Jordan Buckner (00:00)
Welcome back to Startup to Scale, where I'm going to be diving into strategies and lessons that help founders grow smarter and faster. Today, I am joined by frequent podcast guest, Brad Ebenhoeh who's with Belay, a company formerly known as Accountfully. And Brad is a frequent podcast guest and a trusted voice in the CPG community. So we're going to be talking today all around holiday season, right? With it being just around the corner.

I want to tackle one of those important topics, is planning for Black Friday and Q4, and especially covering how to make money during this period and not lose a bunch of money when it comes to heavy promotions. Cash flow is another big issue that comes up in this time. And so we want to make sure you are not overspending on inventory and overspending on promotional costs so that you can actually have a successful season. Brad, welcome today.

Brad Ebenhoeh (00:52)
Thanks Jordan. Excited to chat about this exciting topic. can't believe we are almost two months from Black Friday.

Jordan Buckner (01:00)
two months from Black Friday and I can tell you there's some brands who like have had things dialed in for eight months now and they're like, all right, we already know what things are going on in a year. Other brands listening are like, crap, Black Friday's two months away, what are we doing? And I think for both is really understanding, right? Like how to have some control and strategy for this period and not let it take over.

And so, you know, I'd love to hear from your perspective, like brands that you've worked with on the accounting side, like what is Black Friday, how they season usually look like from a financial standpoint.

Brad Ebenhoeh (01:33)
Yeah, well, there's typically a lot of inflows of money, right? Like on that day, like, look at the deposits, look at where we're at, look at all the sales, look at everything. But again, back to your point, a lot of times that may not tell the full, the full picture, right? So I think clearly planning for heavy consumer demand times, like, you know, black Friday, like the end of the year, clearly that's awesome for any CPG direct consumer brand or anything like that. Cause people are buying more so on Q4 than, than other times of the year. But I think a big part of.

place to start at it is understanding, and we talk about this all the time, understanding your numbers by sales channel, right? To understand how much wiggle room you have with discounting and everything that kind of comes into play. And so when I say knowing your numbers by sales channel, mean, with direct consumer on your website via Shopify, what is your basically, what is your landed costs? Where's your gross margin? What are your fulfillment costs, right? What is your contribution margin?

What is your typical kind of advertising marketing spend, the average order volume? You need to know all that same thing on Amazon, everything like that, because they all have different unit economics. So if you know that very precise and tuned in, then you're able to kind of tweak a little bit more or have more confidence in discounting to sell more, to get more in the hands of your customers.

Jordan Buckner (02:47)
Yeah, I think those are huge. And I think those channel dynamics are so important. And I also love going into it with a particular goal. Like a lot, everyone wants to sell more product, but are you looking to acquire new customers to your brand who might have high frequency throughout the year? You might be willing to even break even or lose a little bit of money if you know that your lifetime value is four times that. If customers are buying primarily in holiday or

once or twice a year for your type of product, then you need to make money on that sale, otherwise you're not gonna get that back, right?

Brad Ebenhoeh (03:23)
100%. So yes, it really is a strategic understanding of what's going on, right? Because to your point, if you're trying to acquire a new customer, you're willing to kind of break even or lose a little bit on that. That's great. But then guess what? As soon as you sell them, send them that email

next purchase, hey, you get 10 % off. So you know what the follow up numbers are. So you start getting that customer bought in, but then at some point you're getting profitable with them and then they keep, you know, maybe they sign up for a monthly subscription. Cool.

great, now I'm making this much money on that customer every month going forward, right? So if that's the plan, great. But if you're, this is your one time a year where you're actually gonna be profitable and make money to support the operations, let's say for Q1, your product for some reason in Q1 isn't, let's say for example, you're a, I don't know, you make Christmas ornaments, right? Or you can like.

Jordan Buckner (04:08)
It's cookie mixes or anything. Correct.

Brad Ebenhoeh (04:10)
Q1, it's going to be slow. So like, let's go make it, make it happen and get everything in place to be profitable in Q4, right? Cause that's going to really, you impact materially the entire year.

Jordan Buckner (04:22)
You mentioned landed costs. ⁓ One of the things I'm guilty of, know a lot of other founders has been calculating cogs maybe one time or once a year and using those numbers to calculate profitability going into the new season. And so how do you recommend founders actually like what numbers should they go back and update and look at to make sure they understand all the landed costs because costs are always changing.

Brad Ebenhoeh (04:45)
Yeah, yeah. So clearly it really matters if costs, if your costs are changing, right? So if you do a deep dive analysis and Q1 of this year and literally you're like, look, I'm still paying the exact same cost for my raw materials, my packaging, et cetera. Great, right? You may not need to do a deep dive, but you have fluctuation and cost, you're impacted by the tariffs, you're importing products. So some of those POs you're getting may be more expensive because they're on a airplane versus a boat.

then you need to recalculate all that and allocate all of those costs to the POs that you're receiving in those products, right? Having really good, accurate and precise landed cost numbers really helps you with everything we're talking about here, right? Landed cost numbers, then you understand all the cost of fulfilling an order for those products, right? By SKU, once you figure that out and then you figure out your advertising numbers, you can back into kind of where you're at from an actual like,

to try to be cash positive on all these items.

Jordan Buckner (05:42)
And here's where I think a lot of founders get tripped up on this. And we've talked about this before on the podcast, the difference between like FP &A, financial planning analysis and accounting. Cause a lot of founders are like, look at maybe their QuickBooks or look at the report from their accountant, but that doesn't really show the full picture of some of these like landed costs by order by sales channel, right? Like the accounting software doesn't always break that down. so building out those reports like outside of that, which

It's probably a little manual. Is that right? Like is the best way just basically in spreadsheet or Excel and inputting all that?

Brad Ebenhoeh (06:18)
Yeah,

yeah. Typically, unless you're using like an inventory management system, you know, that has that detailed information that you can pull from at the end of the day, though, it is funny because everything like as much as the detail you have in QuickBooks or even an inventory system like since seven or whatever, a lot of times you're literally have Google Sheets or Excel up doing numbers and calculations and modeling, right? That's just kind of the day the day to day where we're at to figure that out. ⁓ So, yes, projecting that and putting that into place clearly.

some of these platforms that you have in place, like if you used an inventory system with some of their AI tools and forecasting, there's a lot more kind of automation and leverage you can get from them. You just need to know what they're doing, what information they're building on, is the actual baseline information accurate, right? Is that data that's in there accurate? Then you can make much better decisions and then have that precise information.

Jordan Buckner (07:04)
How should brands approach forecasting demand for Black Friday and holiday promotions without overextending an inventory?

Brad Ebenhoeh (07:11)
Great question. There's so many variables that come into play here, right? Because you have the basic or the tenant kind of core variables of inventory ordering, right? Like, hey, what are my lead times by reorder points? The order of quantities or minimum reorder quantities from the vendors, the safety stock in case things delay or whatever. So you have to have all that in place already for each product or each raw material, whatever, right? But then as you get towards Black Friday or these events where you have kind of more

you know, higher expected, higher velocity, expected higher, you know, turn. How much more do I order? Right? So then it goes into factors. Number one, cash. Do you have the cash to support this? The one thing is some of these suppliers may even, you know, give you a discount on some of these products. Cause you maybe you're buying more to support that, that year end sales. Well, guess what? If you get a point or two or three, two and a half points off of a product to buy, then guess what? That could even

you know, correlate to your discounting, right? So you have to kind of understand what that looks like, right? But figuring out if you can get any discounts from them. A big decision you all seem to make is not a decision, but are my suppliers and my commands, are they reliable? Are they going be able to provide me this

numbers when I order a hundred SKUs, do they always only give me 80 SKUs because something happens like.

You need to factor in kind of that unknown variable that comes into play. Do you have warehouse and you know, place to store this product if you have a ton of product, right? That kind of comes into play there as well. And then I think, you know, lastly, if you order a bunch and you expect this product to sell on Black Friday and it doesn't, what's your plan? Right. So you've got to have a plan as well. If it's like, Hey, let's try to hit this out of the park, but if it doesn't, then what is our plan to get rid of this product? If it is CPG, typically there's

shelf life, right? So like, shelf life. it's, there's a lot of factors that come into play. This is why inventory is so complex for a business and having a really focused approach and that to have as much information on hand to help make those decisions, whether it's landed costs, inventory quantities, all the variables from a purchasing variable I talked about, as well as like consumer sales price, like what do we, what's our go-to-market strategy from a marketing standpoint, sales standpoint, et cetera. It all needs to be kind of integrated strategically.

Jordan Buckner (09:20)
Yeah. And I see, you know, I think what's so wild is that like, depending on any like new channels that you're on or new products that you're launching, like sales swings can be so great during this time, right? It's not a exponentially real linear look at last year. Not like, all right, last year we sold this much, we can make you 10 % more this year. And I think brands have to understand those two sides of would I rather sell out of product and have customers who can't buy or have more product than needed.

and have the to get rid of that, maybe through liquidation or elsewhere. It probably depends on like cash for your business and what your goals are within there,

Brad Ebenhoeh (09:59)
Yeah, a hundred percent. I mean, sometimes it's, think, you know, this comes from me, even though I'm an accountant, but an entrepreneur, but I'm still like a little conservative. It's like, well, do we shoot over the moon and have to liquidate or do we maybe conserve it a little bit? And this is again, it's just my perspective. And then just don't discount as much, right? Like just provide a good opportunity or a good product, but maybe not discount as much to try to sell everything. Right. So, you know, it's a very interesting conversation and it all depends upon.

And I don't think anything, any decision ever is right. It's just the situation where you're at, what you're selling, your current cash position, your current company position, right? Is this the last ditch effort to kind of turn things around? Cause you've had a struggle the last nine, 12, 18 months. Well, then maybe you're going to shoot for the moon, right? And then you try to figure out if you can do that.

Jordan Buckner (10:46)
Yeah, I think there's two other things. was just talking to another one of my friends, Ali Ball on the podcast and talking through like, is your product a Q4 product or not? Right. And it's like, if you are selling maybe like smoothie mixes in the frozen sector, maybe like a freeze dry one, like, yes, people still might have a smoothie if it's part of their workout routine in the fall. But people are thinking cookies, holiday dinners, family get togethers, gatherings.

And like your product might not be like the thing that's top of mind for people. so it might not be worth investing in lots of extra inventory and promotions for something you have to almost like pay people to buy because they're not excited versus something that's like in demand that people are searching for specifically for that season. And they're going to buy something, whether it's your product or a competitor.

Brad Ebenhoeh (11:34)
100 % and it's funny, that brought me up back even to like, this is kind of off topic a little bit, but matching expenses to your seasonality, right? So essentially, for example, a big expense throughout the year or like a big annual expense for small businesses is insurance expense, right? So Matt, if you are a Q4 product or that's your kind of highest time when people buy, have your big...

annual expenses come in January, right? Cause then you should have sufficient cash versus doing it in summertime versus if you're selling ice cream and an ice cream shop, don't have your big expenses come out December or January when you're going to have your lowest sales. Right? So it even kind of goes very similar to that is you need to understand your business and the variability of the ups and down and what really, what's your product market fit? If there is any seasonality that comes into play there.

Jordan Buckner (12:23)
And you talking through just like those annual, maybe business expenses or contracts with vendors or things like that, that you want to like space out at different times of the year.

thinking about like when you're saying those big costs, you don't want those to hit at one time. you thinking like the, like maybe software or insurance costs and maybe it's do one time a year working with them and saying, Hey, can you charge this in a cashflow like strong period versus a cashflow week period?

Brad Ebenhoeh (12:49)
Correct, correct. How do I do that? even if you have to like change the premium dates, renewal dates, or even if you're like, hey, I'm going to like kind of pay for this monthly and then you're five months in and then you maybe pay the last seven months in bulk in January, right? So it's just, managing your cash. It goes back down to managing cash when you need to kind of manage cash, it's easier to kind of manage things, especially if you have a lot of variability in what's in your bank account.

Jordan Buckner (13:11)
Yeah, let's talk a little bit about like cash flow within there, because I know it can be a huge stressor. What are some of the strategies to ensure that brands don't run dry during those heavy promotion months?

Brad Ebenhoeh (13:22)
Um, it's planning your entire year on that. So if you are a Q4 brand and you're like, Hey, you know, November, December is where I'm going to have 40 % of my revenues for the year in those two months. Then everything should be mapped around that, right? You should be planning cash outflows, uh, buying inventory in preparation for that. And you should have a plan of, I need to earmark or set aside X number of cash a month or a week throughout the other times of the year to save for that in order.

to buy inventories at this date, or I need to make sure my credit card balance is at zero because I need to use it, right? So number one, it's having a plan and understanding what your annual kind of cashflow cycle is. That's number one. Number two is, I always say this, go back to it, is when you don't need cash and don't need money is when you actually need to go out and look for a loan, line of credit, credit cards, et cetera, that you can use, right?

financiers, the bankers, they're going to basically not

provides you money like when your last ditch effort to do something, right. And when you're desperate, cause then they're, or if they do something, you're desperate, you're going to get a high interest rate. But, but a lot of times, you know, they're conservative in nature, so they're not going to like lend to you or whatever. But if you're looking good and let's say you have a account

your financials done, get your taxes done, Q1, get out to the bank and try to get a line of credit immediately that then helps support this. So it's being proactive. It's literally having a plan in place, being proactive.

managing cash week over week, having a 13 week rolling cashflow that you see every week to understand where like, what is my cash going to be at the end of this 13 weeks based upon actual expenses and estimated revenues and update that each week, right? So it's having just that consistent visibility to it is going to really help out into that and then make sure, you know, clearly your inventory costs are accurate, purchase costs are accurate, everything to map into there and then understand your terms, right? So even outside of that, you

especially for the

suppliers or comment or people that you all are working with, let's go at them and see if you can have terms extended or whatever, right? Or, hey, can we extend terms to 120 days? And if I pay you at 90, I'll give you a percent off or something, or excuse me, I'll pay you an extra percent or whatever. Negotiate with them in some capacity to see if you can help out. And it doesn't hurt to ask, and especially for those relationships, so have a long-term situation with them.

Jordan Buckner (15:35)
Yeah, I love that whole point of round negotiating during the strong points of your business. I think like you just said, right? Like with ingredient suppliers, if you had a great key for whenever that time period is in the year for you, like that's the time to say like, look, we're buying more than we've ever done before. We're spending more money with you. Can we extend our terms because of this growth? Right. And they're like, ⁓ your orders are getting bigger.

instead of decreasing or staying the same, like, yes, that's the partnership we want to invest in. like lines of credits is for most of them, almost all right. Like typically you only pay against the line on money that you've drawn from it. And so even if you get it in January, but don't really use it until August, September, right? You're getting the best rates without paying any of the fees.

Brad Ebenhoeh (16:21)
Correct. And it even goes down to, you know, having in case you need to run something for payroll or, you know, customer page away. It's just good to have. And I know it's, it's hard for a brand new company to get it, but it's the point of building up to that point, right. And being a professional business. And after you get to year one, then year two, what are my improvement points? Do I know my numbers? Do I go and make a relationship with a local banker or maybe a local bank or regional banker? Don't just go bank with Chase and expect them to do something. Go to

a local bank or shake some hands and try to figure out what you can do and how you can get something. Listen to these podcasts. know, Keith Kohler had a great podcast last weekend, just kind of with somebody else on, you know, just kind of the market and numbers and financing, like understand the full spectrum and make yourself smarter to help you make better decisions and then use partners and consultants and advisors that can help you out.

Jordan Buckner (17:10)
that. Any other opportunities or pitfalls that you've seen for brands who do Q4 really well that you recommend people look into or emulate or any other kind of thoughts or strategies?

Brad Ebenhoeh (17:22)
I mean, the rest of the stuff is more on like the marketing side and how they do that, which is not my, you know, my, expertise, mine is more on the, accounting, finance, cash inventory, which I think we talked about in general. it's just being proactive and being professional and getting, being strategic and executing week over week on your business. It's going to set you up for the most success for me for a Q4.

Jordan Buckner (17:44)
that and get planning now if you haven't already and I always tell brands to write like if things don't feel right if you're maybe going through transition your brands you don't feel like don't feel like you have to force in q4 sales if that's just going to distract you recalls other headache and I've been guilty of last-minute planning setting off all these ads and trying to do a discount some last-minute email marketing and generating just like a handful of sales I was like

it probably would have been worthwhile to step back, think strategically about Q1, right, the beginning of the next year to do it. And I think that's the other thing. I think there's a lot of better 4U brands that actually see a lot of growth in January, February, who are taking advantage of the new year, new you kind of vibes and maybe planning for that as your, one of your big times of the year.

Brad Ebenhoeh (18:31)
100 % agree.

Jordan Buckner (18:32)
Awesome. Brad, thanks so much for being on today. As always, if you are looking for help with your accounting, and especially from someone who really understands CVG, get in touch with Brad and the Blay team to help your brand. Thanks so much.

Brad Ebenhoeh (18:46)
Thanks Jordan, you rock.