How to Get off a Sinking Boat ??

Happy Monday!!!!

Last week was an EPIC week and I woke up today so amped to keep the momentum going. If you follow me on Instagram then you know we locked in THE BIGGEST retailer of our life last week. I’m so stoked to talk more about it in the following weeks. Its a massive win for the company and just proof that amazing things will come if you keep grinding and building the brand the right way. If you’re not following me on IG then that’s your mistake - @chrismeade

I’m out in San Diego right now for Commerce Roundtable - in my eyes the best e-commerce 2-day event of 2024. Sendlane does an incredible job of getting brands to actually show up and it will be two days of networking, meeting up with internet friends and breaking bread. If you’re in town, we’re throwing a 60 person dinner tonight and the RSVP list is out of control. If you want to join us tonight, get on the list here.

RSVP to Commerce Roundtable SD Dinner by The Founders Club

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How to Get off a Sinking Boat ??

As we head into the back half of the year I wanted to cover some of the unsexy things of running a business and some areas that if you put a few hours of focus may make you discover that you’re actually bleeding and losing money. Make these quick fixes and you’ll have a much better ship to ride into Q4 & 2025.

The inspiration for this week’s newsletter came from re-reading my favorite business book Double Your Profits which I stole from an overpriced WeWork one day. The book is amazing and I should have an affiliate link for it at this point. But this random google link should suffice.

As entrepreneurs, we’re always on the lookout for the big obstacles that might threaten our business as we grow. One of the biggest mistakes I see entrepreneurs make (especially as they scale) is underestimating their operations cost, only to realize they’re bleeding money.

You’ve got your product, your website is live, and orders are rolling in. But there’s a reality check waiting just around the corner — hidden costs that can sneak up on you and chip away at your profits. They’re the silent killers of businesses, and if you don’t spot them early, they can take you down.

In this week’s newsletter, I’m going to break down 10 of the biggest hidden costs you need to be watching out for and, more importantly, how to avoid getting blindsided:

1. Payment Processing Fees

Think you’re keeping every dollar from each sale? Think again. Payment processors like PayPal, Stripe, and Shopify Payments are taking 2-4% of every transaction. That might not sound like much, but it stacks up fast, and it can turn into death by a thousand cuts. The more you sell, the more you’re bleeding out through these fees.

You’ll never be able to cut this cost entirely, but there are ways to make it less impactful. Start by shopping around for processors that offer lower rates, especially as your volume grows.

Never underestimate the power of negotiation. Your processor would rather keep you as a customer than find a new one. Leverage that to your benefit, and always keep an eye on those fees so they don’t eat up your margins.

Pro tip: If you are not factoring processing fees into your daily profit & loss you’re making a huge mistake and miscounting hundreds or thousands a day.

2. Shipping and Fulfillment

Nothing in life is truly free, and that includes shipping. It’s free for your customers because you’re the one paying for it. Whether it’s through a fulfillment center or handling it yourself, the cost of packaging, labeling, and delivering products adds up fast.

Sure, customers love free shipping, but you need to be honest about what your business can handle before you offer it. Either build the cost of shipping into your product price or charge a flat fee to make it more predictable.

Better yet, optimize your packaging to reduce weight and size, and leverage multiple shipping providers to score better rates.

We’ve worked with dozens of terrible 3PL’s who have ripped us off. Rackd is the only one that’s ever been good. Hit up Ian - [email protected]?

3. Product Returns and Refunds

Returns happen, and in e-commerce, they happen a lot. A lot of entrepreneurs don’t realize that every return comes with multiple costs. For us shipping CROSSNET back to us costs nearly $22. If my landed product cost is roughly the same, then shipping back what is probably a damaged or opened product that I probably can’t sell anyways is not even worth it.

You’re dealing with reverse shipping costs, restocking, and sometimes even losing the value of the product entirely. It’s the kind of hidden cost that can cripple you if you’re not prepared.

Spend time with your team to streamline your return process and be crystal clear with your product descriptions to reduce misunderstandings that lead to returns. Build a robust returns policy that doesn’t tank your profits. You need to create a fine balance of whats in the customer’s best interest and the companies.

4. Website Maintenance and Platform Fees

Everyone loves having a badass website, but building a premium site can have the same pitfalls as building your own house. You think you have a clear plan, then you start adding on plug-ins and widgets to elevate your site (and elevate the cost).?Even worse, you work with an expensive agency like I did back in 2021 and then you can’t even change the website without paying them!

True story, I paid $40,000 for a website refresh after we crushed summer sales in 2021. I did what any logical person does and get a SICK NEW website….The damn thing sucked and I couldn’t even make changes without them billing me $1000. It was a terrible experience.

Running an e-commerce site isn’t just a one-time setup. From hosting to domain renewals, security upgrades, and those sneaky monthly fees for additional features, the costs pile up fast. It’s easy to underestimate just how much these recurring expenses will cut into your profits, especially when you’re scaling. We’ve recently started scaling up and down from Shopify Pro to more basic plans based on seasonality. Easy way to save a couple hundred bucks.

To keep your expenses in check, regularly audit your site with a once a month software bill meeting. It should take 10 minutes. Are we using this? Is it fluff? Can I delete it? When your tech stack is lean, your margins stay strong.

5. Inventory Management and Storage

Got inventory sitting in a warehouse collecting dust? That’s money you’ve tied up in products that aren’t selling. Inventory mismanagement is the NUMBER ONE KILLER of companies going bankrupt.

The only thing worse than overpaying for inventory you don’t need, is massive storage fees for the inventory you don’t need.?

Trust me: I could write Harry Potter books worth of pain and sorrow about having to watch CROSSNET products sit in a warehouse through the winter. You don’t want that pain.

Seven years into this game, I’d rather be out of stock than have thousands of units collecting dust. Even right now we have sold out of our 5th & 6th best selling product. Old Chris would have placed another order right away and put $50k more of debt on the balance sheet ordering these products that sell thru slow in the first place. Now I’m waiting to sell more from best sellers 3 & 4 before I rush to do this.

Adopt just-in-time inventory strategies if possible, or look into dropshipping models to avoid holding stock altogether. Your cash flow will thank you.

6. Marketing and Advertising

You can have the best product in the world, but if no one knows about it, it’s dead on arrival. Marketing is crucial, but it’s also one of the biggest hidden costs in e-commerce.

Running Facebook ads, Google ads, influencer campaigns — they all add up. And the worst part? Customer acquisition costs (CAC) are rising, and many new entrepreneurs don’t account for it.

Instead of pouring endless money into paid ads, look for ways to build organic growth. SEO, content marketing, and community building through social media are low-cost but powerful strategies. That’s what we’re doing with the Founders Club. We haven’t run a single ad for it and the growth week over week is beyond impressive.

If you don’t listen to anything else I’ve said here, listen to this: track your return on ad spend (ROAS) religiously.

7. Protect Your Business This BFCM with Chargeflow

Black Friday Cyber Monday (BFCM) is a goldmine for e-commerce, but it’s also the perfect storm for fraud. According to Mastercard, e-commerce fraud spiked by 35% during last year’s BFCM period, and it doesn’t stop there. Chargebacks can skyrocket by as much as 60% during the holiday season. We’ve seen it firsthand at CROSSNET —? companies that go all out for BFCM only to get hit with a wave of chargebacks in February.

Here’s the reality: without a solid fraud prevention strategy in place, your most profitable season can quickly turn into a nightmare. That’s why we’re using Chargeflow to protect our business during BFCM and beyond.

Chargeflow is a tool designed specifically to fight chargeback fraud in real-time. It not only helps you prevent fraud before it happens, but it also automates the process of disputing chargebacks — saving you hours of headache and protecting your bottom line. And they’ve put together The Ultimate Fraud Prevention Checklist for BFCM, a guide every entrepreneur needs this season.

Here’s what you’ll get:

• Self-assessment quiz: Test your fraud prevention readiness for the upcoming holiday season.
• Revenue Protector Guide: A comprehensive guide on how to track and protect your revenue.
• Actionable Checklists: Step-by-step guides for preventing fraud.

In just 30 minutes, you can protect yourself from fraud this holiday season. Last year we had nearly $75,000 in chargebacks that Chargeflow helped win. Don’t wait for February to discover your profits were stolen through chargebacks. Get ahead of it now with Chargeflow and safeguard your business for the most critical sales period of the year.

Take the Quiz Here

8. Customer Support

Every business knows they need customer support, but I meet entrepreneurs all the time who underestimate just how much it costs to provide. You’re hiring staff or outsourcing, handling multiple communication channels, and possibly using expensive CRM systems.

Automate where possible with chatbots or pre-written FAQs, but don’t skimp on the human touch. Excellent customer service builds loyalty—and loyalty builds revenue.

9. Packaging Costs

First impressions matter. Packaging is a part of your brand experience, and it can’t be ignored. Just think about how iconic Apple’s packaging is. “Product unboxing” is one of the most popular video niches on the internet.

People are about good packaging, but it doesn’t come cheap. You’ve got the box, the protective wrap, the labels — and don’t forget, if you’re doing custom packaging, that adds even more cost.

Keep it simple and efficient. Source your materials in bulk, and if you can, switch to eco-friendly options that not only resonate with customers but might also save you some money in the long run.

10. Taxes and Compliance

You know the saying: there are only 3 certainties in life:

1. Death
2. Taxes
3. My newsletter being absolute fire

If you’re not factoring in taxes and regulatory compliance costs, you’re setting yourself up for disaster

Sales taxes, import/export fees, and regulations change from state to state, country to country. Ignoring them can lead to fines, penalties, and even legal trouble. I remember our second year in business we found out that we owed several thousands to random states I had never even stepped foot in.

Automate as much as you can. There are great tools out there that handle tax calculations for you. Find one that works for you and integrate it into your processes ASAP. If you haven’t already done this, tap into your network to get an accountant or tax professional in your corner as you grow.

E-commerce is full of hidden costs that can sneak up on you if you’re not careful. But now you’re armed with the knowledge to spot them early and take control.

Remember, the goal isn’t just revenue — it’s profit. And profit comes from smart management of both your visible and hidden expenses.

By getting ahead of these costs, you’re positioning your business to thrive, not just survive. The smartest entrepreneurs are always one step ahead — now it’s your turn.

Talk soon! Hope you loved this.

Chris