ Discount (-) Landed COGS (-) Outbound Shipping / Fulfilment (-) Merchant Fees (-) Advertising (-) Any commissions / transaction fees = Contribution 𝗦𝘁𝗲𝗽 𝟮: 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿, "𝘄𝗵𝘆 𝗮𝗿𝗲 𝘄𝗲 𝗱𝗶𝘀𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴?" Depending on the reason, we may not need to break even on each order. 𝘌𝘹𝘢𝘮𝘱𝘭𝘦 Discounting a first-time purchase to get repeat-purchases... >> we can lose profit on the first purchase b/c we gain on the lifetime value. >> If we are betting on lifetime revenue, then calculate lifetime contribution to determine the appropriate discount. 𝘈𝘯𝘰𝘵𝘩𝘦𝘳 𝘌𝘹𝘢𝘮𝘱𝘭𝘦 Discounting overstocked inventory because we need the cash... >> the Landed COGS is already spent, so remove Landed COGS from our contribution calculation to determine what cash we can get out of this promotion. The marketing team should be suggesting best practice discounting strategies depending on the type of promotion. 𝗦𝘁𝗲𝗽 𝟯: 𝗦𝗼𝗹𝘃𝗲 𝗳𝗼𝗿 𝗧𝗮𝗿𝗴𝗲𝘁 𝗗𝗶𝘀𝗰𝗼𝘂𝗻𝘁 Set a target contribution margin. Adjust the discount % until the contribution margin hits your target. These 3 steps will help you determine your target discount, but this framework can also be used to run all sorts of scenarios. Just replace step three with "Solve for target ad spend", etc. For more info on this, DM me. I have tools for this stuff. #ecommerce #finance #growth #margins #profit #cashflow #cash #cfo #leadership

An encouraging trend: The ecom industry is 𝘴𝘵𝘢𝘳𝘵𝘪𝘯𝘨 to shift focus from top-line to bottom-line. People like Taylor Holiday and Ronak Shah are leading the way on this. The macroeconomic climate shifts are forcing founders to shift their focus. 𝗕𝗲𝗳𝗼𝗿𝗲 𝗦𝘂𝗺𝗺𝗲𝗿 𝟮𝟬𝟮𝟮: - equity funding widely available - loose underwriting from DTC lenders - valuations on revenue multiples - aggregators galore A business's success was dependent on the approval of lenders and acquirers. 𝗦𝗶𝗻𝗰𝗲 𝗦𝘂𝗺𝗺𝗲𝗿 𝟮𝟬𝟮𝟮: - hiked interest rates - loans harder to find - valuations on EBITDA multiples - more selective buyers So why am I encouraged? When brands focus on the bottom line, they can get healthy. When brands get healthy, they break free from unhealthy dependency on lenders and acquirers. When brands break free: they can better support everyone who depends on the company, they can select the right partners, they can maintain control of their broader mission. #ecommerce #finance #bottomline

Be careful... Lenders can make pricey debt look cheap. A real example: A brand was offered $500k at a $50k cost. Terms over 15 months. Sounds like a 10% cost of capital... (Prime is 8.5%!) Nice! Right? Not so much... 𝗧𝗛𝗘 𝗥𝗘𝗔𝗟𝗜𝗧𝗬: During the 15mos, the Lender is only "out" ~$50k on average... ... and they charge $50k for it. That's a lot more than "10% cost of capital"... More like: ~80% APR. 𝗧𝗛𝗘 𝗠𝗔𝗧𝗛: They loan the $500k in 5 separate installments. Let's say each installment is $100k. Add the 10% cost of capital = $10k. They take weekly payments, straight from your sales. You pay end up paying back each installment in ~90days. During the 90 days, quick math says... the lender is out ~$50k on average. $10k fee on a ~$50k loan... That's 20%. 20% for 3 months. (aka 80% for 12months) That's an 𝗔𝗣𝗥 𝗼𝗳 𝟴𝟬%... not 10%. Of course, they won't lie and tell you 10% is an APR, but they are incentivized to let you insinuate. 𝗤𝗨𝗜𝗖𝗞 𝗘𝗫𝗔𝗚𝗚𝗘𝗥𝗔𝗧𝗜𝗢𝗡 𝘁𝗼 𝗺𝗮𝗸𝗲 𝗮 𝗽𝗼𝗶𝗻𝘁: Lender: "I will loan you $100 for a $10 fee." Me: "Great! I have bills to pay.." Lender hands me a $10 bill, then takes it back immediately, again and again... 10 times. Lender: "Ok, I loaned you a total of $100." Me: "........?" Lender: "Now, I'll take $10 out of your paycheck before you cash it." Me: "what am I going to do? I still have bills" Lender: "Want another loan?" 𝗦𝗼, 𝘄𝗵𝗮𝘁 𝗶𝗳 𝘁𝗵𝗶𝘀 𝗶𝘀 𝘁𝗵𝗲 𝗯𝗲𝘀𝘁 𝗼𝗳𝗳𝗲𝗿 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲? These facilities aren't inherently bad. They belong in the ecosystem of loans. They are tools you can use. Many have benefitted from them. But they are tricky... and can burn you. So, first, make sure it's the best offer. You need to: 1) calculate how much money you are being loaned at any given time during the term. 2) Know how quickly you have to pay back each installment. 3) Recognize: if you have to pay it all back before you can sell your inventory (or generate operating income to cover it) this will tear your business apart. But after all that consideration, if it is your best offer. Use it as a one-time bridge to a better operating state that will open up access to a more permanent financing solution. #financing #DTC #ecommerce #growthcapital #capital #CPG #shopify #MCAloans #finance

Are owners, employees, and investors incentivized by the same things? In my experience, no. Not financially and not personally. That doesn't mean we can't align them. Often "incentive rivers" flow to different places, at different paces. Sadly, so many owners struggle to align their team or their investors, because they fail to see the different rivers. Let's learn each others' rivers. And, if possible, bring them together. (or at least point them to the same ocean) Want more profit? Reward the team for more profit. Raising money? Understand what makes your investor money. 𝗛𝗼𝘄 𝗵𝗮𝘃𝗲 𝘆𝗼𝘂 𝗮𝗹𝗶𝗴𝗻𝗲𝗱 𝘆𝗼𝘂𝗿 𝘁𝗲𝗮𝗺/𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀? #teamwork #finance #incentives #ecommerce #cfo #dtc #payroll #raising money