Jordan Buckner (00:00)
If you're a CPG brand or in that matter, any business right now, there's a lot of economic uncertainty going on. There are, we're in the middle of the tariffs that are happening. The situation is changing every day. And a lot of founders I talked to are trying to figure out how does this impact my business and how do I build a strong foundation to move forward with knowing that things are going to change. So for the conversation I want to invite on frequent podcast guest and friend Brad Ebenhoeh the founder of account fully, which is a accounting bookkeeping service, financial planning service for CPG brands. And so you are living this every day with your clients. Welcome Brad.

Brad Ebenhoeh (00:38)
Thanks Jordan for having me on again. Excited to chat and yes, we have a lot of clients that are worried and stressed out about what's going on economically and how it impacts their business.

Jordan Buckner (00:47)
So I think one thing important to note, and I guess all of us have gone through this recently, it seems like these

changes and forces in terms of tariffs, pandemics, supply

chaos, this is just part of the business, right? it wasn't a lifetime problem. This kind of thing is happening every few years. It seems like every two to four years.

There's something big that comes along that threatens to change how business is done. Do you kind of see things as that way? Like this is just part of the business now, or is this really something unprecedented?

Brad Ebenhoeh (01:22)
think it's part of not even business part of life, right? Like, let's just go back. is it 2025 go back to, you know, let's just say the dot com bubble or whatever that burst in the late nineties, right? Then you had the housing crisis in a way and then things happen in the middle of teens a little bit. And then all of a you have COVID, which completely was different, right? And these tariffs and trade wars and all this stuff things that impact costing prices. So it's very similar to, again, life in general.

there's unforeseen circumstances and things that pop up. Some are bigger, some are smaller. But on the business side, you got to expect something every five years at this point, every couple years, right? So the biggest part of it is it's not knowing what it's going to be and when it's going to be right and timing the market or timing situation. But it's do I have my house in order to properly respond to whatever happens? And that's kind of the biggest thing. I think that

the theme of 2025 and even the past five years going forward needs to be, do you have your house in order? Do you have your business in order to properly respond to whatever happens?

Jordan Buckner (02:22)
What are you hearing from your clients right now in terms of their questions, their worries as it relates to the finances of their business?

Brad Ebenhoeh (02:30)
Yeah, I think it's around a couple of things, right? So if you just look at the last two years, right, there's been a drain on it specifically with emerging CPG and small inventory based businesses. It's really been really hard to get funding

money to support the operations of your business versus what it was from 2015 through 2022, even through COVID, you have loans, PPP loans, EIDL loans. People were still kind of pumping some money out, FinTech loans when people went 100 %

Shopify sales and oh cool, let's get that right. So you're able to kind of float your money and get cash to support the operations. Then all of sudden that slows down the last couple years and you have to move to, especially for the small emerging brands, it's impossible. Like until you have foundation

numbers.

to get that. But when you're starting in an aspect of that and you're focusing on kind of fundamentals, expense management, flow management, profitability, and maybe you don't have the cash in place and then you have this map and this forecast in place of how I'm going to run my business. And then all of a you compound that with, holy shit, I am going to, you know, my cogs are increasing by 15 % just right now. That's a big change. how do I impact that? Right. So it's a lot of stress going on.

lot of, know, again, as an entrepreneur myself, you have empathy for these people putting their blood, sweat and tears and their entire, you know, family's finances and their time commitment into it. And all of sudden, they feel like they're getting the rug pulled from underneath them. But at the same time.

How do you get through it? are the options I can do to move through it? Because we're here right now, right? So it is what it is. We can complain about it. But the point of this is how do I move forward with the next steps to keep my business operating? Maybe not at the similar margins, but keep moving forward in that realm there.

Jordan Buckner (04:08)
You know, Brad, that brought to mind something I've really been thinking about recently is how businesses are funded and how they can grow and survive. Because I've really seen like two main divergences, sometimes there's some overlap, but there's businesses who are funded by customer sales, right? They have a product, customers are buying it, and they're using the profits from those orders to grow their business primarily.

there are other businesses that are outside funded, meaning VC funded, maybe they're finding some grants, maybe there's special government programs going on, but the fundamentals of the business cannot be supported based on customer revenue alone. as companies grow, right, there's companies that could be profitable, but maybe they get outside funding to grow even faster. And what I've seen is that

Usually it's the companies that are outside funded in some way or form they're under the most pressure through these economic changes because They are the ones that usually haven't quite found what I call like product market fit not just me right? like the commentary but like they haven't found their product market fit and because of that they Like investors go away because they're uncertain like they read they lose their funding source when government

and politics change, they lose access to grants and the funding that is probably up their business. And when they have to go back and rely on like just customer revenue, a lot of them times they find they can't do that.

Brad Ebenhoeh (05:35)
I think you're 100 % right. mean, when you're from a general standpoint, you're 100 % right. The first one that you mentioned of

I'm running my business based on customer sales is like a typical sustainable business model that you're running your business on revenues, right? And you have some sort of cashflow positivity that you can keep moving forward. You have a lot more leverage in a situation like that versus being over here where you're dependent upon some external party where you hope they say yes or no. It's right. It's just it's like you're trying to get into college or you're waiting for the admissions to send the letter in the mail. You're stressed out. It's depending upon a decision maker or whatever. And then that relies upon your

business being in place. That existed big time in the timeframe I'm mentioning in that 2015, the aspect where I need more money and people would just pump more money in because the revenue grew even if it wasn't a profitable, sustainable business. So if you have that sustainable business and you're able to fund your business through it, there's a ton more opportunities in terms of change or like being agile and how do I keep getting through this aspect here. When there's other side, it's really hard.

Jordan Buckner (06:36)
Yeah, and I mean, of course, right, there's times when the economy changes, people may not be able to afford your product or buying behaviors change, but the more, the bigger the problem that you're solving for customers, the more likely they will stick with buying and using your product through these changes unless something so drastic happens that it affects everyone. So I think that's probably one of the first things, right, is like, how do you build your company to be resilient through economic shifts by probably diversifying?

where your income's coming from, having lots of different customers so you're not reliant on any single one. I'm kinda curious, have you seen that where you have clients that pretty much have one or maybe like two or three main revenue sources and like if one of those goes out, then it disrupts their entire business?

Brad Ebenhoeh (07:21)
I mean, that's, you know, that was the whole initial COVID change, right? Where people like heavy in distribution or heavy in retail had to switch quickly as part of kind of, you know, e-delivery and different things really changed in that aspect. But I'll remember the one wasn't even CG brand. had this a decade ago. One of our original local clients had a digital agency where they had, I don't know, 80 % of their revenue on one big company. And then the company just was like, I work in business house or wherever they did. And literally it took their company from 25 people to like 10 and they literally had to shift and they did fantastic in terms of shifting and agile. But it was a two or three year struggle of getting through that. So it's it's customer concentration. You know, you can't have so many customers in one specific area or niche or whatever. Like for a while that could be fine. But what happens if something happens specific to customer concentration or diversification, like you're mentioning, just that little things like, hey, I am in my target market is in the specific geography. Let's just throw it up of Western North Carolina and all my clients are there. Then all of a this 100 year emergency happens where a hurricane goes through and blows up the entire situation. Well, that could affect your business for the next 10 years, right? Again, I know a physical retail store there, that's sad. But if you're external and you're selling into that area, like how do we think differently in terms of it, right? So it's just setting yourself up for success and to be as agile as possible.

if and when a situation like this happens.

Jordan Buckner (08:49)
So I think that's so important on the revenue side. Let's switch and talk about on the cogs and supply chain side of things. I found that something I've dealt with in my life as an entrepreneur, see lots of others founders dealing with is not really knowing the true costs of manufacturing their product and all the different elements that go into it. So can you talk through like how you help brands really think about knowing their numbers so that they know

how much ingredients are costing, how much their product is costing, how that changes over time.

Brad Ebenhoeh (09:21)
Yeah, I mean, a big thing we do, like again, when you start your business from an inventory perspective, it's not like you need to go head first into an inventory management system that can help automate a lot of this, right? Like that's very time intensive, that's cost intensive and different things like that. the biggest thing is getting everything organized from your supply chain, your procurement, your manufacturing model, where you have inventory, et cetera. And what we do is basically we have this template called the inventory workbook and Google Sheets. It's got several tabs and it's just getting everything organized

one spot and then we can analyze the data within it. We have clients that have come to us in the past that, and especially a long time ago before people like Food Bevy existed where now there's a community and people are learning more and more. feel like the consciousness of the community keeps raising, which is great.

Coming in and also we get this data in place and we're like, by the way, you're selling your product at a loss. Did you know that? Wait, what are you talking about? I thought it was this, right? It's things like that of understanding your bill materials, building that out, understanding all your costs, making sure, hey, I'm spending this amount on a gallon versus a quart, because that matters, right? There's even gets on the VAT level, right? So step one is getting access and understanding your product costs and manufacturing and tolling. Step two is making sure you understand how like the freight in and the duties and to tax

impact that and how you can allocate that across the products, Then making sure that you understand where your inventory is actually housed. Okay, so where it's housed and how you get accurate accounts. Because the cogs and the margins and all that data could be perfect. But if you don't have control and custody over that inventory products and understanding where they're at, and if they're good to sell still, that's just as bad as having bad margins, right? So,

You know, I have it at a 3PL, I have it at Amazon. That's fine. That's great. You should leverage and outsource that. But are you getting accurate counts? Is the quality good? Can you, can you sell that product, all that type of stuff? Because if you just have to take a loss in 20 % of your inventory, it doesn't make sense with that realm, right? So just making sure you have that in the amount of founders I've seen over time that just have no idea of why, why don't you, why don't you count inventory? My co-backer, my 3PL says this, was that accurate? That's the most important resource you have. You need to make sure that it's accurate and complete.

So understanding your COGS, make sure you have a full good understanding of your cost of inputting, as well as where your inventory is the value, I think are the biggest two things initially to do that, right?

Jordan Buckner (11:34)
Yeah, I think that's huge and right knowing where your product is because here's what I've seen and experienced happening. When you have product loss or deductions, chargebacks, expenses, a lot of times they're not happening in like one large lump sum. There are dozens or hundreds of charges over time and it's not until you actually sit down and analyze them collectively that you realize the impact, right? because you're like, oh, $100 here, $200 there, and actually you know it adds up to 40, $50,000. And you're like, oh, that's actually a material impact on my business. And I think a lot of founders who are not keeping an eye on their accounting and their money don't really understand how that fully adds up. And so what are some of the checks that you think companies and founders should do? right now to understand their current situation in terms of recalculating product margins, ingredient cogs, like what are those things they need to kind of go back through and look at either themselves or with a partner.

Brad Ebenhoeh (12:39)
Yeah, think a couple of things are number one, just, you you talking about the small dollars and cents just reminds you of like office space, right? You're taking like a penny off over time and and adds up material. So I think a couple of things is just like when a situation like this happens, right? Where it can material impact your costs. You just have to, you have to have good data to make decisions. That's what it comes down to. So having the data that I mentioned and having an understanding of your balance sheet, your P and L and different things like that, right? Like what are the things that we can do when this happens?

Well, number one, if you have a lot of inventory on hand that's already bought and purchased at a lower cost, right? Than what possibly new products are going to be. And it's been sitting there. Well, maybe discount it. Go on a sale and try to get cash in the bank to then support, you know, new purchases that you need, right? So like trying to be agile in that realm right there. Identifying, you know, I know a long-term play is identifying maybe in US manufacturing. You can't just change it right now. But again, that's where in advance having the diversification effect maybe sums in US. to move some things overseas in the future, things to think about. But outside of that, mean, these external manufacturers that are passing on the cost to you, that are bringing in, you have higher tariffs.

Well, guess what? They're stressed out as well. Because what if I lose all my customers in the United States? What does that do to me? Well, now you have a little bit of leverage and negotiation play to have a conversation with them and be like, hey, we're partners in this. Like I'm getting an X thing that's coming right to me. What if we share this? Because I want to keep this relationship in place. Like I want to do this, but we need to get through this. This could last two months. This could last six months. This may be here for a while, but it may just in three months, it's all fine and we're back to normal. Who knows?

So understanding that and just don't feel like it's just you with that. In terms of that, have a conversation with them, especially if you're a true partner and try to get through this together. I know your margins won't be solid, but these things you're doing in the meantime, these could be huge opportunities where you reanalyze your costs, you reanalyze your sales channels, you reanalyze your pricing, right? And then maybe once you get out after this impact and your business is set up for better success and your profits go higher because you've kind of re- looked at this, so look at it as an opportunity as well.

Jordan Buckner (14:44)
Yeah, I think the other thing you mentioned sales channels I found is that a lot of founders will rely on something like QuickBooks Online to as like the source for looking at their financials without understanding how that breaks down is in running their business, right? Because if you're selling on your own website, Amazon through a distributor, the margins and the pricing costs are going to be different every single channel.

And when you're looking at your P &L, you kind of see a blended cost across everything. But you might find that one sales channel is actually, losing money now because of cost changes. And maybe the other one, you're still profitable. And so how do you kind of recommend companies should go through and actually look at those sales channels to see what their margins look like?

Brad Ebenhoeh (15:29)
Yeah, no, it's a great point. not even even specifically within sales channels. It's even within like, let's say, with the big distributors and retailers, it can even be specific to that customer. Right.

losing money and unify but I'm good on Katie for reason. Right. So it's even getting down to that level. So I mean this is this is one of the biggest I think once you get your books in order and have a good team to kind of get just your balance sheet and PNL updated on an accrual basis is segmenting your PNL via the class function in QuickBooks by sales channel. So then you have all direct revenues gross and net deductions. have all your direct cogs. You have your direct kind of logistics fulfillment the impact contribution margin and then you have your direct

advertising, commission, broker spend to that specific channel. So then you're able to really see what is my profitability by sales channel after all these factors. So you can make better decisions going forward because you may be losing this money for 12 months on it and you're I'm gonna pull the plug and reallocate resources, i.e. team money, marketing money, etc. other...

channels that help you make better decisions as well as maybe a more profitable company. again, it goes back to kind of just setting your business up for success and having the proper visibility in place to do that.

Jordan Buckner (16:42)
How about, how do you think about cash flow management in times like this, right? Is now the time to be taking big bets because when other people are holding off, do you suggest companies kind of hold on to a little bit more cash on hand to be able to, you know, keep in reserve to last longer? And, you know, what do you see clients doing?

Brad Ebenhoeh (17:06)
Yeah, think now is a, like, it's a great time to again negotiate with vendors, negotiate with manufacturers in terms of,

fees and price points but also sometimes just in terms like hey can I pay you 60 days versus today like I know we already have that like or you know instead of paying in full like how can I get through this again how can we partner and look at that but also understanding that they're freaking out as well so like having that relationship with them what will help out with that in terms of outside of that like

Two things, right, from a cashflow standpoint. Maintain cash as long as possible. Your biggest outflow of cash as an inventory-based business is inventory. So now you need to start really, if you have a long...

days on hand of inventory, basically means when inventory comes into your warehouse and when you sell it. And if you have a long cash cycle of when you have to pay for inventory versus when it sells, we need to get that reduced. So you need to have better analytics and decisions on when you buy inventory and when you need to reload an inventory and how it matches with your sales process. Right. So instead of buying this much where it's going to cost you a lot more to do it, maybe buy a third and a third and a third, even though your margins are a little bit less, but your cash flow is able to

Staying in house a little bit, right? So that's number one. Number two is I'll always go back to this is where Being proactive and having your house in order to order in advance helps out So having your financials in place already working with your bank over the last several years to get a line of credit or a loan or

SBA loan, working with debt financing partners like Keith Cole or different things like that of trying to get that in place so you have that access to that capital that you may not need, but then you need it for something like this that helps you get through it, right? So it's really a part of that, of being proactive in it, and then it'll be less stressful. And again, as your competitors struggle throughout this time, you can identify it as an opportunity to really take advantage of some market share.

Jordan Buckner (18:50)
Yeah, I think the financing piece is really smart because there are a lot of debt products, like lines of credit where financing partners will actually approve you, but only charge you based on your usage of those funds, right? So when things are going really well, actually the times you actually want to apply for them, because then you can get access and then usually those will be open and live even when challenges come.

Unless, like if you're seeing sales drop or cost rise, like that's a hard time to then get funding in that place because you don't have that track record with them. But if you can secure those, when times are good, then you can have those in times where they are more challenging.

Brad Ebenhoeh (19:33)
Yeah, I always remember this is one thing that somebody told me in business a while ago. And it was like, you remember here was basically that bankers will give you an umbrella when it's sunny, they won't give you an umbrella when it's raining. So you got to remember that. So in sunny times when things are good, make sure you're working with advisors and helping you get to that aspect. And a big part of that is financials in order, accurate books, understanding kind of how your tax return plays into that. Because a lot of that comes into play of, hey, you're profitable in year one or year two of tax return. Well, there's ways that you can kind of finesse that a little bit, depending upon cash versus accrual and different things that kind of comes into play with that. But on top of that, understanding how your personal credit score and different things that can impact as well. So understanding the full scope of what goes into that is really going to help you be set up for success and have an umbrella and kind of a to help you get through like uncertain times like we see every couple years.

Jordan Buckner (20:22)
Yeah, that's so helpful. Brent, thanks so much for being on the show today and talking through how brands can navigate these challenges. I think, right, number one thing, build a strong foundation for your business and for your accounting so you can make decisions from a place of, I was gonna say certainty, but at least a place of understanding so you know exactly where you are now and how you wanna navigate moving forward.

Brad Ebenhoeh (20:45)
Absolutely. Remember, it's tough to run a successful business, so it's not made for everybody. if it was, then it would be easy. So it's not easy. It's always hard.

Jordan Buckner (20:53)
And so anyone listening as well, you're dealing with lot of things right now with sales, with your costs, get help on the accounting side if you need. I always recommend working with Brad and their team because they understand CPG and inventory management and accounting operations to help you get a true grasp on your business and where it is today. We'll drop a link in the show notes of how to get in touch with accountfully, but definitely recommend them so that you can understand and know your numbers to make better decisions.

Brad, thanks for joining again as always.

Brad Ebenhoeh (21:22)
Thanks Jordan, appreciate it. Have a good one.