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: ?????????????? ????. ?????????????????????????? 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... (???????? ???????? ???????????????? ?????? ????????????????????????) to a better place. (???????? ???????? ???????????????? ?????? ????????????????????) 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 ???????????????????????? wreck your business... (As a friend of business owners, I promise I don't take this lightly.) ?????????? ????????????-???????????? ??????????: 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... ?????????? ?????? ?????????? ?????? ????????????-???????????? ???????? ???????????????? ???????? ????????? . . . #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 ??????? Investors, lenders, and acquirers ask for accrual books... But more importantly, without accrual books, the P&L doesn't show REAL profit. ?????????????? ??????????????: 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 ????????-???????????????????? ???????? ???????? ??????????????: 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.) ????????-???????????????????? ?????????????? ???????? ??????????????: I sell $300 of product each month, and buy $300 of inventory each quarter, ?????? 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) ????, ?????? ???? ?????????????????? ???????? ???? ???? ???????? ?????????? ?????? ???? ????????? 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 ?????? ????????) This applies organizationally, professionally, and personally. Good analysis and reflection celebrates wins, and asks the question: "???????? ???? ?????? ???????? ?????????? ?????????" 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: ?????? ???? ?????? ???????? ?????? ???????? ????????????? #finance #growth #coaching #dtc #ecommerce #startup #CPG #D2C #CFO

If you're in a cash bind, do this exercise before seeking outside capital... ???????? ?????????? Let's dive in... ??. ???????? ?????? ?????? ?????? ????% ???? ?????????????? ???????????? ?????? ????????????????. 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.) ??. ?????????? ???????? ???????? ???????????? ?????? ?????????????? ????????????. 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. ??. ??????: ???? ???? ?? ???????????? ???? ????????????????????????? Bridges are temporary. Breakthroughs last. Bridges serve to take you from a bad place... (???????? ???????? ???????????????? ?????? ????????????????????????) to a better place. (???????? ???????? ???????????????? ?????? ????????????????????) 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. ??. ???????????????? ???????????? ???? ???????????? ?????? ?????????????????? 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) ??. ?????????????? ???????? ???????? 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 ???????? ??: ?????????????????? ?????? ???????????????????????? ???????????? Here's the formula... Gross Sales (-) Returns/Refunds (+) Shipping Income (-) __?___ Discount (-) Landed COGS (-) Outbound Shipping / Fulfilment (-) Merchant Fees (-) Advertising (-) Any commissions / transaction fees = Contribution ???????? ??: ????????????????, "?????? ?????? ???? ???????????????????????" Depending on the reason, we may not need to break even on each order. ?????????????? 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. ?????????????? ?????????????? 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. ???????? ??: ?????????? ?????? ???????????? ???????????????? 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 ???????????????? 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. ???????????? ???????????? ????????: - 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. ?????????? ???????????? ????????: - 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... ?????? ??????????????: 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. ?????? ????????: 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 ?????? ???? ????%... not 10%. Of course, they won't lie and tell you 10% is an APR, but they are incentivized to let you insinuate. ?????????? ???????????????????????? ???? ???????? ?? ??????????: 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?" ????, ???????? ???? ???????? ???? ?????? ???????? ?????????? ?????? ????????? 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. ?????? ???????? ?????? ?????????????? ???????? ????????/??????????????????? #teamwork #finance #incentives #ecommerce #cfo #dtc #payroll #raising money