Creating a Planning Process for Your CPG Business

Jordan Buckner: [00:00:00] As CPG founders, we spend a lot of our days reacting to the world around us and not enough time really strategizing and planning for the future. It can leave you feeling unbalanced and constantly behind. So one of the best things you can strategize is your sales and inventory planning so everyone on your team can be on the same page.

Today I've invited on Yuval Selik, who is the CEO of Promomash, to talk about how to create a single source of truth for your sales and planning needs so you can make more informed decisions. Yuval, welcome. 

Yuval Selik: Wow. Thank you very much. I love coming on your show, Jordan. It's always fun.

Jordan Buckner: Thanks for being back. I think you're going to hit our record for the most episodes per guest. So I love having you here. So Yuval, I want you to take me back a little bit to your days running your CPG brand. I know you had some periods of tremendous growth and I'm curious to know if you had. Time to accurately plan and how that affected your business, good or bad.

Yuval Selik: So as everyone knows, or [00:01:00] some might not, I am a recovering CPG founder. And by the term recovering, it implies that I didn't plan well enough and I didn't understand the planning process back then, which is why when I lost all my distribution back in 2011, 2012. I decided to build a company or create a company that helps brands succeed.

And part of that, alongside the promotional aspect of things and deduction management is planning. And that's why we're speaking today. So was I the expert on planning back then, but that's why I failed. Am I the expert on planning today? Probably not as good as some, but I'm good enough to be dangerous because I've learned so much from the brands that we've helped over the years.

Jordan Buckner: You know, a lot of times we take our learnings from our experiences, right. And then create the thing that we wish we would have had. That's part of the reason I created Foodbevy because I wish I would had something like this when I got started. So I think let's ground our audience in terms of like where we want to focus on planning because there's, you know, [00:02:00] business planning in general, hiring, there's even like marketing promotions, all that stuff.

But I think a lot of the balance become between what founders do is between. Managing their sales growth and all the things that come with it. And then also like their inventory and ingredient and production planning as well. But, you know, tell me more about kind of what you think are the fundamentals are of kind of planning , for CPG brand.

Yuval Selik: So let me tell you a story. I'm going to create a fictitious brand just for Thanksgiving. We're going to create a brand called Jordan's Harvest Natural Turkey based in cream. How's that? I like it. Brand new, brand new in the market. Never seen before. The cream of all creams. So here's the story, right?

Let's break down the process for Jordan's Harvest Naturals Turkey based in cream. So first things first, right? The team gets their heads together, bring everyone in to get the lay of the land, right? They're checking out what's hot in the market. What the buyers are into these days, right? What their competitors are up to.

They're looking at spins data to understand category placement and where they are [00:03:00] in the scheme of things. They also take a good look at their past sales, right? Most likely from Crisp as an example, which shameless plug is a exclusive exclusive partner with Promomash. But they provide real time daily historical sales data, right?

But you also have syndicated data. Allows you some reasonable insight into consumption. They also look at seasonality. And finally,

what effective marketing initiatives were done in the past. So that's you and your team sitting down, figuring that out. So next everyone from all the different departments, sales, marketing, finance, right? You name it. They come together for a bit of brainstorming power. The marketing folks chat about what's trending in natural products.

The sales team shares the down low from retailers and customers and their private discussions with Joe, the buyer at Kroger, right? And the finance teams, they put in their 2 cents about. What they need to see in the coming year and, you know, and there's always this pressure. Right. Because the founder [00:04:00] or the CFO, they have to take this information and either present it to the board or to investors literally in like three, four weeks, because you never plan at early enough, right?

It's always, okay, team, we got three weeks, let's get it done. So now everybody's all panicked, but they're all excited because it's about the next year, right? Forget about this year. We screwed up. Now let's figure out next year. How could we do it better? So now they roll up their sleeves. To guess, and it really is a guess, which is what the forecast is, right?

How much they're going to sell in the future. That's the crystal ball. So they're piecing together past sales into current market vibes, any special promos, anything, and stuff that are planning to launch. Right. So that's all in consideration. Now it's time for the big meeting. So you guys, I don't know what your budget is, but you're probably renting out, you know, a local holiday and conference room, and this is where things get a bit spicy because now you're setting these sales targets.

And it's not just numbers. It's about what you guys are aiming for and how it's going to affect the CFO [00:05:00] when they're in front of the board. Right. But after some back and forth and maybe an arm wrestle or two, which happens quite often, you guys land on a plan that everyone agrees. Right. And then when you do is you need to lock this plan.

And now with this plan at hand. Right. The sales team gets a spend and a sales budget, and then it's over to the ops. Cause now , you're telling the ops what consumption is going to look like, what demand's going to look like, what sales are going to look like. And they're out there trying to schedule production.

You know, sorting out supply chain. And meanwhile, the CFO is still busy dividing up the budget, right. For marketing production R and D. And they're still keeping an eye on cashflow though, because they need to make sure that the company stays afloat. So the reason this is such an important process and why so many don't want to stretch the numbers, except for the CFO and the founders is because they all have a bullseye on their back.

That's why planning a lot of times doesn't happen. The sales team doesn't like planning because there's a bullseye, right? Now, if sales predict, imagine this, if , sales predicts a 30 percent increase in demand, right? And [00:06:00] consumption, what does the CFO going to do? They're going to have to approve potentially, let's say a 20 million machine or some equipment that's required to produce , those numbers.

Right. So that's kind of scary. And just when they think that they got it all sorted out though, they gotta be ready to tweak. Because actual sales, right? Whatever else is going on in the world is going to happen. And plans are great, but I think, you know, and I know for sure everyone knows what happens. To the plan.

Once it's set. Right. 

Jordan Buckner: I feel it right by definition. Plans are will forecast and fill hands along with that are going to be wrong, right? They're always going to be wrong next day. 

Yuval Selik: It's wrong. So, but it's a plan and you can't change the plan, right? That's the whole point of locking the plan. So now it's all about adapting and learning as the team goes on.

We call that latest estimate and we're using each cycle, whether it's a month or a quarter, right? To make. Yeah. The next forecast, even better. So what happens is you create this plan by forecasting and predicting and guessing. And now it's an actual plan, which is [00:07:00] the law of the land. And now the law of the land is no longer the law because it's changing every day.

And there's your latest estimate. And you have to, on a monthly. Or quarterly basis, look at what's been happening, right. To compare it to the plan, to see how much, how off you were. And then you have the next three months, six months, a year, two years to forecast again. So the whole planning process is all about understanding the background, forecasting, creating a plan, forecasting, again, creating another plan, forecasting.

So that's the forecasting process. And I think a lot of brands don't understand because they say, I need a forecast. It's not the case. A forecast doesn't mean anything. A forecast is part of the planning process. Which is where I think brands go astray because ultimately they need to understand the process and the plan to understand what a forecast is and what it's used, used for.

Jordan Buckner: So here's where it's really hit me as well. When I was running Teasquares, I handle all the sales and my co founder did the operations, right? And we're a small team. And so. I was pushing and saying, Hey, we have these new [00:08:00] accounts they're like, definite, we had new retailers are going to be launching, but we had no idea what the actual philosophy is going to be.

We have potential sales in the pipeline, and we had a kind of operational production cap because at the time we were. Self manufacturing, but we also did contracting and factoring as well, or our order time would be like three months. So we needed to kind of plan all this stuff in advance and I remember these numbers, but, you know, because I was pushing for essentially exponential growth for our company, because I was also wearing a CFO hat.

And I knew that if we didn't get that, you know, we wouldn't survive as a company. He had his operations hat on and was saying, Hey, I know you're saying we need to grow 25 percent per month. But looking operationally, we've been averaging 11 and so I don't want to have all this extra inventory. We don't have space to store it.

And so he's planning for 11 percent growth and I'm planning for 25 percent growth. And, you know, there's a mismatch there. And I think what's so important is kind of what you're mentioning as well. It's like part of the planning process is figuring out what's important to you as a company. Is it growth?

Is it cash flow? Is it profitability? Let's You [00:09:00] know, and then how did you bake that into all your numbers to say, Hey, it's going to be wrong, but let's err on the side of of maybe more inventory if our plans to growth, because we want to take advantage of every every opportunity, or we're okay with some out of stocks because we want to be profitable.

And if we lose a couple of sales, that's okay. Right. And it's like kind of figuring out what you want to optimize for. 

Yuval Selik: I think a brand founder, especially at the size brands that you work with. Needs to understand that everyone has an agenda and they bring that agenda to the planning process. And sales is going to produce initially the lowest potential plan forecast that they can, because , they don't want to overshoot themselves, right.

And miss the mark. They're always going to try to , get ensure that they're hitting their goal, their target. So that's, I mean, I've been in meetings, our brands that we work with sometimes invite me to planning meetings where literally the analysts, the data, the ops folks, , the sales folks, the VP of sales, the founder, I mean, they're all there in a room.

And that's why I was saying they're arm wrestling. [00:10:00] Cause they're literally yelling at each other because the VPS sales is telling the sales guys, you could do better. Like what is wrong with you? Like, what do you do? You're on 5%. Like, was that? And then the CFO is yelling at the VP of sales. Like you better give me numbers that are accurate.

Because if you don't give me numbers accurate, I'm going to get fired. And the ops person, like we don't have enough inventory to manage , this growth. And what do you, and it's just this crazy. Environment. That's really funny. Like when you're, when you're sitting from the outside, right. And as a watcher, I think, it's an hysterical meeting.

When you're in it's tough, but when you're watching, it's like, wow, like that's just really cool. So my experience comes from both sides, right. From planning initially , and , I effed up, right. Because for me, my co founder. And I, we were planning for one of the years where we were growing really quickly and the numbers were showing that, and it was really all first time orders.

And a lot of them were free fills. And so we're starting to see this big growth and we projected that our current inventory, which we [00:11:00] had minimums, cause we were not, we were not self manufacturing. So we had minimums , to abide by. It was showing that our current inventory was going to last us about six months.

And it took us about six months to get an order in because it was coming from the South of France. So we decided to purchase another round of inventory at a cost of 230, 000 and found out very quickly that the current inventory that we had after we already committed and the inventory came to our warehouse was going to last us at least for a year, a year and a half.

And because 2008 happened, it was lasting us for about two years to two and a half years. So we just bought. 230, 000 of inventory that was sitting in our warehouse, not going to be used for at least a year and a half or so. 

Jordan Buckner: Just money sitting there. I mean, 

Yuval Selik: we could have locked away, but that's, but guess what happened?

So how do we pay for this inventory? Well, we take loans or we borrow money and then we get into a hall and that hall gets larger and larger and larger, especially when a black Swan event happens like 2008 and everyone stops buying luxury items [00:12:00] like. What we were selling. So Murphy's law, this is why planning is so important and why I sucked at planning.

Right? So you learn this three ways of learning that the first way of learning is real life experience, right? I'm sitting there. I overpurchased 230, 000 of inventory, real life experience. I just learned something. The second way of learning is something that I've done with Promomash. You work with other brands.

You're not planning, but you're sitting by their side. Right. And they're planning, but you're watching and learning kind of secondhand. The third way is you buy a book about planning and you read a book, right? So guess which one is the most effective, right? In order, number one is the most effective, kicks you in the ass and you never do it again.

Second way is kind of as good, but , it's good enough for you to learn. Third way, you better have either one or two by your side. Just reading a book is not going to get you there.

Jordan Buckner: So Yuval, let me ask this because a lot of... Teams, big or small, have lots of different information coming in from purchase orders, your ERP system, if you're using CRISP How do you suggest kind of bringing all [00:13:00] that data together?

Is it about having the perfect set of data is about having something that's good enough? Do you work with the teams to create a single dashboard that has the information that everyone agrees to abide by, even if it's not perfect? Like, what are the best ways to actually even just start having that conversation and agreeing on what numbers are true?

Yuval Selik: Well, I'm going to say something very obvious, but Excel is not the way to do it. And that's how 99 percent of the brands manage it. Because Excel and that planner of that beautiful planner of yours with 45 tabs that must take in insights from spins as an example, syndicated data or other sources of data.

Does not speak with the ERP system, and there's valuable data there because deductions are stored in the ERP. So deductions are your, are the canary in the coal mine, which means that you need to figure out when you're looking at previous year's data, what actually transpired. And in order to see what actually transpired, you need to look at your previous plan, your previous sales numbers, and your previous deductions to understand how your plan latest estimate and actuals transpired.

Once you understand that [00:14:00] part, then you can forecast into what stores you're going to get into, what your percentage growth is going to look like and what the previous sales. Shows you right. In terms of analyzing what that base is going to look like, because ultimately forecasting includes a lot of master data assumptions, distribution, pricing new store counts base seasonality, all kinds of things.

Right. So by having it on a spreadsheet, you are limiting yourself to a two dimensional model. And you're not getting all that data instantly feeding insights. And especially if you want to get reporting and analytics on it, so you can then plan better. It's almost impossible to do on a spreadsheet. Now, I've seen some really good spreadsheets.

I got to be honest with you. Like those that work in Mars and Kimberly Clark have some sophisticated spreadsheets that I don't even know how it doesn't break Excel, but it's literally that sophisticated. But it's still not enough. Like we have multiple brands that are coming to us at Promomash. To help them on, you know, , with forecasting and planning, because their spreadsheet is so complex that it's really difficult to manage.

And by having it on a platform. And this doesn't have to be our platform. It's just any [00:15:00] platform that can handle, like what I would suggest is only work with a platform that can handle past sales data, both from all three aspects, from your direct shipments, sales orders, from indirect shipments, which is what we get through CRISP with KeHe and UNIFI and your syndicated data.

Or POS data. When you have that and you have your previous promotions , and analysis on your lifts and everything else, then what you can do is you can take a look at bringing in your deduction. So at least the platform must have the full scale planning, latest estimate and deduction processing. So you are keeping it all in one place.

Steve Jobs said it best. The best performance happens when it's a closed loop solution, when everything is managed. In one place. That's why he created iTunes. That's why he created, you know, the way that he created his company. It's all one stop. Oh, it's a one stop shop. It's all inclusive and that gives you the best ecosystem.

Yeah. One ecosystem gives you the best ability , to capture the right data, to make the right decisions. 

Jordan Buckner: Yeah. I'm definitely Guilty of creating them one of those really advanced Excel spreadsheets and then realize how much bias [00:16:00] goes in personal bias goes into whoever it is who's building that spreadsheet because they have to make decisions with every button they click.

Last thing I want to just chat on real quick is when planning out for sales and that uncertainty how. Do you go about revising that forecast throughout the year? Because as you mentioned, it constantly changes. Do you recommend companies get together , every, or what you see every quarter, , every two weeks to review how things are going every month?

Kind of building , that process and where they're reviewing what's happening versus what's predicted. 

Yuval Selik: I think it depends on the company size. If you're a mature company and you're doing 150, 200, 300 million, 500 million, et cetera. You kind of know your business, so you don't have to consistently look at updates, right?

And latest estimate you can look at on a quarterly basis. Perfectly fine. But a startup, a company that's maybe under 5, 10 million or so, will never be able to forecast or plan accurately. Initially, they're not going to know , what sales are going to look like. They're not going to know what your deductions are going to look like in terms of returns, damages, shortages, you know, MCB scans, advertising, the whole [00:17:00] thing, right?

I would suggest for smaller, younger companies who don't know. They're asked from their elbow, which is a lot, you want to make sure that they're looking at it, at least on a monthly basis, because then you can analyze what's happening and take quick, you can make quick decisions and make this and move and movements to eliminate the chance of you really effing up at the end of the year, because it's so dynamic for smaller brands.

And I think , that's what you should do. And again, if you are going to manage through a spreadsheet, You have to figure out a way to connect your ERP deductions alongside your plan. If you don't know what's actually happening, deductions are the canary in a coal mine. You know what they say about the canary, right?

You put a canary, you let a canary loose in a coal mine. And if you stop hearing the canary, you better run back because something's going to explode because the canary just died. There's a lot of methane, right? So that's really what it is. , it warns you that you're having issues with your plan. I've never seen one company that projected an X percentage of trade.

And at the end of the year had X percentage of trade, you always have a Y percentage of trade, and it usually is much higher than [00:18:00] they expected. So you got to be vigilant. Otherwise you get yourself in trouble, especially if you don't have the cash to, you know, , to ride it out. 

Jordan Buckner: Right. Yeah. And the last thing , I'll mention on that is I've seen a lot of brands who get in the early days, right?

The first five years, there's a lot of. Negative data that can show up, right? Deductions are way higher than you expect it. Sales lower inventory costs higher, and it's easy to want to hide from that data because it makes you feel like you're doing something wrong or things don't look good. It's just really hard to see.

And I encourage all of our founders to really embrace the truth and the data so that you can make good decisions going forward and honest decisions. Thanks so much for being on the show today and sharing that perspective and for our brands. Start that planning process now, if you haven't already for 2024 and looking forward to what you can create this year.

Yuval Selik: Jordan, you are the man. I appreciate you and what you do to the community. Every time I speak, I'm honored to be on your show. Thank you so much. 

Jordan Buckner: Definitely appreciate it. I love having you. 

Yuval Selik: Awesome.