The Tech Stack to Grow Operations and Finance Your Business.

Jordan Buckner: [00:00:00] As you're growing your business, you're gonna face challenges in growing your operations and financing everything that you are doing. And so how do you actually go about making sure that you have the right systems in place and the money to support all the growth that you're going to see. For this conversation, I have invited on Mel and Branden from Settle to talk through how to actually build that tech stack for your business to make sure you are properly managing it so that things aren't getting lost.

We're gonna go through details on like your supply chain management, how they keep track of orders, sales, inventory, operation to make sure everything's flowing together and then seeing. Where you need cash to help support your business efforts and how to actually get that. Branden , Mel, welcome to the show.

Mel, I'll start with you. I'd love for you to give, give a quick introduction to, Settle and to yourself. 

Melissa Cafagna: Amazing. Yes. We like to say like Settle is the finops platform for consumer brands, and so most of our [00:01:00] customers are in the CPG space or e-comm. Honestly, it's a little bit of both. And, like, as far as the introduction for me, I go by the financing fairy godmother. I love helping emerging brands with financing, chopping it up with them, even if it's not Settle, that is an option. Like, okay, what direction do you go next? And, and honestly just helping them understand the way credit works, which isn't actually too different from like consumer credit.

So if you ever had to buy a car, right maybe a home loan, get your first credit card, we've all been in that position. So looking at it from that lens and, and trying to understand. The way business credit works and how that's a little different. So I love to support in that way. And then specifically love helping female founders as well.

But yeah, I'm basically an an accountant turned sales person. And that's why I just, the FinTech space made so much sense for me personally. But specifically doing it in the CPG vertical, like we're just coming back from Expo West to such a fun show, such a great industry, so much good energy and you know, that's what I'm all about.

Branden Foote: I love that. Branden , how about you? 

First [00:02:00] of all, thanks for having us. My background is a little more on the operations side working with the CPG businesses, any consumer brands really. My background stems from a little more sales focus, but working specifically with small businesses throughout my career stepping into this like.

Branden Foote: Big space that is consumer brands. There's like a lot of very unique problems, a lot of big stuff where we see a lot of brands go the way of the dinosaurs and we're kind of positioning ourselves to help you grow and succeed in setting you up for success in the long run there.

Jordan Buckner: Yeah, I love that. I'd love to talk to. What are some of the key problems that brands are experiencing that they're running into when scaling? That they really need to make sure they have covered? 

Branden Foote: Yeah, I mean, I. The big one for me is cashflow management. Like ultimately you live and die by the cashflow inventory and supply chain.

I like to think of it as like you're on a train track and one train track is your cashflow management. The other one is your [00:03:00] inventory and supply chain, and you really need those working both together to work in unison and have that success. The other side that we see a lot of like issues with is kind of the fragmentation that comes on the backend of working between spreadsheets and like all these different systems and trying to tie information together to make sense of your trajectory is nearly impossible when you're starting out and getting things off the ground.

Jordan Buckner: can tell you, when I was running my brand T we built our own like custom spreadsheet dashboard with 15 different tabs tracking sales inventory in, right? Like starting out. That was like, that was fine. It was fun to build it, but I spent, you know, hours and hours, days like building that spreadsheet and it was working fine until we added a new product to that sheet and.

Everything broke because it was all built on the assumption that we had one product and three flavors and everything was linked specifically for that. And as soon as we added one other thing, everything [00:04:00] completely collapsed. And I was like, there has to be like, why am I a software like engineer, like building out like a inventory management software when I'm running a CPG brand?

And that was like the big issue that I ran into. 

Branden Foote: Totally. We hear that all the time. It's like, if things were to stay the same, you'd be great. But change is the only constant when you're working in this space, and so like totally curve balls are gonna come at you, you're gonna launch new things.

You want to grow and expand. That's gonna introduce a ton of complexity. 

Melissa Cafagna: Yes. To piggyback on that, like I would have to say like another huge problem we see, especially on the financing side is capital needs. So a lot of brands who start off in the food and bevs space, right? Maybe you start on the e-comm D two C side, and then you are trying to find product market fit is your product actually, you know, selling and then eventually as a Food and Bev brand, you need to meet your customer where they're at, which is at a grocery store, right?

And so when it comes to being a Food and Bev brand, you have. An insane amount of options when it comes to that retail expansion and an an insane amount of [00:05:00] customers who pay on different terms. But the thing that's really gonna change for you is your cash conversion cycle is gonna lengthen, right? And as if you're a new brand.

If you're not gonna get the best terms with a distributor like KeHE or Unify and or grocery stores who allow you to ship to them directly. So Settle is really helping to solve that problem of not having cashed tied up entirely in your inventory. And so I think. With that capital need.

Like it's just such a huge pain. I hear about like, almost every call I ever get into that is like the number one, number one pain. 

Jordan Buckner: Can you break down a little bit about like the cash conversion cycle and how lengthens and like what that looks like? I. 

Melissa Cafagna: Absolutely. I would say one, it definitely matters where you're sourcing.

Like are you sourcing those ingredients yourself? Are you working with a copec who already has them on site? And is kind of bringing that all together for you. So the first initial thing you wanna ask yourself, or what are my lead times, right? So how long does it actually get for me to get product once I put in a purchase order with my supplier and actually get [00:06:00] that to a three PL or to that customer.

And then. When do I actually receive payment? Right? So when does that order actually turn into cash in my pocket. So if you're on the direct to consumer side, you know, you put things in a warehouse, they start shipping it out to customers, maybe in like a week you start getting money from that, right?

But once you have a customer like a U NIFI or KEHE or a grocery store, they may put you on net 45, net 60. And for a lot of emerging brands, net 30 is rare, you know? So if you find, if you find a, a retailer that is like working with you in that way, that's awesome. But it's just not something that I hear about often.

And so that time of, Hey, when do I put this order in? Right? And actually tie, start tying my cash up into inventory, and then when do I actually receive funds to huge pain? Right? And the goal is to make that as short as possible, right? But. You know, supply chain is wild, you know, so it's not always an easy thing to do.

Jordan Buckner: Yeah. I mean, that's one thing that I remember experiencing of [00:07:00] like getting that concept kind of in theory, right? I have to buy ingredients, make the product, sell the product, and , get paid for it. But the other thing I didn't realize the reality of is that while I bought the first batch of product for one retailer, retailer two comes in, they're like, Hey, we wanna buy double that product.

I don't have any cash because I spent all my cash as an inventory. So I need to then get cash to make the product again and sell to that other co retailer while I'm waiting for it. And by the way, a third retailer now comes and so like how do, how am I like layering these? Everyone has different payback periods and terms, and that's usually where that like cash crunch comes in on top of all your.

Fixed overhead costs for the business, plus the other variable costs and marketing expenses that you're also paying for on top of all this inventory. So like the cash piece totally. Is huge. 

Melissa Cafagna: Absolutely. Yeah. Absolutely. You hit it on top 

Jordan Buckner: there. Mm-hmm. With that, like what are the different, financing debt options that [00:08:00] you usually recommend for founders.

I love that you call yourself the fairy godmother, other people who call you that. Because it really is confusing out there, like what type of debt products to to use. 

Melissa Cafagna: Yeah. You know, it's like. You know, when you were like 18, 19 years old, maybe 20, 21, like you're, you're starting to, you know, be a real adult, right?

And you're like, maybe you're getting your first credit card. Right. I like to think about it in that way where it's like, this is your first time dealing with business credit and I. Guess what, you're not gonna get the best options, right? Because your first business, maybe if it's maybe your second or third might be better, you might already have some banking relationships.

But let's, on the risk curve, you're considered pretty risky, right? So you need to be realistic with that one. And you need to consider how the cost of capital, which you will eventually need how that's gonna impact your market margin. The second thing you need to ask yourself is how comfortable are you with loans that collateralize your personal assets?

If you are not comfortable with that, your rate is gonna be higher. Now, if you are comfortable with that, you're gonna get lower rates and some [00:09:00] options there. But that really just depends on the person and you know, just kind of like what kind of general wealth do you have, right? And for everybody that's different.

And then I would say, the third thing to really consider is just figuring out. How much debt you need at a particular point in time. 'cause you don't wanna over-leverage yourself as a business. So I would say definitely, like I talk to a lot of founders who like in that year zero to one, they're doing like these zero interest credit cards and getting real savvy with it.

Which I kinda love because I'm like, well that, that, like, you know, if your supplier takes those and you just have cash flow right there for free for like a year. Right. 'cause a lot of those cards are like 12 to 18 months. Do that, right? If you have good credit history, do that. If you don't have good credit history, that's gonna be a little bit harder.

So that's like another thing to ask yourself. I think from there you can generally graduate into some of the FinTech products that are available to you. You got some sales, you know, you, you know, things are picking up in year one and year two. And so there are a lot of. Providers out there, merchant cash [00:10:00] advances like way flyer, Shopify Capital clearco uncapped.

And then you have other providers like Settle that aren't merchant cash advances, but they're alternative lending solutions that are really meant to help with cash flow issues. Right. I would say there is a use case for merchant cash advances and generally it's for like certain times where you need just fast funding.

You wanna take advantage of this opportunity? My advice is if you're gonna go down that route one, don't do it often. Two, actually figure out the cost in multiple scenarios for yourself as a founder. So a lot of times they'll say, because they're taking a percentage of sales, oh, you'll probably pay this back in three or four months.

You actually don't know that because they're taking a percentage of your sales. So it could actually happen in one to two months. And guess what your A PR is now like. Just like insane predatory, like right. And if you keep asking yourself, I keep taking this debt out, it's gonna actually be really expensive.

'cause usually the way these providers work is like, you can take it out 1, 2, 3, 4 or five times important thing. Always, literally everyone [00:11:00] has chat gt, go ask ChatGPT, hey, if I take this loan out, these are the terms that they gave me. What is my APR? If I pay this back in two months, three months, four months, five months? 

Figure out how that plays into your margins. Like that because you do not want to end up in a situation where you just need more credit because you're not profitable because of how expensive your capital is. So that is, I've seen a lot of bound sheets. That is not a situation you want to be in.

Right? So. If you're a bootstrap founder, that is something to take into consideration, but just be savvy with it. Understand how much that cost of capital really is gonna be and what it, how it could affect your bottom line in multiple scenarios. 

Jordan Buckner: Yeah, and I love that because my recommendation when it comes to debt is always have a clear plan of how you're gonna pay that back.

Where it's gonna come from, exactly what it is. Yeah. I think a lot of founders get. Disillusioned when thinking of like if they have equity financing, where like there's not really a plan to pay the money back to investors, right? It's basically we're gonna risk [00:12:00] everything and either go outta business or like pay you back billions of dollars.

But with that, it's a lot different. And it's thinking like, okay, this, I'm going to use, the debt to specifically pay for this and that's gonna come from this revenue, from this retailer, from these sales that I have planned. So it's not just this like lingering thing that's out there. 

Melissa Cafagna: A hundred percent.

And I love that you just also brought up equity. 'cause actually 50% of customer Settles are venture backed. And so what they're doing is they're using those funds, they're using that liquidity that they have, and they're saying, how can I get a debt vehicle to help with this? How can I use this debt finding for these like repeatable expenses like inventory, maybe ads.

Spend packaging, right? And I'm gonna use these equity funds for riskier initiatives, right? Maybe like a new campaign, maybe product development or hiring. And that's a, a strategy we see leveraged all the time. And that works really well because ultimately what it's doing is giving founders more runway before they have to either raise again.

Or until they become profitable and they don't have to raise [00:13:00] again. Right. That's the goal, right. Because at the end of the day, you know, if you look at a company like Siete that just got acquired, you know I don't know about like the structure of how much like they lost over time. They didn't raise too many times, but how much you end up selling for, and the equity that you lost.

Could be like millions of dollars versus if you just had a debt vehicle that at that time seemed expensive. But when you're at that finish line, nothing is gonna be more expensive than how much you lose in that acquisition scenario. So it's like really depends on, hey, what are your overall long-term goals?

Is this something you're passing on to your family or is this something you're trying to exit? Right? So again, that's something you really need to ask yourself. 

Jordan Buckner: I love that. And we were talking just about like understanding your business so that you know where the funds to pay the debt are gonna come from.

Branden n, I'm kind of curious you what are kinda those essential tools that businesses need to run their operations? I know we talked about like inventory a little bit. Like what are some of those other like parts that you need to be tracking as a brand? 

Branden Foote: I like to think of it as like a five foundational systems [00:14:00] that they really need for that backend system.

We talked about IMS, that's like a huge one. Understanding your inventory, 

Jordan Buckner: inventory management system. 

Branden Foote: Yes. Inventory management system. Something to like track and keep track of your sales orders as those are coming in. That's where things can get a little overwhelming if you don't have a system set in place.

Bill pay is another obvious big one. Gotta like, run things through your system. And then something for your managing your procurement. So that's where a lot of complexity comes in, into the supply chain of understanding where things are at in the process. A lot of the times, this is where we get into spreadsheets and there's like.

A lot of tabs, a lot of formulas, a lot of just like manually tracking things or moving numbers across multiple spreadsheets. And then having to, on the fly, create purchase orders or like just using emails as it so it's not a very, it can be a little, a little tricky to manage all of those moving pieces at the same time.

Which. Obviously it leads to a little bit of [00:15:00] breakdown in that process and kind of growing pains as you increase that complexity side of the equation. 

Jordan Buckner: When have we seen or think brands should transition from using spreadsheets to managing their business with a software? 

Branden Foote: Yeah, there's a pretty good fine line.

I mean, ultimately, like , if you're out there in the market like. Try not to start with spreadsheets. The sooner you're on some kind of like system, the easier it is gonna be to grow and scale, especially if you have confidence in what's going on. I'd say like the time where the spreadsheet breaks down most is when your manual work is outpacing the growth that you're experiencing.

So if there's a trade off of you having to move stuff around all the time that you don't feel like is getting. A like significant ROI on your processes, that's usually a good indicator to pick up and move to something , like Settle, like some of the other providers that kind of bring all that together into one place.

Jordan Buckner: I see a lot of that papers, like when you start missing stuff, right? Like when you miss a [00:16:00] purchase order and you can't fulfill that, or when you miss sending an invoice and you're not getting paid, you're like, Hey, didn't we invoice this company? And like, oh, we didn't even invoice them, so they didn't pay us.

And it's been like nine months or something, a year out, thousands of dollars like that has real monetary value to it. So I think that's huge. And then maybe for Mel, I'm kinda curious like how. Do you see that connection between accessing working capital with, like understanding your business?

Because I think what's interesting with Settle is that they're both together and so how do those two interact? 

Melissa Cafagna: I think that's a great question. It is honestly Settle superpower. And a couple of the different fractional CFOs that we work with just love that component of, you know, there're actually being a financing component with an AP component and an inventory component.

All of that kind of working together really just makes your life easier as a founder. I would say for me, like. When you think about what an underwriter is thinking, they're looking at profitability. That is one of the number [00:17:00] one things they're looking at for your business, right? Investor, underwriter, any stakeholder that can help your business out by providing some kind of capital or like at some point, they're gonna look at your books and that's gonna be the first thing they look at.

Settle is giving you visibility into your actual landed costs, into giving you better visibility into your margins day to day as they're fluctuating, which they do, right? And I think having that understanding will help you make better decisions to improve your margins. Which bar none. That is like one of the most important things you can do as a Food and Bev founder, because guess what?

This is the most. Difficult thing to deal with because guess what, when you start growing into retail, these distributors and retailers, ma'am, you know, we could probably do a whole segment on trade span and deductions. Okay. and so it's like understanding your margins for like any other brand that breaks into to retail.

Like it doesn't all like, it really is like a very food and bev specific thing. You like I [00:18:00] am imploring you as a Food and Bev founder. You need to have clarity in your margins. Like if an investor, should ask you. Like at expos, I'm like, Hey, do you know what your margins are for like this product that's your best seller?

And you don't know how to answer that, that's a problem. So Settle is giving you visibility so that you can have a healthier balance sheet so that you can have a healthier PNL, right? And what that means is. Better capital opportunities for you in the future, whether that's debt, financing, or equity.

So I think that is a huge part of the equation, but also just it's those macro decisions, but also the micro decisions, right? Where it's kind of like, oh, this is what my margins are. Hey, do I need to negotiate with my supplier on something so I can improve them? Or, Hey, our margins have improved.

Does that mean like we have a little bit of, you know, cash flow to now explore research and development for a new skew? Right? All of that really. It's like what Settle is empowering founders to do, it's just giving you more clarity, it's giving you more time. So that's kind of like the magic to me that I see.

Branden Foote: Double clicking on that. I think like Settle is through and through like built [00:19:00] for CPG brands built for consumer brands. We deeply understand where those like challenges are. We have a couple brands that the business runs as well. And so it's kind of a constant like learning and adding these developments to our platform to make all that easier.

Like Mel said, like 70 to 85% of food and Bev, CPG brands don't make it past two years. That has to change. That's an insane statistic, and it can be as easy as like software coming in to fix that and make it a much better statistic in the future. 

Jordan Buckner: Branden , I know a lot of. Companies will say like, oh, my business is like special or unique because we sell in this way.

We're like, we're only selling in farmer's markets right now. And they're like, I like how is the software going to know how to handle my business? Have you seen that come up and how do you respond to that? 

Branden Foote: it comes up all the time. It's kind of a, a little bit of a misconception and it like, feels like, okay, like They have [00:20:00] something that's totally unique or we do something in a different way. Generally though, the same systems are gonna exist for other companies. And I heard like this great quote, I can't remember where it came from, but it's like, if you can figure out the, like three keys to making a business run, no matter what industry you're in, like.

Those are the three keys. And I think it's kind of the same thing where it's like even if you do have a complex style or you're in like specialty or something, there's already systems in these like machines set up to make it work for you. It's a matter of like figuring out how to plug that in. And.

Being able to work with providers like Settle that have kind of the hub and spoke into whatever those systems are to really make that data work for you and be customizable and free enough unlike like ERP solutions to be able to tailor it to whatever that specialty is. 

Jordan Buckner: I love that. Yeah. I, always tell people like, if you do something that's so out of the ordinary, either [00:21:00] it needs to be like your number one superpower and that's all you focus on.

Otherwise it's just gonna be a distraction at unnecessary distraction to your business, unnecessary complexity to your business. Absolutely. And then the last thing I wanna touch on is. Mel having this insight through, Settle into like how businesses are performing. Not typically, as you mentioned, like you have to give a PNL balance sheet, which is like a snapshot into your business, to other lenders and they don't have much information to go on.

But because of your partnering with businesses to help them grow kind of throughout and manage their operations, does it give you a better insight that helps you to better, create debt products that fit for them. Like when you're giving or offering debt through Settle, are you requiring like a PNL and a balance sheet? 

Melissa Cafagna: Yes. Yes. So high level, you know, we sync with QuickBooks, NetSuite NEL Loop which are a lot of the popular platforms we sell, and we look at your PNL and balance sheet.

If a provider only looks at your sales, [00:22:00] that is a red flag. You know what they're telling you? they're telling you they don't care how much debt you already have within your business. Okay? So certain easy capital that's too easy to get is a red flag, okay? And again, I'm not saying do or don't use this because everything is the tool.

What I'm saying though is be mindful, right? Ask more questions. Okay? and the second thing is. One of the biggest like flexes like brands can start to do is hire an accountant. So a lot of times it's like you wanna handle all that stuff yourself. I get it. Like initially you can, especially if you have an accounting background or maybe you have a CPG background, but there are a lot of complexities in the way that you report.

Your finance on the financials, and it's just like an accountant, a CPG focused accountant, a food and bev focused accountant is gonna be able to help you with that. That's one of the ways you could really start to really get a better understanding of, you know, your profitability how you need to be reporting certain things like sales tax, right?

A lot of people are putting that on the expense and on the PNL that actually needs to be a balance sheet item. So [00:23:00] there are certain things that you may not know. As a founder. You gotta start getting organized, getting your books together, because you need that visibility and clarity. And so do stakeholders.

You are not gonna get money either from an equity investor or a debt provider if you do not get your books in order. And that is one thing you can start to do because you should want to have that visibility and clarity, like as soon as you can afford it, hire an accountant. It is a good investment.

So yeah, I would say like it for us. We love to look at that because it gives us a holistic picture of how this business is really performing. Is this debt that we're giving them gonna actually help them grow? Or are they looking for debt to survive? Because those are two different scenarios. 

Jordan Buckner: I love that.

Yeah. Branden and, Mel, thanks so much for being on today and talking about these different tools that brands need to use , and how they can access capital. What's the best way for them to get started with the Settle? 

Branden Foote: Right on our website. We can get you set up, you can talk with either my team or Mel's team and we can , get you [00:24:00] moving in the right direction. 

very, brand friendly and just updated a whole bunch of stuff on our website. won't go too far into detail, but a lot of very favorable stuff right now for brands that are out there looking. 

Melissa Cafagna: I love that. 

Jordan Buckner: We'll include the link in the show notes as well. 

Hey Mel, Branden , thanks so much. 

Branden Foote: Appreciate you. Yep.