Building A Bullet-proof Plan For Growth In 2026
This episode is a practical walk-through of forecasting for e-commerce growth, specifically how media buyers and operators should think about revenue targets, paid spend, CAC/ROAS degradation, contribution margin, fixed costs, and cash flow without building a fantasy plan that assumes everything stays perfectly flat.
Abir (outsourced CMO/operator for multiple e-comm brands) and owner of UpCounting.com breaks down a simple-but-real framework: start with the story in the historical data to build a forecast that’s honest about constraints (marketing efficiency, supply/inventory, staffing, cash conversion cycle). Then, turn the forecast into an ongoing operating rhythm where you review monthly performance vs plan, diagnose why you landed where you did, and update assumptions instead of “hoping next month works.”
A big theme: most brands hit a “terminal velocity” with their current offer/creative/channel mix. From there you either (1) increase the value you get from customers (LTV/retention, bundles, new products, adjacent audiences) or (2) improve business efficiency so you can reinvest profit to raise your ad spend ceiling—aka the “two machines” model: ads machine + ops/profit machine.
Key Takeaways:
Using more than just "vibes" to justify perfomance when CAC stays flat while spend goes up.
How to forecast using your actual “terminal velocity” instead of your dream scenario.
The difference of forecasting from a revenue goal → spend/CAC → contribution margin, Vs. just backfilling numbers to match a target.
Knowing where your business actually breaks first (marketing efficiency, inventory, cash conversion cycle, headcount, or fixed costs)?
The fastest way to spot whether growth is coming from new customers vs returning customers and why this changes the whole model.
How to properly plan for CAC degradation when you begin to SCALE.
Why tracking this one metric can confirm if extra spend is actively hurting your brand.
Moving away from just looking at ROAS and moving on to a monthly system for forecast vs actual + “why did this happen?"
How to know you're investing cash in the right lever and helping raise your ceiling faster.
How to run the numbers to insure you're holding your internal team to an ROI standard and not just giving the team a free pass.
OpEx bloat (tools, subscriptions, extra layers of people) and how it is quietly eating your ability to reinvest in growth.
To connect with Abir, you can follow her on x at https://x.com/Abir_CFOofEcom or at https://go.upcounting.com/
To connect with Andrew Foxwell send an email Andrew@foxwelldigital.com
To connect with Brad Ploch send him a DM at https://x.com/brad_ploch
To connect with Zach Stuck send him a DM at https://x.com/zachmstuck
Learn More about the Foxwell Founders Community at https://foxwellfounders.com/
Full Transcript
Building A bullet-proof Plan for Growth In 2026 - YouTube
https://www.youtube.com/watch?v=gpnfYEBbtuw
Transcript:
(00:01) But brands that have very high fixed expenses, especially ones that like do their own manufacturing and stuff like that, like those are the ones where it's like you need to make sure that your worst case can cover all of your fixed expenses so that it's not going to destroy your business.
(00:16) So the second big chunk is the relationship between new customer revenue uh and advertising spend. So being able to kind of see, okay, what was spent on different channels? How much was that kind of increasing over time? What sort of CASs were you able to see? What sort of volatility did you see in your CAC? How much of a degradation did you see in your CAC over time? and whether or not the projections you have for, you know, increased spend and a certain amount of CAC degradation, like are you making the investments on the creative side, most business owners do not spend enough time scrutinizing
(00:36) the ROI on full-time hires. I think when it comes to personnel, for some reason, they just fly under the radar in so far as like what sort of value they're driving and what they're contributing to the business. Where if I were to go to them and be like, "Okay, what did this person do last month?" They're like, "Well, they did XYZ.
(00:48) " I'm like, "Okay, cool. That cost you in salary, let's say $8,000." If somebody came to you with an RFP and said, "I will do these things for $8,000. Would you have signed that contract?" Absolutely not. [Music] And now, let's take a listen to the Scalability School podcast. Welcome to another episode of the Scalability School podcast.
(01:14) Your best friend for running your e-commerce business the best way that you possibly can. Uh, glad to have you. Today's special guest, A Beir, who is one of the financial gurus really that we have in the Foxhell Founders membership. somebody that we all look to to think about planning and forecasting and all of that as it relates to running a business.
(01:35) So, Air, welcome. Glad to have you. Thanks so much. I appreciate you guys inviting me. Are you guaranteeing everybody's going to have a 50% increase in rorowaz and and contribution margin this year by your presence on the podcast? If they don't, I'm willing to give up my CPA title. So, perfect. Perfect. Yeah.
(01:58) So, a beer um I don't if you don't know a beer, I'll just give like a quick bit of background on my own. Uh a beer's organization is like an outsourced CMO for a bunch of different e-commerce businesses. It's also done presentations in the Foxwell community about running your agency better and thinking about just how to think about, you know, how you're making money and you're thinking about expenses and um everything else.
(02:22) Um Brad was trying to figure out how to do forecasting and was digging around YouTube and found a beer's old YouTubes uh about running things and so um Brad you want to do you want to give your background on a beer in case people don't know who he is? Yeah, I know. We've we've chatted we've chatted a few times just like through the Fox group and that's where we met and it's uh one of my favorite things about the not the group, not to make this a pitch for the group, but um we get to you get to meet people who have uh similar and differing opinions, but um we've interacted over uh shared shared and
(02:52) different differing spreadsheets primarily. So yeah, no, I've just kind of seen the seen the work that you do and the resources you put together for the the folks in the group and um just uh always admire and take inspiration from those. So yeah, I appreciate it. No, like I I know you do some great uh work on the like margin side in the models as well.
(03:09) So, I'm a big fan of your work too. Appreciate that. Appreciate that. The goal of today's episode is to walk through, you know, look, you're looking at 2025, you're looking at what happened in the previous year and then you're looking into a new year. Just right out of the gates, Air do you start reviewing the prior year before planning the next one? 100%.
(03:29) is the historical is always the best place to start because it's uh forecasting is a very challenging exercise because it obviously requires a lot of uh dreaming and assumptions and imagination and what have you. And as much as possible, you want to be able to ground it in some amount of reality and the arguably most honest data that you could work with is what has happened in the past.
(03:48) Not to say that that's necessarily a perfect reflection of how the future's going to go. Uh but nevertheless, it is something that can be a very strong starting point. So usually the whole forecasting game is kind of broken into to simplify like the three pieces. So one is that you kind of pull up the historical data, make sure that you're able to analyze it in a way that allows you to as much as possible understand a story of how the business has been doing and it gives you a lot of indications not only as to what sort of trends you're seeing but also kind of like fundamentally what the the company
(04:16) is capable of like what their market looks like, how their product stacks up against things like what they've actually been able to accomplish. Um the second piece of it is then having that conversation with the brand in to one extent to be able to kind of understand a little bit more depth beyond just what you're going to see from the financial side.
(04:31) So like what are the things that you tried? Why do these things work or not work? Um you know what sort of challenges do you have that may ne not necessarily be reflected purely in the financial data and then also then kind of speaking towards what the plans are like what do they want to be able to accomplish? you know, what the goals are to some degree, but also like what are the things that they think they'll be able to do or what sort of tactical plans that they have in place that will be able to kind of allow them to see improvements over the historical data. Then that's obviously tempered by some
(05:00) amount of conservativism and judgment on my part because some people are especially ambitious with the the the plans that they have. And then it's a question of being able to okay now say let's take that story and then build it out as to an extent an extrapolation of the historical data so that there is at least a little bit of a consistent story between kind of the last 12 months and the next 12 months to be able to kind of show how that can uh you know realistically be the same company
(05:25) you know run by the same people and with the same product and the same market and then see how what would have to actually happen fundamentally to be able to kind of achieve those goals to be able to say if it's realistic.
(05:40) So if you say you want to be able to I don't know uh increase revenue by 150% then at the very least we can say okay well historically this is what the profile of revenues look like in terms of new customers returning customers the ad spend that you had and the CAC that you had. So mathematically what would those numbers have to look like and what configuration of numbers would actually let you hit that 150% revenue growth and you know if your CAC would have to go down by 50% but you'd have to double ad spend for that to be hitable then we say okay it's probably not a realistic goal so let's go back to the drawing board. Yeah. Can I can I lay out like
(06:07) a very like a specific example of how somebody could do this and you tell me like that makes sense, but I would change it and do it differently this way just to give people an idea. Sweet. So, the way that I the way that is a very like light version of looking at last year could be let's start at the top like let's look at revenue and ad spend trend by month and let's just export those for like the last three years and put them side by side.
(06:31) Um the way that we do it is like a simple version is like you can just wait the last three years and say cool if if if the last three years are similar to what we can expect this year now you can understand where revenue occurs throughout the course of the year on a monthly basis. So before you think about 2026 and whatever, it's like okay, I can see how revenue flowed throughout the course of the year seasonally and I could see how spend kind of went along with that and then you start to look at those those peaks and valleys and to your point what you were saying is you start to plot well, okay,
(06:54) what are we doing this month? What are we doing this month? Where could you know maybe we have some ideas as we're doing this is like start to plot this out and literally see okay this is the this is the the the quantitative power to the marketing calendar that becomes the qualitative stuff that goes along with it.
(07:13) So we just kind of export, look at the last and call it, you know, you could do two, three years, see when those revenue peaks and values occur and then start to like map it out side by side. Is that was that similar to what how you do that? Yeah, I like that approach because essentially you're incorporating not only the month overmonth aspect of it, but the year-over-year aspect.
(07:30) So you have the seasonality component in so far as like how does uh revenue peaks and valleys occur during a year, but then also making sure that the trend from a year-to-year basis makes sense. So if year 1 to 2 to three you only grew by 15% each year and now you're predicting 80%. It's like cool maybe but you've got to give me some sort of convincing story as to why that might be possible. So you're incorporating both sides.
(07:49) The only other thing that I would probably add to that, which is to some degree already factored in what you're describing, is that for high retention brands, I think the breakdown between the returning customer and the new customer revenue is extremely important because the way that those cohorts kind of affect what sort of growth you can get from a count compounding basis like that can be one of those things where it's a very different profile of how that analysis is done for like a higher retention brand versus kind of a mostly first order profitable brand. But mentally the concept
(08:15) applies because the new customers might flow with seasonality but if your retention has been crazy like that might smooth it out and it's kind of misleading and confusing right. Mhm. Yeah. And and there's a compounding effect because you could grow from like say 15% to 25% to 35% to 50 60% that can happen if you have you know really good retention and you're able to kind of make that that play work.
(08:40) Uh especially for subscription brands like it's it's a a much more different approach. So that aspect does it's almost like having two different versions of how you approach forecasting. It's like if you're below a certain amount of returning customer revenue and if you're above and especially if you're on a subscription heavy bread. Yeah. And would you say that doing that kind of like top level like starting with revenue maybe splitting it by new and returning customer looking at ad spend.
(09:03) Is that enough depth for like most brands if they've never done this before as like a starting point just like hey like zooming out and looking at this is going to get you a long way or when do you start to layer in like okay I want now I want to pull up meta and see how that fluctuated throughout the year.
(09:13) I want to pull up Google and see how that fluctuated throughout the year. I want to look at my creative trends and see how that fluctuated throughout throughout the year um what is what is like how do you how do you take it and add uh depth to it? I mean I think if a brand isn't doing anything then certainly kind of starting with the revenue side of it is the easiest place to go.
(09:30) I think if they have um a lot of ambitious growth plans and kind of maybe going to a little bit more of the creative or the channel level side of things can help a lot but then al also you get into a little bit of the whole issue around kind of attribution incrementality and all that stuff and it comes down to the sophistication of the person analyzing the data.
(09:48) I think doing the split on a channel by channel basis and kind of attributing things to different things like if you're mostly met Google like I think maybe that breakdown is maybe somewhat worth it because Google again depending on the product and whether you're going heavily branded or non-branded or whatever the case might be then like that can often be a little bit more stable to some degree.
(10:04) So, I think where the analysis will probably get you the most bang for your buck for for people who have ambitious growth is when they're looking at their meta spend and kind of whatever they can make any assumptions they want about their CAC and how much that degradation they're going to see as they increase spend. I think the key part that a lot of people neglect is their investment on the creative side.
(10:22) Um because fundamentally for you to be able to double your spend and only see maybe say a 20% increase in CAC, uh you probably are investing a lot more in creative. That doesn't happen unless you're giving a very substantial investment to that side. And I think that's a part that people oftentimes just gloss over. Yeah. I think it's easier with uh people that are marketers that became brand owners versus people that are brand owners that are trying to figure out how to do marketing, right? Um so let's say that you're you're starting to build a forecast for the next year. You're thinking about So what are you taking
(10:52) from there to inform to make a great forecast? Yeah, it's a good question. So I I'd probably tackle maybe like three pieces. So the first one would be kind of what we discussed with Brad u the the breakdown of kind of what your overall revenue performance looks like. So especially if you you want to be able to forecast effectively and you do have good retention and like being able to pull all the cohort data to be able to understand like how does uh how do newly acquired customers perform like that's one very big aspect of it. The second big chunk is the relationship between
(11:21) new customer revenue uh and advertising spend. So being able to kind of see okay what was spent on the different channels how much was that kind of increasing over time what sort of CACs were you able to see what sort of volatility did you see in your CAC how much of a degradation did you see in your CAC over time and whether or not the projections you have for you know increased spend and a certain amount of CAC degradation like are you making the investments on the creative side and then the third piece is everything essentially operational so um that it cover that covers a lot
(11:51) but I just kind of lump it all together because philosophically you're kind of approaching it the same way, but it's a question of okay, for a given level of activity, what are you seeing in terms of kind of agency expenses for personnel? What do you need to invest in? Um, you know, development cost or product uh product expansion or product research or launches or whatever.
(12:07) Uh, and then also that has to tie into everything from a cash flow and inventory perspective too. That's the very big chunk from the on the balance sheet because um you can kind of like predict whatever sort of growth that you want, but that has to be fundable.
(12:21) So depending on the cash resources that you have available, can you actually fund that sort of growth? Can you purchase the inventory at the rate that you need to to be able to scale up into it? So that part is the that's difficult from a mathematical perspective, but it is very logical. If you can get the first two things right, then everything else technically just flows mathematically from that, but people still struggle with it because it's hard math.
(12:43) Um, but the first two are or the second one in particular is the especially difficult one because that's the one where you're kind of just guessing and it's essentially impossible to know for sure. Yeah. So let's say there there's two scenarios. It's either what particularly in your case it's like you're you're saying okay we've we've looked at last year uh client what would you want to do in 2026? Um and you either get okay that's realistic or it's probably not realistic.
(13:07) And I've been telling our team lately it's like we're not we're not really in the camp of it's not possible. We're just likely to happen unlikely to happen. What needs to happen in order to make it more likely to happen? Um but so those are the two scenarios. Let's assume that it's they've been growing 20% year-over-year the last couple of years and they want to push for for for 40%.
(13:26) Um, when they give you the 40% number, are you asking for, hey, what's your profit goal or are you breaking it down into to revenue and spend? Like what are what is the specific metric you're starting with? Are you going bottoms up, top down? Like um how do you usually do that? It usually starts with a little bit of a conversation as to kind of like what the brand has in so far as kind of their aspirations for the company and what they have available in terms of funding.
(13:49) Um, so for example, if their aspirations is like, oh, I want to be able to build a a cash flowing business or a lifestyle brand, whatever it is, that's going to be one approach versus like, no, I'm specifically trying to target an exit in X amount of years. So that inevit to some degree just kind of like lays out what the sorts of goals are and whether or not what they're saying for this particular year is in line with what would be necessary several years from now to be able to kind of accomplish that overarching goal.
(14:10) And the second piece of it is like, okay, with the resources that you have available, is that possible? So, if you're bootstrapped, then that's a very different game versus like if you plan on raising funds or if you're going to be taking on a lot of debt or whatever the case might be. But beyond that, I agree with kind of what you laid out where it's not about saying that anything they bring to the table is not possible. It's about saying this is what would need to happen for that to work.
(14:31) Um, anything is kind of possible. Something is just very difficult, but you have to be realistic about it. So, somebody says, "Well, I want to be able to um triple my ad spend, but also like I'm not going to invest in creative or improve my agencies, and I've never been able to do that in the past.
(14:43) " It's like, "Yeah, sure, fine. Maybe if you find like, you know, a spectacular marketer that is able to completely change the messaging and branding and everything, then possible, but like realistically, there's going to be certain amounts of investments necessary in the marketing machine to be able to help it increase because um it's not just about ad spend. That's just the fuel.
(15:02) the machine itself has to be capable of processing a certain amount of spend effectively. If not, you have to upgrade the machine. So, that's a thing that people It can often be a little bit of a hard pill to swallow for some brands. Yeah, definitely. So, let's let's use a let's use the Andrew's hat hat shop scenario here. We've got uh Andrew's been slinging hats.
(15:20) He did $2 million in profit last year and he wants to do $3 million in profit this next year. How do you how are you building like what's what's a simple version of and I know it might be hard to like um fully visualize this if we don't have a spreadsheet in front of us of actually like going through this but um you know I want people to be able to like walk away saying like okay I kind of know I need this this and this and I can work my way back to a goal what kind of steps would you take from there I usually go top
(15:43) down so I would start from the revenue perspective so these are the sorts of um revenue growths that I would have to hit and obviously the models are dynamic so like you start with off like a rough guess and like well that only got to 2.4 million. So, let me tweak my assumptions.
(15:56) But essentially, that's the idea. You you come at it from the revenue perspective and say, "Okay, well, this is the sort of revenue that I need to be able to hit for that. I need to be able to this amount of spend at this sort of CAC that'll give me this sort of contribution margin." And then from a fixed expense perspective, you kind of hope that you're able to keep it stable, but realistically, you're going to have to increase it to some degree.
(16:12) So, you say, "Okay, well, I need to add a little bit more personnel on this side. I need to be able to do XYZ." And then again, you also come back to the cash flow side to say, "Okay, this is the P&L that I want to be able to have." inevitably for this amount of revenue growth, this is amount the amount of inventory I have to buy based on kind of like my bleed times and what have you and like do I have enough cash in the bank to be able to sustain that whole uh cash conversion cycle. Um so it's really just kind of working top
(16:34) down from the revenue perspective in most cases. So looking at so you're making this forecast you're looking at the revenue going through that with them and forecasting when people are building how are you changing forecasts quarterly monthly weekly like how often do you recommend a brand owner changes that and revisits the forecast.
(16:59) Um because I think sometimes people I I've seen brand owners hold on to a forecast longer than they should based on things that aren't happening, right? Um and that could be a combination of a lot of different things, but like how often do you recommend people are revisiting it and and looking at it based on what they're seeing because there's obviously going to always be changes um that are taking place. I'm just curious.
(17:20) Generally speaking, I'd say a month, like every month. Um I think you get your updated data. Yeah. You going through you do your forecast to actual analysis. You see like the the process you get your books closed. You do your forecast to actual analysis and then you ask the question.
(17:34) It's like okay cool. If I miss my forecast above or below what was the what were the assumptions that I had made incorrectly even if it's a favorable outcomes what are the assumptions that I made incorrectly and how does that affect my future assumptions? I think uh if people are doing that monthly that gives them the opportunity to make the corrections.
(17:53) A brand owner could look at that and say like, "Oh yeah, I thought, you know, I was going to 58% increase spend and I didn't do that, but that's because, you know, Zuck like but next next month it'll work." And like, okay, cool. They can be delusional about it. That's their own prerogative, I suppose.
(18:07) But nevertheless, I think the the habit is to do that monthly forecast to actual analysis because realistically, the forecasting is it's always going to be guessing to some extent. It's just a question of you getting better at guessing over time and improving your judgment. and um you know hopefully improving the conservatism as well if you happen to be somebody who's a little bit overly optimistic.
(18:26) So that analysis on a monthly basis is good and then usually you should it's usually easy enough to be able to just kind of tweak the the forecast as necessary to make it a little more realistic. Is it a lot that they're missing forecast because they're not properly understanding like what their OPEX is and it's changing and they're not able to get as many sales in the door or is it tied to is it a you know you mentioned creative creative previously. Is it that they haven't invested in
(18:51) the other arms of it? Like what are the reasons that people are missing a forecast? Almost always it is that they overestimate how much they'll be able to increase ad spend while maintaining the same row as CAC.
(19:07) It's it's almost always that like the most default assumption is people just showing up like yeah we'll increase ad spend 10% month over month every month for the rest of the year like that that's like the default that everybody just assumes is going to happen and it almost always is the biggest problem because to be honest almost everything else flows from that. So yes, a person can like you'll have other instances like for example um one brand comes to mind they hired a very expensive uh like VP of sales because they wanted to be able to kind of like have all this retail growth and the person didn't work out. So they would have projected that okay we're going
(19:34) to get this sort of kind of traction in retail and whatnot and that didn't really end up happening. So then they end up firing the person. So there's adjustments to the forecast as a result of that where okay your personnel your revenue didn't kind of come go up the way that you hoped and your personnel cost went down.
(19:51) But realistically if you're being at least somewhat thoughtful about how you optimize and run your business everything should flow downwards from from the way that revenue is performing. So in a sense it's like if you're thinking in terms of cause and effect it's sort of like almost all of your opex is an effect of or sorry a yeah an effect of the cause which is kind of like the revenue and the ad spend and the only thing that's upstream of that if you will is creative investment for the most part just either your investment in kind of like the marketing
(20:18) talent the agency and the creative because that is probably step one which affects how much you can spend at whatever sort of CAC and then for a given CAC and for a given amount of spend in a given obviously consequentially amount of revenue. That's what affects everything else. That affects your cash flow, your inventory balances, your opex, the personnel that you hire, how much you spend on software. Pretty much everything is downstream of that.
(20:40) So like that's the biggest place that people miss is just the assumptions around ad spend. I mean, I feel like that's something that as a as a marketer, I've had to tell people for a long time on Meta, like the more you spend, you're going to reach less relevant audiences and unless you're creating creative immediately as you expand to reach out to new personas and stuff. One more question and then Brad can ask a question.
(21:04) But like people are doing this, they're they're reaching less relevant audiences. The cost is going up. It tends to beat to me a a brand owner will say, "Well, now we're going to fire the agency and bring it in house. It's going to be cheaper or whatever." That seems to be an answer.
(21:25) Um, it seems the new answer is we're going to try to find something that can be subscription, which I think is actually a good answer. And I think so a lot of it too comes to like product innovation and coming out with that along with sometimes bundling would maybe be another answer. What other things have you seen businesses do that help them fight the rise of CAC as they increase ad spend? I think one of the stronger ones is to be able to rely on uh increasing the LTV and the retention side of things.
(21:54) So essentially, how do I sell more things to the people that I'm already acquiring and then also having a little bit more expansion in so far as like what my acquisition mechanisms are. So simplifying a little bit, let's say I have one core product that I, you know, acquire like put all my ad spend into and over time I do make the investments in creative and I'm able to optimize that that is going to to some degree hit a bit of a natural plateau or an asmtote where I just can't really scale that much more beyond that. So then the question is okay cool this is essentially my terminal velocity for
(22:24) this particular configuration in the business. So, I either increase how much value I can get from each one of the people that I acquire without changing my front-end offer, but it's all on the retention and lifetime value side.
(22:36) So, making sure that I have more products that I can sell to them, and that can also show up on the front end in terms of like bundles and what have you. But for simplicity, let's just say I'm selling more things to those same people or I expand a little bit so I have a slightly different avatar or an audience that I can kind of pull into. And ideally, it's adjacent enough that I can also still leverage the same sorts of things that I'm selling.
(22:53) But once you kind of hit your terminal velocity from a revenue perspective, then it's a question of just optimizing everything else to being able to say like, okay, now how do I maximize my profit from that perspective? Because a frame that I use that I started using a little bit more recently, so I'm curious if you guys think it makes sense.
(23:12) But I I think it's a bit of a a simple but elegant way to think of e-commerce is that it's essentially just two machines. One machine is just saying, how do I spend as much money on ads as possible to be able to get like at the best possible c? So, how do I just keep increasing the amount of money that I can spend without too much cash degradation? And the second one is how do I run a business as efficiently as possible for a given level of revenue and ad spend.
(23:39) And the goal is to maximize your profit as much as possible so that you can just reinvested in increasing that ceiling. So, that's why a lot of brand the two mistakes that often happen is number one, they're not running operationally very efficiently, which means that there's less profit available for them to reinvest in. Again, not to say create is the only thing to say, but just for simplicity, like oftent times that is the thing that will move the needle the most. So there's less profit available to invest from that perspective. And the second
(23:58) mistake they make is that they often try to spend beyond the point of like their peak contribution margin. So they're going to spend closer to a break even because they think that's like the fastest that they can grow. But the problem is that that's actually hindering themselves because they're shooting themselves in the foot.
(24:17) because if you're less profitable from a contribution margin perspective, then you have less money to reinvest in the the actual improvement of your ability to spend at a higher ceiling. So, I think those two mistakes are the things that like really hinder the brands from kind of making the progress that they need to. But, um yeah, I'm curious if that sort of frame is is something that like again I started using this recently when I talk to brands, but I don't know if you if you guys uh see it makes sense too.
(24:43) I was I don't know if I was having a conversation with somebody or I was talking to myself via AI and just keeping notes and brainstorming things as I as I've tended to do so far this year, but I I I had a very similar kind of like thought process to that. So that that definitely resonates with me.
(25:03) But it's like brands today, it's like you you have to be good at a lot of things, but like you have to be good at marketing. Like it is just for better or worse, like it is one of the fundamental things you have to be good at. And it might sound dumb, like you've always had to let people know about your stuff and and how you sell it, but like more than ever, like ads just continue to eat the world. Uh AI AI eats the world, ads eat the world.
(25:20) Like it's just this these are the two things that are happening. And so I think that speaks to machine number one that you're talking about. And then yeah, machine number two is like, well, if you want to have any dollars left over for for you or for growth or for inevitably both over the long term, then yeah, it's it's it's key.
(25:33) We should we should probably come back to the opex point of like opex inefficiency and like where the biggest mistakes you see are with that but um we can we can put that to the side for for the moment. So like, okay, we've talked about or looking at the last couple of years, setting an understanding, then building your forecast for this year, and then um and then you kind of went through uh what you guys were just talking about was, okay, I'm now reviewing on a monthly basis.
(25:56) And so a takeaway maybe for people to to do is like you should go set a task in your project management tool right now or wherever to say like review the forecast. Like if you don't have one, you should do it and you should have a monthly cadence for for reviewing the forecast. And to your point, so you can go and see, okay, I said revenue is going to be this, it landed here.
(26:12) Why was that? Okay. Well, maybe my spend was less efficient than I expected. Okay. Why was it less efficient than I expected? Well, I thought Facebook grows was going to be here and it landed here. Okay. Well, what's wrong? You know, it's like it's the chain of that you just kind of follow that logical chain to to find those issues.
(26:27) Let's say you you come in and you're 20% behind on forecast for for January. Does that mean you're just kind of doing this like quick like, okay, well, I know we're simplifying it to not be new versus returning, but does that mean, okay, for the rest of the year, we're going to say we project to be down 20% off forecast the rest of the year, then what do we need to do to not let that happen? So, you at least have rooted someone in reality or like what what step do you take from uh you've you've updated it.
(26:52) Um how are you updating it? Um like maybe specifically on the number side and then like how do you build a plan from there? It comes down to the answer to what you describe which is under the the analys that cause and effect relationship analysis. So like when you kind of keep working down towards the root cause of what happened once you have that answer that'll determine what sort of an impact you make to the rest of the forecast and what is necessary to be able to kind of change it.
(27:15) So really, if it's something where like, yeah, we were below on revenue because this one particular ship container from China didn't arrive because of XYZ war that happened or whatever, then yeah, fine. That probably shouldn't happen again. We should be good going forward. So that could be reasonable. Where if it's just like a rorowaz assumption thing where you just got a little bit uh trigger happy with like setting really high targets, then yeah, probably worth making the the adjustment to the to
(27:39) the forecast. Do you set multiple like do you set a range of forecasts? Like are you doing a here's kind of like the base case, here's the best case, like are you setting multiple or you just kind of go in like this is the this is the this is the one that we're we're going off of and we're going to stick with this one for the year where possible. Yeah.
(27:58) I mean it's always ideal to be able to set you know your base worst best. Um obviously it's also a question of like the brand that we're working with and whether it makes sense to kind of because that's obviously a lot more work. Um so it depends on that. I'd say the value of doing the based uh like the the three sort of scenarios if you will are important in brands that have a lot of high a lot of fixed costs.
(28:20) The the reason being that take the the logical extreme of a brand that's like all variable, say a drop shipper, right? It's just like they don't have inventory. They don't have any fixed cost. They don't have any employees. Just some like 18-year-old kid lives at home. He has got like no no expense. It's just like he just rides the wave of ad spend.
(28:38) like things go up, revenue goes up, profit goes up, everything goes up, and things go down, they just go down. But he doesn't have any issues with that to a certain extent. Like there isn't necessarily that much of a need to be able to forecast what's my best case, what's my worst case, because then you're just going to ride the wave either way.
(28:49) So yes, if you have like maybe a contractor for like say 1,500 bucks a month or something, but you're actually doing 100k a month in sales, then like whatever, ride your wave up and down. You're you're worst case you're still not going to fire the contractor. You're you're good. But brands that have very high fixed expenses, especially ones that like do their own manufacturing and stuff like that, like those are the ones where it's like you need to make sure that your worst case can cover all of your fixed expenses so that it's not going to destroy your business. So that's
(29:17) where the scenario analysis becomes a lot more important because you want to make sure okay at a worst case am I good? Cool. Now what do I need to be able to achieve the more likely base case so that you can make the investments for that place without necessarily putting yourself in a situation where you screw yourself over. Yeah.
(29:33) Well, you you me so we're talking about like the potential the negative side, but there's even there's even a cap on upside growth from a cash perspective, which I think, you know, we've been talking a lot about like P&Lish metrics, right? It's like, okay, revenue, spend for uh efficiency, but we're not Well, I think it's it's it's I think it's hard conceptually to understand cash flow. I mean, I struggle with it for sure.
(29:53) It's like one of the things I'm really trying to spend my head uh wrap my head around this year is like, okay, what is the cash flow implication of these things? Because if you're if you're not, you know, if if you're if you're barely above break even, it's like you can't even place your next PO until you sell through most of your inventory.
(30:10) So like and then you're stuck for two two months waiting for it to come in on a boat and then then you can finally ramp back up. So there's this like huge delay. So like um but let's assume things are going well. Have you seen people like actually be constrained because their growth is either too fast and not efficient enough or like some kind of combination of that? No, you're absolutely right. And don't feel bad.
(30:28) Like even most accountants have a lot of difficulty with cash flow because it's a conceptually very it's a very counterintuitive thing honestly. Um I I wish I could say that it I see it more often because that means like some brands are just crushing it. But realistically everybody always ends up like uh setting themselves up in a way where it's like things have to work out perfectly for them to be able to hit their plans and like a lot of times it's a little bit tough.
(30:48) But yes, it does sometimes happen and in theory you're absolutely right that like if you are able to absolutely smash out of the park from the ads or let let's go with a simpler example. um you just go viral, right? Like it's not a question of like things you got lucky, things just shoot up. You have a lot of sales and yes, it can happen where you just from a cash flow perspective aren't able to necessarily sustain what's necessary to be able to hit that.
(31:10) I think it's interesting because in e-commerce it's a little bit less of a risk in a lot of cases because of the fact that your cash conversion cycle is pretty low. So, for the most part, depending on again your supply chain and lead times and all that stuff, if if you're getting like say really really good rorowaz all of a sudden and things are just going really well, you are for the most part in a pretty healthy place because Shopify is going to pay you out in a couple of days, you pay your ad spend, you know, whatever 30, 50 days depending on like your your financing structure there. And as long as your
(31:40) supply chain is not like 120 days, like you can just place inventory order. So, generally you should be able to kind of move relatively well. Um, but where it becomes a little bit problematic is for the brands that are being a little bit aggressive and kind of running closer to break even, then they have to be able to say, "Okay, cool.
(31:56) " Even unless they have a negative cash conversion cycle, they have to be conscientious of like, "Okay, how much of a credit line do I need? How much funding do I need to be able to take? Where do I spend that money?" So, um, they it's it's not it's less of an issue of you if you have incredibly good return on ad spend, then you're usually pretty good, but it's more of an issue of like, okay, we're in our best case where our revenue number is very high, but we are still operating on kind of a razor thin contribution margin. Then you still just need to be very conscientious of the funding as well. Yeah, that's
(32:22) fair. When does adding complexity with a forecast actually improve decision making? That's a great question. I'll give you three things. So firstly, it depends on the sophistication of the actual person. Uh there's no point in having a forecast if you're the type of person who like doesn't really pay attention to it, doesn't really look at it, doesn't try to operate against it, and doesn't really make any changes to your assumptions.
(32:45) So some people are a bit more like methodical, sophisticated, and thoughtful about those things. So some of it is really how are you going to use it? Because a forecast is not inherently valuable. It doesn't make you money by existing. It only works if you use it to inform your decisions and and are are thoughtful about that. The second one is with respect to I'd say kind of like a a risk element to it.
(33:06) So if you are running in a situation where you are taking some very big risks. So kind of maybe going back to the example where you have like a very significant amount of fixed expenses then like yeah that's a situation where the additional complexity of the forecast can kind of cover and show you the different areas where you can have failure and where you can have that risk.
(33:23) So adding that additional complexity can be quite valuable. Um but at the end of the day if you're in a situation where I guess coming to the third point you have very few constraints like the actual bottlenecks on your business is like this one thing adding the additional complexity is not necessarily going to add that value. So the other piece is really what are your constraints right now to be able to grow.
(33:43) So to to kind of clarify that with an example, if really the problem that I'm having right now is that I cannot increase ad spend beyond 100k without you know cu imploding then I don't necessarily need to spend too much time forecasting all of my software expenses or exactly when I'm going to hire each person how much going to pay them how much are their bonuses going to be.
(34:03) Like that's not the thing that's needle moving for me. It has a lot more to how much I'm going to spend on the agencies, how much I'm going to spend on creative and how much I'm going to spend and what's the cat going to look like. So like I need to focus the entirety of my attention from a forecasting perspective on that aspect. It's not really the rest of it that's going to be a big needle mover.
(34:19) Or on the other hand, if you're a business that does a lot of manufacturing, like another brand I'm thinking of that we work with, for them like they do their own manufacturing. So for them, their constraint is they're actually doing quite well from an ad perspective. They can kind of push their revenue up.
(34:33) Their constraint is that they can't keep up with supply um unless they make investments in machinery and you know their the size of their warehouse and the staff that they hire. So for them the they would spend a lot more important a lot more of their time on that aspect. So it comes down to where the constraint is.
(34:49) Um but if you have low fixed expenses your constraint is really just on the marketing side and you know you're a marketer-minded person then like you can put 90% of your forecasting attention on just that aspect and most of the opex do it at a high level just be like yeah get 20% of revenue like that's probably going to 8020 you good enough. Maybe I'm maybe I'm misunderstanding, but I think what you're saying is like once you identify the constraint, then you can make a decision on whether you should be investing OPEX into solving that constraint and to what degree. I was talking about it from the context of like specifically
(35:17) the how much value there is to kind of going super detailed on that part of the forecast, but it's exactly the same as what you're saying from the perspective of like that also mirrors how important that section actually is. So if my constraint is over there, then like I don't need to spend that much time on that other poor place over there from a forecasting perspective because it doesn't really affect the business that much anyway. Yeah.
(35:38) Well, I think it's I think this is an appropriate time for beef, Andrew, given that we're we're talking about our frustrations with OPEX decision-m and I mean, look, we're we're marketer-minded people, so like we want every dollar that we can to to pour into uh into uh op into into marketing rather than random fixed expenses. Uh, so I'll start.
(35:57) But beefs, if you're not if you're not familiar, is just like something that uh something that frustrates you. And since we're on the top, really grinds your gears. Yeah. Really grinds your gears. I'd say in the context of beefs as it relates to opex, I I just think like my one of my biggest frustrations is like um you when when when brands make decisions around opex without like an actual expectation of what that is going to return.
(36:16) Now, you can have you can have a theory about like I think um hiring this agency is going to to do is going to help me increase my efficiency. It's like okay well how much does efficiency and incre need to increase and at what spend level or like what what in order to for it to pay for itself like what actually needs to be true and so I just think it's not like taking that next step and just doing the math.
(36:40) Um you can just yap into chat GPT with how much it costs and like your your metrics and it can return to you like what what needs to be true. And so I think it's just uh not actually taking it like making a making an opex decision that you don't uh take to to the math to understand like well okay what needs to be true of this. The same could be true for like you're opening a retail location.
(36:56) It's like okay I know most people opening a retail location like generally think that through because it's a pretty big thing to do but like did you figure out how much your lease is going to be and what this needs to do in revenue and what the implications are for the staff that you need to hire and there there's a lot that goes with that.
(37:07) We had a client that just did this and they did they did the exact opposite which is they thought it through very thoughtfully. Um and so that's why I bring that one up. But what opex are you uh what are you beefing with? Uh so I don't want to copy you because I would probably say the same thing. So, I'll give you a couple, but they're very closely related.
(37:27) Um, so one of them is specifically, uh, and this one annoys the crap out of me because I think it's something that we fall into like as a business as well as a trap. Um, businesses do not spend, most business owners do not spend enough time scrutinizing the ROI on full-time hires. I think when it comes to personnel, for some reason, they just fly under the radar in so far as like what sort of value they're driving and what they're contributing to the business.
(37:48) And a person who works full-time can like I'm not not to imply that they're like time thiefing or like actively trying not to do stuff, but they'll do stuff, but it'll just be like a lot of busy work along the way, too. And the the frame or the scrutiny that people apply to agencies or freelancers or contractors, like anybody that's a an external to the business, they just do not do that to somebody full-time.
(38:06) Where if I were to go to them and be like, "Okay, what did this person do last month?" They're like, "Well, they did XYZ." I'm like, "Okay, cool. That cost you in salary, let's say $8,000." If somebody came to you with an RFP and said, "I will do these things for $8,000. Would you have signed that contract?" Absolutely not. But people just don't go into that frame at all.
(38:25) And I think it it often comes up as a specific point of frustration in the context of like people comparing in-house marketers to agencies. Uh because they'll hold like this almost unreasonable level of scrutiny to agencies that they'll just never apply to somebody inhouse where it's just like things just kind of happen with the in-house persons like what how much time they spend on things, how much value they drive. It's just it's a completely different way of analyzing these, but at the end of the day,
(38:46) yeah, cool. One's a full-time employee. Sure. The other one's an agency. Yes. But at the end of the day, it's cash out and what are you getting in as ROI? And people just don't think about that. And I think that I personally find quite annoying. Um, but just to not completely copy you, I'll add in a slightly tangential second one, which is that there's also oftentimes a lot of bloat that develops when it comes to fixed expenses. People will be thoughtful about adding it, but then it's
(39:10) now there forever. And so they don't necessarily spend that. It's almost like in in like the real world people like have subscription issues like just kind of keep subscribing to stuff. It's like all 10 bucks for Netflix and 10 bucks for Spotify and 10 bucks for Apple Music or whatever and that just kind of eats adds up over time.
(39:28) So whether it be softwares or also personnel too or like you know you just have an army of 17 VAS that all had different things that they had to do that kind of made sense at the time. Um there's a lot of bloat that shows up in OPEX that people just don't necessarily scrutinize because it takes time and effort to kind of and it's cognitive load to do that and people are like so busy kind of like trying to focus on all the fun dynamic exciting stuff like ad spend and CAC they just kind of like assume the fixed expenses are fixed and they never really take the time to think like okay cool how much if I were to be able to shave off like 10k
(39:55) of fixed expenses and then I spent 10k on creative how much more of a needle mover would that be for the business but people just don't do it and I find that too. Well, you've given people very tactical homework.
(40:09) It's go look at the last couple of years, then build the forecast, then make sure you're updating the forecast. If you didn't set the task in your project management system, you need to go do that. And now you've given them another task to add to that, which is like, okay, probably on a monthly cadence, go look at your your OPEX. Uh I think the at this point in time, there's this like viral thing on Twitter, which is some guy made a thing that you can upload your personal expenses into chat and it uh it it uh reviews it and yells at you if you're spending money on dumb things. Um, you can do that with your business as well. Um, Andrew,
(40:33) I don't want I don't want to leave you hanging on the beef though. What you got? You got something teed up for us. I mean, my big beef actually is in relation just because you mentioned about people opening up retail locations. Mine is is like I feel like I don't know why we keep seeing it, but it's so common that you hear big companies opening up a retail location before they need to.
(40:56) Like the the most recent example I've been very privy to because I'm a cyclist as a lot of people know is like um Rad Power Bikes. So they're an ebike company and they they grew in the pandemic and everybody was buying ebikes and then they just assumed everybody was going to buy a billion ebikes till the end of time and they opened up like some crazy number like 12 retail locations and I know for I know for like for real in Santa Barbara, California where I live their lease somebody told me is 50 grand a month. I was like, "Why? How many ebikes do you have to sling to like
(41:30) and then and then guess what? They just filed for chapter 11 because they're freaking bankrupt because like Yeah. So my I I think there's so much in business from a from a forecasting standpoint. If I am given the keys to a business, I always ask myself how much of this in the forecast is based on hubris and how much is based on reality.
(42:00) And I think that there's a lot of ego and hubris that's like tied into running a business and the more you can be tied into like is this a real thing? Like is is this are we actually seeing this happen is like a big thing that separates operators. So that's my beef. Um because for some reason these MBAs get put in these jobs at Rad Powerbikes and they're sitting around a conference table and like they make this decision and you're like how you know I know that things are going well but like and I'm just so conservative.
(42:31) I would never make that call. You know what I mean? It's just and then people get pee money and then they do really crazy stuff and they're just like okay I guess you're just lighting money on fire now. So that's my beef on that. But anyway, back to the regularly scheduled uh programming. I think what you said about, you know, looking at the employees is a huge one.
(42:53) I think um that is something I've seen and and have talked to a lot of people about because I do a lot of work with people that are brands that are in the Foxhole community. Do I to go in, you know, do I train my person better? Do I bring it in-house or do I use an agency? You know, obviously there's this is an endless debate we could go on and on about, but in terms of other things that people can assess in look, you know, forecasting and continuing to forecast, what are the top three things you would make sure that a
(43:22) business owner is doing that you don't think 90% of them are? I'd say deeply in analyzing their inventory. Um, a lot of times people just kind of assume that it is a it's on the balance sheet, right? So, people don't even necessarily look at it. So look at how many days inventory on hand do you have and what the distribution is for the various amount of SKs.
(43:40) I come across a lot of businesses who are sitting on hundreds of thousands of dollars of inventory and still ordering more every month um because it's in the wrong SKS. It's not in the stuff that they sell. And so then figuring out like okay fine if you're not going to sell it like can you liquidate it? Can you do some sort of bundling? Can you use it as an offer to be able to kind of improve your acquisition or something? But at the end of the day it's just if it's just sitting on the balance sheet it doesn't make you money and it's again it's cash that you could have been using
(44:02) elsewhere. Um so I say the inventory is one that a lot of people miss. The second one I mean we we spoke about it at length but um just essentially kind of spending a lot of time to understand what are the investments that you are making in increasing the ceiling for your ad spend. So not just assuming I'm going to increase ad spend 10% every month or every quarter or whatever it is.
(44:21) Like it's it's easy to make the assumption. It's like why do you think it will work? Like what are the what are the actual things you're doing that would allow you to increase your spend? because last month you spent 100k. So why should I believe that next month you're going to spend 110K and CA's going to stay the same? If it could do that, why didn't you just spend 110K last month? So making like spending the time to be like, okay, I can justify that there's a reason this will go up because I am making these sorts of investments. Um and the third one I already said,
(44:48) but personnel, I think personnel, people need to spend a lot more time on justifying why somebody should be hired. um and what the people are actually spending their time on because um yeah to to your point like I know the the agency versus in-house debate comes up a lot and I think that there are arguments to be made for the in-house but I think a lot of times it comes from an idealized scenario of like the theoretical benefits of having somebody in house and how much money you could save but the thing is that most business owners don't necessarily have I think the
(45:15) um let's call it discipline to be able to scrutinize an in-house in-house hires uh activity and what they do in the same way that for some reason they naturally and easily do to agencies uh such that the vast majority are probably better off just going with agencies until they're in a place where like it's truly justifiable to house.
(45:35) Yeah, I've so let's just talk about this for one second because I have lots of opinions about it. I think it's totally true. You know, I think that we've had a lot of people that have brought that are brand owners that have brought their head of growth into the Foxville community to make sure that the head of growth is like on it and they've given me a plan to say make sure that they this person is, you know, on it with this, they're getting reviews and whatever.
(45:59) There's so there's so many people that are just not they're not positioned to be able to know whether that person's doing a good job. So, if you're going to in-house, equip yourself first. and like almost learn it eight out of 10, nine out of 10 yourself before you hire someone because hiring someone in-house without the proper oversight is not going to be helpful for you.
(46:24) Someone's can come in and then they're going to realize that you have no idea what you're doing and that they're and it's they're unfortunately in most cases they're going to take advantage of you, you know, and I've seen that happen. I mean, I'm not saying there are certainly head of growth type people. There are marketers that are fantastic, that are selfstarters that go out there like and could just crush it and the their boss doesn't need to know, right? Think about the previous episode we did with someone like Miranda from 365 Holdings.
(46:48) She's insane. She's so smart and she's going to keep doing that, you know, cuz her she's probably maybe she's incentivized to do that. You know, that's another thing. Make sure you're incentivizing the employee to do a good job. But like that kind of self-starting mentality and attitude is rare.
(47:04) And there's a so just anyway that's another thing I I think it's important to talk about because what you're getting with an agency is like you they are going to be on it mostly like you know and that's what you're paying them for because they have to be V2. I didn't know we were getting I could look you want me to pull something up I can I can scroll through my Twitter for like four seconds and I find endless things to to beef with.
(47:29) Super super fun to talk about forecast or at least relatively speaking. Um, obviously a lot more fun to [ __ ] about agencies versus in-house, but no, I totally um Air let people know where they can find out find you and um about your company. Yeah, absolutely. Um, so I'm on the internet. My name's Abir, so it's not that hard to find me. Um, but yeah, be you can find me on Twitter, LinkedIn, all that kind of stuff.
(47:54) Uh if you're a brand that's listening, we offer a really cool kind of like one hour CFO deep dive that reviews kind of like the last 12 months of data and does a lot of the stuff that we're talking about kind of prior to the forecasting just kind of making sure that all your numbers make sense and you have that strategic plan that is kind of realistic.
(48:12) So that's also something that we um offer for free to kind of Foxwell folks, but I'm sure we can do it for free for anybody listening to this episode, too. Um but yeah, otherwise upcounting.com. That's where I am. Awesome. Thank you, Air. I'm glad glad to have you and thanks for joining us. Of course. Now, thanks so much for having me. This episode is brought to you by Brad's company, Work Marketing.
(48:39) If you need a DOC marketing agency, let me tell you, Homestead is great, but Work Marketing is also fantastic. And let me tell you, you aren't going to find friendlier people out there uh in the e-commerce space. So, we decided to do these little ads for each other's company. So, hopefully you find it interesting. But seriously, great team at work marketing. Very smart. Brad and Jordan are incredibly dialed in.
(49:02) Um, I just gave them a lead already made this brand that I gave them like I don't even know, double double revenue that they had the previous month or something. So, you know, it's very exciting to to be connected with Brad. And if you need a great agency, there's really no one better.
(49:20) Uh, Zach, anything to comment on work marketing? Yeah, I mean, if you want an agency that cares about your business much more than they care about their own website, I just tried to load workmarketing.com and it was broken. So, they're definitely going to give more of a [ __ ] about your business than their own. So, I highly recommend Brad and the team over at work. They've been incredible.
(49:36) We've referred a lot of business over to them as well. Really, really good as far as like cracking funnels and figuring out like rapid growth for brands. So, highly recommend these guys. The only way that we grow this podcast is by you sharing it with your friends, honestly. Like, reviews kind of don't really mean anything too much anymore.
(49:57) They're really meaningful, but they don't do a lot for the growth of the podcast. Um, and so sharing YouTube links, sharing Spotify links, sharing Apple, whatever we call it under the podcast app. Now, anything you can share, the better we're going to be. Um, guys, anything else you want to say on this? Yeah, please go check us out on YouTube. Rack up those views for us. We'd love to see it.
(50:17) And then subscribe. Make sure to subscribe on YouTube as well. And I relentlessly refresh the YouTube comments because it dictates my mental health for the day. So, please say something nice about all of us. Thank you everyone. Thank you for listening. Honestly,
