How to Scale An eCommerce Brand to $100k per Month

In this episode, Nathan shares his advice for ecommerce brands aiming to reach $100k a month. He covers the fundamentals of scaling, customer acquisition, resource allocation, and the benefits of being under $100k per month. Nathan emphasises the importance of understanding the business equation, effective resource allocation, and the role of creative in scaling. He also discusses the misconceptions around return on ad spend and the significance of tracking CAC and first purchase contribution margin. In this conversation, Nathan shares valuable insights on scaling an e-commerce business to 100K a month. He discusses key metrics, common mistakes, and actionable strategies for growth. He emphasises the importance of customer acquisition, maximising first purchase profitability, and efficient resource allocation. Nathan also provides real-life case studies and addresses the mindset required for business scalability.

Takeaways

• Understanding the business equation is crucial for driving profitability.
• Effective resource allocation is key to overcoming growth bottlenecks.
• The role of creative in scaling and the cost associated with it.
• Misconceptions around return on ad spend and the significance of tracking CAC and first purchase contribution margin. Customer acquisition is the key focus for scaling an e-commerce business.
• Maximizing profit on the first purchase is crucial for sustainable growth.
• Efficient resource allocation and skill acquisition are essential for business scalability.
• The mindset of a small business owner can limit the potential for growth.
• Real-life case studies demonstrate the impact of strategic marketing and financial operations on revenue growth.

Chapters

00:00 Fundamentals of Scaling to $100k a Month
04:18 Effective Resource Allocation for Growth
30:25 Misconceptions Around Return on Ad Spend and Tracking CAC
32:25 Strategies for Scaling an E-commerce Business to 100K a Month
43:43 The Importance of Customer Acquisition and Profit Maximization
50:31 Efficient Resource Allocation and Skill Acquisition for Scalability
54:19 Overcoming the Small Business Owner Mindset
56:53 Real-Life Case Studies: Impact of Strategic Marketing and Financial Operations

Transcript

0:01

Welcome back to the Blues Brothers podcast in this episode, I wanted to run through my advice to ecommerce brands trying to hit 100k a month. In this episode, I'll be running through the fundamentals of scaling to 100k a month, the benefits of actually being at sub 100k a month. I'll talk about exactly how you acquire customers profitably at this scale will run through the exact SOPs the exact strategy that we use at the moment, we'll run through what you should be monitoring on a month on month basis and what actually deems success. I'll touch on what not to focus on and what to focus on. I'll go through the three common characteristics of all about top performing clients that scale at the highest growth rates. And I'll then tie into a little bonus section at the end. The goal of this podcast is that you can walk away and immediately your business to a hundred thousand dollars a month in the next three to six months with everything that I'm about to give you. Now you might be wondering who actually am I? I've worked with over 250 e -commerce brands directly over the past three and a half years. I've spent over $40 million on IEDs. I've generated over a quarter billion dollars in attributed revenue. I currently consult other agencies on their paid media strategy. I've scaled four of my own stores to $100,000 per month. I've scaled our agency to multiple hundreds of thousand dollars per month. So when it comes to scaling a business and particularly an e -commerce business to 100K a month, I've done it quite a few times. Now it would be a different story if I was sitting here telling you how to scale a business to $50 million where I have absolutely no track record to prove that I know anything about how to do that. But scaling a business to 100K a month, I've done it multiple times myself. I've helped other econ brand owners do it tens of times, if not probably hundreds of times themselves. And so this is the domain where my expertise lies. I've seen a lot of common mistakes across a lot of clients that we've worked with that have never hit the 100K a month. And then I've seen all of the commonalities between clients that hit this number and hit it quick. And that's a limiting belief that I'll also touch on in a second. So let's dive into the fundamentals of scaling to a hundred K a month. And throughout this episode, normally there's someone else with me and while they talk, I'm sculling down water. There's not someone else with me. So I will be taking breaks from time to time just to sip on a tea and some water here. Starting off with fundamentals of scaling to a hundred K a month. There's three fundamentals that I wanted to talk about. Number one was, the fundamental equation of business. So I've been talking about this a fair bit across some podcasts across the BlueSense digital YouTube channel. And that's the fact that you can summarize all the business now. And this is honestly, this should be lesson one of business when you go to university. I never learned this in any finance degree that I did at uni, which was how profitable a business is, is how low is the cost to acquire a customer and how high is the lifetime contribution margin on that customer. And then if you know that CAC, you know the LTCM, you can then know exactly how much profit you're driving per unit sold. And then you can know how many units you have to sell to cover operating expenses. And it's that simple. And so that when we reason down to first principles, we can reason down to does this decrease CAC or does this increase lifetime contribution margin? They're really the two questions that always have to be answered in all the business. And this applies to the agency model as well. Anytime we're making any kind of decision, it is does this drive down the cost to acquire a customer or does this increase the value of an existing customer? Now, with a brand doing under $100 ,000 a month, there's a caveat here, which is that I would not base your understanding of the business right now on lifetime contribution margin. I would switch this to first purchase contribution margin. And the reason being is that, okay, fantastic, you think that you might unlock$500 over the lifetime of a customer, but that's a complete assumption that's based in that. heavy degree of weighted risk. And so in reality, you want to be cash flowing positive on first purchase. And so you want to be spending on ads, you want to be spending on influencers, you want to be spending on organic SEO, you want to be spending on emails, whatever it might be. And the cost to acquire the customers needs to be lower than the amount of margin that you have on the average first purchase. That's fundamental number one. Fundamental number two is scaling a company is about allocating. your resources effectively to the current bottleneck within growth. And so anytime a business does not grow for a one to two month period, it was because of a poor allocation of capital or resources and resources to define that further is either actual cash or it's the time of the founder. Both are incredibly restricted resources when they're a startup. You only have so much time in a day. And you also only have so much cash unless you have external funding, even then you only have so much cash. And so being able to allocate your time and your money to the bottleneck within the growth of the business and being able to identify that effectively really ends up being the difference between someone that goes to a hundred K a month in a 30 day period and someone that goes to a hundred K a month in two years. I want to provide a little bit of social proofing here as well, which is that out of the four stores that I scaled to a hundred K a month, two of them, I did it within 15 days. And so the store was created and within 15 days of creation, it was at a 100K a month runway. So we went straight to about three and a half thousand dollars a day, which is what that one rate is. And so there is a limiting beliefs that might need to be broken by a lot of small business owners, which is that. the time in which it takes to get to 100K a month is completely constrained by your ability to allocate resources effectively. And that's it. And so if you're not currently doing 100K a month, and I'm probably might be shooting myself in the foot here where clients or future clients are watching this and they're going, you said that you could get to 100K a month in 15 days. That's my expectations. Well, no, and I'll tell you why. paid media agency isn't going to a paid media agency generally isn't the primary bottleneck in your scaling of your business, unless it is. And let me tell you what I mean by that. If you're working with a really, really strong agency, and they can fundamentally prove it to you, okay. And so if a client came to us, and they said, Hey, look, I want you to prove to me that you are better than everyone else and that the strategies that you are using on our accounts are the best because I want to have certainty, absolute certainty that when I'm working with you and it isn't working, it's not the paid ad strategy that isn't working. And that's a great question to be asking because if you can have certainty that we are the best, we know exactly what we're doing. I have done this hundreds of times for businesses just like you and it's not working for you. Well, guess what? It probably isn't the paid ad strategy. You're allocating all of your resources to fixing the paid ad strategy, but it's not working. And so this goes back to the last fundamental. If it's not working, then why isn't the company growing? It's because there's another bottleneck within the business where resources aren't being allocated that isn't being fixed. Is it that the website is terrible? Is it that the pricing is off? Is it that there's actually no consumer demand for the product? is it that the product is being framed incorrectly, which you could argue might tie into the paid ad strategy, but ultimately that's a messaging and a framing issue for the brand as a whole. And then the list goes on. There's all of these different reasons as to why a brand might not be taking off, might not be growing, and we'll go into a few of them at the end. But if you have a really, really, really good paid ads agency, and they can prove it fundamentally too, they can... show you the tests that they're running on a month -on -month basis, that they can go through all these things, which I won't go into in this podcast, because it's a deviation from the topic, then that should tell you that getting to 100K in the next 15 days isn't a limit on paid ads. It's a limit on something else in the business. There's actually some benefits of being at under $100 ,000 per month that people don't really take the time to appreciate either, which I wanted to mention, which is that if you are doing under 100K a month, you have no OPEX, at least you shouldn't have any OPEX. You have no people to manage and you're super agile. It's actually a really strong position to me, right? Is you can start the business, get to 60K a month and then realize, the bottleneck was that this messaging, this product, this... website is limiting us. Our click through rates are terrible no matter what creative we throw and we've tested 400 different pieces of creative. Okay, now we can know for sure that we need to change these things. And you can change them pretty quickly. Because you have no op acts, you have no people that you have to manage, you have no stuff that you have to pay, and you can quickly be agile. And also the no people to manage, I think is a big one, because a lot of e commerce owners, I think most business owners across every single industry do not start a business to manage people. They start a business because more than e-commerce, they're a very product orientated person. They love the product. They had this product idea and then they want to go and push it to market. And then they realize, the only way to do this is to have a team around me. now I have to manage people. And then everyone sort of gets thrown into management. So appreciate when you're smaller that you don't have to manage people and that you don't have any operating expenses. So the risk of the business is relatively low. Now to the main, how do you acquire customers profitably at this stage of the business? on paid ads, the rich get richer. Understanding that efficiency increases as spend increases is a really important concept to wrap your head around, particularly in this stage of the business. You don't need to understand the intricate details of what I'm about to tell you. You don't need to be able to relay this to your partner when you go home. But you do need to fundamentally understand the concept at a high level, because the concept is what's important. What's really important. and what holds back so many businesses. The concept here, and I made multiple YouTube videos on this on the Blue Sense digital YouTube channel if you wanna check them out. One of them is called the three phases of e -commerce, which goes through the three different phases of business growth. And then the second one was something else, I don't know. It'll be in the recommended under. There's a common misconception that as you scale spend within digital efficiency erodes, not true. And the reason why that misconception occurs is because of traditional media. If you go and launch into a newspaper and you are the perfect marketer, you're the perfect media buyer, you know exactly what you're doing. There's no human element of improvement from serving that first ad. You will be at maximum efficiency. The reason for that is that you'll go in place in, let's say you sell boots. You'll go in place in a country magazine where your target demographic directly overlaps with the product that you're selling. Cool. Now you want to scale. You have to scale through going into broader and broader and broader and broader magazines, which have less overlap with your target demographic. Hopefully they're still going to yield results, but they're going to be nowhere near as efficient in terms of money spent for money back as the country magazine was because it was so specific and niche down and the targeting was so spot on. And so what ends up happening is you have this erosion in efficiency. And then that's a whole different video for businesses doing over a month, which looks into incrementality testing and how you need to be measuring incremental revenue uptake based on spend uptake. But the caveat here is that that's not how digital works. How digital works is that at the start, you actually launch with your lowest efficiency. If you launch a new digital campaign on Facebook or Google, and you were the best media buyer in the world. You're the best performance marketing. You know how to position the product. You know all of these things. Your efficiency is still going to be the worst that it will ever be. And the reason for that is because every single campaign within Google and Facebook has a machine learning element that's guiding the target. And the machine learning element is based on conversion data over the course of the last 30 to 90 days within the account. More particularly within the actual individual campaign. And so when you have no conversion data, your modeling is terrible. The campaign does not know who to prioritize. But then as you start to get conversion data, it gets better. And then as you get more conversion data, it gets better. And then as you have hundreds, thousands, tens of thousands of conversions a month, the modeling becomes really, really, really good. And that's why the rich get richer. As you spend more on these platforms, the targeting gets better because the conversion data sets get better. because they get bigger. And so in the early days, what a lot of businesses will do is they'll launch with two, $3 ,000 a month in advertising spend. They'll be at a four ROAS, which might be around about break even, maybe a little bit profitable for them. And then they'll never up the spend because the logic is we weren't up spend until we see the ROAS that we're after, which is a six. And there's a fundamental flaw in that thinking because of a misunderstanding as to the way that these platforms operate, which is that. You will see better efficiency if you increase that. It seems counterintuitive, but it is how it works. And the reason why business owners don't understand this is because they're misconstruing their current position within business growth to their friends or people that they see who see an erosion as they spend more because they were $10 million business. But guess what? You're not, you're only doing 20, 30, 40,$50 ,000 a month in revenue. And so to scale, you need to spend more. You will get better efficiency because you'll have more conversions track. Now there was a huge caveat to everything that I just said in two particular instances. Number one, if you're putting spending to the wrong campaigns, obviously won't work, right? And this is why I'm actually gonna touch on our SOPs and how to actually set these campaigns up exactly so that you don't do that. Because I don't want people listening to this and hearing me say, yeah, you need to double budgets and you'll see double efficiency and you double budgets and you don't see it. Because I actually have a case study that we'll touch on later. which does exactly the case. Their old agency was trying to double budgets. It wasn't working. We came in and we went, okay, you're just spending on retargeting. Let's get rid of that and just spend on cold targeting. And then it worked. Caveat number one. Caveat number two is you'll see some brands. We have a bunch of brands under management right now that we were partnered with when we worked with, which spend three, four,$5 ,000 a month and they have a 15 row ads. And so you look at them and you go, well, it's possible for them. Why isn't it possible for us? And there's multiple reasons as to why they're at a 15 hours. The main one usually is that they're not a startup that's relying on paid ads as their core primary customer acquisition show. They started as a store down the road and then they got to about $2 million a year in turnover in that store. And about six years went past and then e-commerce started to appear. They decided to tell someone in store, Hey, make a Shopify store and see if we can start shipping products. They made a store. They started doing a few thousand dollars in revenue. an agency approached them, they started spending a couple thousand dollars on ads, 15 ROAS, crazy. How were they able to 15 ROAS? Because everyone already knew about them. It's all brand search and retargeting. This is not new customer acquisition. And this is the fundamental pillar of this part of the podcast, which I really want to stress is, I'm going to show you how to acquire customers, not how to get a good ROAS. And there was a clear delineation here that most small business owners need to understand. ROAS does not equal new customers. It doesn't. And that's one of the fundamental issues with the reporting within agency side for most agencies is that I can double your ROAS overnight. Easy. Super easy. I just take money out of cold targeting and put it in retargeting. And then you go, well, we'd be able to see that. That'd be obvious, right? We'd look into the ad account and we'd see cold targeting spend is down, retargeting is up. I know what these guys are doing. I'm not that dumb. They can't put this facade in front of me. That's not what we would do. We would just take some exclusions out of cold targeting. we would just increase budgets on P max. Everything would look the same. You wouldn't notice it, but suddenly we are heavily retargeting because we haven't put all of the measures in place to prevent it. And I can provide you with a really technical example of this, which is, it's hot tea. Which is that we have found through an experiment that we ran internally that if you run... retargeting campaigns on Facebook adjacent to Advantage +, it suppresses the retargeting component in the Advantage+. The hypothesis to why this is the case is because retargeting campaigns take priority at placement with higher bid caps because they're set at higher budgets on the customer audiences and so the CPMs are higher so they'll get prioritized at placement, which will then result in the Advantage +, doing more cold targeting, driving more new customer visitors. And so that would be a really easy way for an agency to trick you or not. Right? If they're running a retargeting campaign, they're actually doing more cold targeting because they're forcing the other campaigns to not place on those audiences. But if they aren't running a retargeting campaign and they go, Hey, we don't even want to run retargeting because Nathan said on the podcast that you watched that retargeting is bad. That means no new customer acquisition. And therefore we're just going to run cold. Impossible. You can't do it on Google, can't do it on Facebook because then the existing cold targeting campaigns will just retarget anyway. And now all the data's blurred, you don't have any delineation of cold and retargeting data and you don't even know what's going on. That was a little sidetrack, but it's to really prove that point home, which is that. The rich get richer as you scale spend, you will see better efficiency given that the spend is going into the right campaigns. Do not look at other brands and look at the way that their return on ad spend is flourishing at these lower ad spends and use that as a KPI for where you should be. It's completely subjective based on hundreds of different components. Return on ad spend does not give you a good understanding of the actual new customer acquisition being driven through these channels. Diversifying channels isn't a great option, but you need a bit of it. What do I mean by that? Omni -channel presence. I said this getting pushed quite a bit by. any really traditional media company that's getting into programmatic, which is that you're going to have an omni channel presence. You're going to be everywhere. You're going to touch the customer when they're on Spotify, and then they're going to see YouTube ad and then you're going to be on search and then you might even be on TV as well. Unnecessary. Unless you're a hundred million dollar brand, which we're not right. We're talking to some 100 K per month brands right now. Unnecessary. But number two is. It blows out tracking as well and it diversifies your ability to pull conversion data within a single campaign, which ties directly back into what I was just talking about, which is that the more data you have within a campaign, the better it will perform. Cool. We know that. So if you had a 2K budget, putting 2K on Facebook, 2K on Google, is that a good idea? Logically speaking, no, because you will now yield half the conversions on each platform, which will result in half the performance. Now there is a bit of an interesting caveat here that a lot of people don't really know. And I abused this back in the day when I was scaling for all of my stores to 100k a month. And that is that the Facebook pixel isn't just tracking users who convert through Facebook. The Facebook pixel is tracking every user that converts on site and trying to match it to a Facebook cookie on their browser. And so for example, if I go to the iconic.com right now and I go through and I purchase a shirt, I didn't click on a Facebook ad. I'm not even getting served Facebook ads by them, but their Facebook pixel will say that I'm logged into a profile on this Chrome browser and it will associate that to the pixel. And now count me in to the improved conversion modeling within the Facebook ad platform for that ad manager that's connected to that pixel. And so what ends up happening is that. the iconic benefits from all of the purchases occurring from elsewhere, as long as the users are signed into Facebook. It improves the modeling within Facebook. And so there is a component of the fact that if you are running half -budget Google, half -budget Facebook, you will see an uplift in performance on Facebook, naturally due to retargeting of those existing visitors, but also due to the fact that your pixel data is improving because both pixels are tracking conversions and trying to use that to improve their modeling. However, the weighting of that conversion modeling is lower than what is weighted in at the campaign ad set and ad level. And we have a video on this on the BlueSense YouTube channel, which is called the layers of machine learning in Google ads. The exact same thing applies to Facebook, which is that there are machine learning models at the campaign account ad set and ad level, and they are all providing a weighting into auction live. to determine whether we should place an offer on an individual user based on the psychographic data points of that user. And these different layers of machine learning are segmented down at the campaign ad set ad level so that it can delineate based on slight differences in psychographic data points between different categories or different messaging that you might be pushing. For example, if I sell men's and women's clothing and I run a Facebook campaign, for men, which has men assets in it, but I don't make any delineation and targeting. And then I launched one that has women-based creative. The campaigns need to know how to optimize individually. They don't want to both go after the same people. They want to be able to uniquely figure out, okay, I can figure out right now that these ads within my campaign are only working for men. These are only working for women. Okay, segment target. And so that's occurring at the campaign level, at the ad set level, and at the ad level. But there was components of... data being fed from higher up in the hierarchy. Whole nother video in itself. So if you do want to watch that video, go to BlueSense Digital and watch the laser machine learning. Diversifying channels isn't a great option because it dilutes the data, which is what we've just gone through. And secondly, it dilutes your focus. What are the odds that you as a business owner managing your own ads are going to become excellent at Facebook ads and excellent at Google ads within the next 30 days? I would say it's not zero, but it's close to zero. What are the odds that you become excellent at just Google ads? It's probably higher. Right. If you can allocate all of your time to just understanding Google ads, if you went and watched all of my videos on Google ads, if you went and watched a hundred more, and then you reached out to some people to see what they're currently running in Google ads, maybe you got an audit or two on your account. I can almost guarantee you would see better efficiency at the top line level of the business and you'll get to 100 K a month faster. And so diversifying channels usually isn't a great option. Don't go and try to test five different channels. The same thing applies in. like agencies and other business models, which is that multiple different acquisition channels for clients isn't a good idea because you're just going to dilute your ability to optimize one. Right. If we were trying to acquire clients through outbound sales plus ads plus referral partners, plus a lead generation book, plus the list goes on and on and on through all the different acquisition channels that you can have within the agency model. What would end up happening is our focus as a founder would be diluted across all of them and we wouldn't be able to make any of them work because we wouldn't be able to crack outbound because we just can't give it the thousand hours that it requires to understand how outbound actually works. We couldn't give a thousand hours to paid ads to actually get them to work because to get paid ads to work, you need to be testing. Like it depends how much you want to be spending, right? But if you want to be spending 30, 40, 50,$60 ,000 a month on Facebook ads, you need to be testing six to 10 creatives a week. New creative. That's not a new hook or a new word or a new color on a still image. That's 10 new creatives, fresh ideas. If you want to be continuing to scale past 50K a month in adsman. And so the volume of work required to get a single channel to work is much higher than most people realize. And that diluting. your focus across multiple will just end up ruining you and you'll never be able to reach 100k a month. But you still need a bit of it. The reason why I say you need a bit of it is you still need a little bit of retargeting. So most users don't have a one click conversion cycle. Typically speaking, it will take a user depending on the brand and you can check this in Google Analytics, but it will take about five all the way up to 15 days for the average consumer to decide to buy. And so if a user searching for a couch and they click on your ad on Google shopping, they're probably going to click on a couple more. And then they're not going to buy a couch immediately, they're going to wait a couple of weeks. And so whoever hits them the fastest with retargeting and stays top of mind will be the person that converts that user. And so ensuring that you still have retargeting across Facebook and Instagram if you are running Google as your primary channel, or if you're just running Facebook, make sure that you have some brand search and some low budget shopping to just scoop up when people go to Google. and some display retargeting so that you're still capturing them and maximizing efficiency. So don't go cold on multiple channels and try to get it to work. Go cold on one and then just have your retargeting elsewhere. And that's a common trait of every brand I've scaled to 100K a month plus every brand that I've probably worked with that scaled to 100K a month. I don't have the actual data on this, but they all would have done it through one primary platform. You never get to 100K a month through scaling Google and Facebook. It's one primarily scales and drives majority of the results and the other is just sitting there and scooping rate targeting and helping out with efficiency. platforms that require creative will always be inherently more costly due to the creative expense. Something that a lot of brands don't factor in, but you can counter this as a startup at the size that you're currently at. Which is that if you want to run a Facebook campaign, let's say you choose you just listen to what I just said, and you go, okay, I want to choose Facebook. That's what I want to become good at. I have some friends spending 50k a month on Facebook. I think that's the platform that's going to work for me. Cool. However, have you factored in the cost of creative? As I just said, you need to make, if you want to get to scale, you really need to be making a lot of creative. How are you doing that? Because there's only so much creative that you can make through graphic design and video editors. At the end of the day, you just shoot content. There needs to be rules. And what's the rules going to cost to shoot? Maybe it's nothing. And that very much so can be the case. You can, as an early founder, allocate five hours a week to shooting roles, give it to an agency or give it to an in -house graphic designer if you have one, and then chop it all up, you'll have 10 credits a week. Perfect. That will enable you to scale. But factor in that those five hours a week will eventually have to be allocated elsewhere, which has a cost associated. And this is where I think a lot of these small businesses fall into a trap, which is they try to spend their way to 100K a month, which is not the way to do it. Right, going in. seeing an ad on Instagram that says the TikTok is the new way to scale and that what you have to do is spend $5 ,000 with us and we'll make 20 creatives for you because creative is the limiter on your growth. There was a factual statement in there surrounded by a bunch of lies. And that's why people fall for it, right? Is you hide your lies, you hide your deception in a fundamental truth as the people don't see all of the lies surrounding it, right? Yes, creative is the limiter on your growth. But no, you do not have to pay this person$20 ,000 to get that creative. You can shoot it yourself. Being lean as a small business is what actually makes you able to compete. It's one of the reasons why we as an agency can compete. Okay, it's one of the reasons why we scaled so quickly. I would argue that we're probably the fastest scaling agency in Australia. I haven't seen anyone that scaled at the rate that we have. But then let's put a clause in there so that I'm not just lying and making things up. Let's put a clause that we had zero agency experience prior. Okay, so the fastest scaling agency in Australia was zero experience prior. The reason why I say that is because we utilized our ability to simply work 100 hour weeks to be able to beat other people in deals and winning clients. Right. It wasn't that we came out and we said, yeah, let's spend $50 ,000 on Facebook ads to get a bunch of clients. And that's how we scale. Not at all. We still scaled incredibly quickly. And we did it through just sheer being able to outwork competitors by allocating our primary resource that we had, which was time incredibly effectively. And so just understand that if you want to scale a platform that requires creative, it's going to be more costly. And in fact, a lot of business owners don't, they look at it as op ex should really be a marketing expense. should be factored into your ROI. Meta performs better when Google because of pixel tracking. So I talked about that. Also always understand there's going to be over inflation on return on ad spend. So if you're primarily spending on Google and you're doing some retargeting on Facebook, yes, Facebook's going to have a 20 row as Google's going to have a four. But understand that Google's driving new customer acquisition. Facebook is Facebook's just retargeting. How should you be KPIs your performance? because I've said multiple times, okay, ROAS is not good. ROAS is not a good measure that you should be orientating towards. At the end of the day, you need to be orientating towards maximizing your customer acquisition. How do you do it? What I would recommend is monitor month on month. You can do this week on week. The issue is, and I'm gonna touch on this in a second, you have such little statistical relevancy in small time periods at this size of a brand that measuring day -to -day to week -to -week fluctuations is almost irrelevant. So I would monitor month on month. CAC, how do you calculate that? Total advertising spend divided by new customers acquired in that month, not total orders, new customers acquired. You can get that out of the back end of Shopify. And then the second metric that is paired with this metric, and pairing metrics is always a good strategy because one metric will only tell you half the picture. And so, for example, in our agency, we could KPI around retention. which is ultimately the most important KPI for us. However, it doesn't tell the full story because the other story is average retainer. Because LTV is only high if retention and average retainers are high. And so generally, if you have one metric, it'll tell you pretty well the story, but a pairing metric will actually complete the picture. And so CAC will tell you half the story. Okay, that's what it's costing to acquire customers, but what completes the picture is tracking month on month first purchase contribution margin. For small businesses that might seem like a tricky metric to track. It's not, it's really easy. The calculation that you have to run here is take all of your orders, minus off tax, okay. Take all of your orders gross sales. Let's make that clear. Minus off cost of goods sold, minus off your cost of delivery, and then minus off your transaction fees and... shipping and fulfillment fees, if you have any, you're probably just doing it yourself at this scale, but minus that offer if it exists. And that will give you contribution margin across all of your first purchases. You'll have a total number. And then you just divide by the number of new customers. And that gives you individual unit, first purchase contribution margin. And that's a way to do it. Now you can calculate it five different ways, right? You can get to an answer through five different means of calculation. We have... a sheet in house that we use where we just export Shopify data, dump it into a sheet, we dump in all of the marketing spend and we just get a cohort analysis that shows us month on month, CAC and first purchase contribution margin. If you want access to that sheet and you're an e commerce brand, reach out to me, go to bluesensedigital .com .au fill out our form, we'll give that to you. We'll help you and actually being able to track this because I think it's really, really important for you being able to get to 100k a month. If you're an agency, don't reach out, I always just end up having agencies that to try to get these resources off me that we use internally. That's the core KPI that you want to be measuring. Let's talk about what not to focus on. What not to focus on daily sales. Literally, this is the most common mistake I see in every small business doing under 100K a month, which is that they look at daily sales and we get a message going, hey, sales down today. Yeah, obviously, because the statistical relevancy that sales are going to maintain. at a similar level over an extended time horizon when you're doing 20k a month in sales is literally zero. The variance on day to day revenue is going to occur regardless. And I apologize for that. The noises in the background here. I'll try to speak a little bit louder. So daily sales, do not look at them. Do not look at small fluctuations in revenue on a day to day or a week to week basis. even large fluctuations, because it's not going to have statistical relevancy. And the reason for this is that if you have 200 visitors on site per day, and you have an average of a 3 % conversion rate, you're getting six purchases a day. What happens if Sally decides I'm not going to purchase today or purchase tomorrow, your sales drop by 20 % because Sally Sally decided not to buy. But guess what, it doesn't actually matter. Because Sally's gonna buy anyway, and you're gonna see that average out over the course of the month. So Look at longer time horizons. Number two is what not to focus on improving the product. The product's generally good enough. In fact, I would almost argue that you could scale any single product on the planet to 100K a month. Because product quality really doesn't cause a detriment to the brand until you start to achieve scale. And if you're relying on repeat purchases. And so you can sell a pretty bad product all the way up to 100K a month. And then that will probably be your limiter at about 100. Maybe it'll limit you at 70 or 80. But until then, you should be fine as long as you can spin a value proposition and framing within the product that's good enough to drive sales. Number three is hiring a bunch of agencies. When you're a small business, as I said earlier, there's generally one bottleneck in your growth. And so being able to identify and understand what the bottleneck is, and then putting resources on that bottleneck is how you continue to grow. Why would you hire two agencies? There's only one bottleneck. So why would you hire two? Because the reason for an agency is to I guess there's really two reasons depending on how you look at it. Number one, it's to solve a problem within the business efficiently and effectively. Generally speaking, you want to solve a bottleneck, right? That's going to be your way of allocating resources as efficiently as possible. The number two way you can look at it is they're taking time off your hands, which isn't a bad way to look at it. But it's also not a good way to stay lean and effective when you're small. And so The logic could be, OK, at the moment I spend two to three hours a day on Google and Facebook ads. If I could get that time back by hiring an agency to do it for me, then I could go and spend that time on this, which would grow the business. I agree. I do agree. There is validity in that. You just need to make sure that. that you actually do spend that three to four hours on something that is the actual bottlenecking growth. So identify, are you trying to just serve off time that you're currently spending on something or are you actually trying to solve a direct issue? So generally speaking, don't hire a bunch of agencies. It's just going to overinflate your OPEX and ruin the benefit that you have of being a small business, which is low OPEX and fast agility. Last one is the website being immaculate. Your website really doesn't need to be that good to be at 100K a month. Like that's the... brutal harsh reality of it. I've scaled clients to 100k a month that have had websites that I was embarrassed to do to be working on. I've we haven't put their logo on the site because we were like, people search this brand up and they look at their website, they're gonna go, these guys do a 2k a month, like these guys can't be doing revenue, but we've taken them from like 2k a month to 110. And the website has remained very, very average throughout that time period. Does that mean have a bad website? No, those brands could have scaled faster if they actually had a good website. I'll tell you that. But the website doesn't need to be immaculate. It doesn't mean you need to be a 10 out of 10. You don't need to spend a bunch of time on CRO and trying to figure this stuff out. It's helpful. It'll make you more efficient for sure. But it's generally not the bottleneck. And unless a hyper specialized e commerce, like coach tells you it is, then it is but in most brands, it isn't. What should you focus on? Number one, customer acquisition. That's all that matters. Acquire customers. Number two, maximize profit on the first purchase. How do we make as much profit on that first purchase so that if our cost to acquire a customer does go up, we'll be fine. And then number three is hire a VA to handle any $5 per hour tasks. Generally at the start, that's customer support. Does that mean that as you start the brand, let's say you start the brand, you've had 100 orders, should you go and hire a VA to do customer support? No, absolutely not. And you should not hire anyone ever for any role. If your business is under $5 million a year that you haven't done yourself. And the reason for that is you don't know what good is. Plain and simple. If you have not done the task, you don't know what the standard is and you don't know how to measure performance. And so if you go and hire a VA and say, Hey, handle these emails. And they go, okay, what are the systems? What do we respond with? I don't know. I haven't done it before, but you've done customer support before you figure it out. They're going to do a terrible job. Okay. Because fundamentally someone within the business that is not the owner will never operate at the level of quality work that the owner will because they take pride in what they're doing at a level that is very, very hard to infuse into other people on the team. And so if you can do it at your level, and then you can hold the standard there or even just like slightly below, you're going to get way better performance out of anything that you hire for and it's not going to be a detriment to the business. Funny enough, customer support can be a cost center to a business. If you have bad customer support, people walk away with a bad experience, which impacts your lifetime value, which impacts your word of mouth for your brand, which impacts all of these different things, which don't. become realized in a short time period, they become realized over the long time horizon. And so that's the brand that gets to 100k a month in 30 to 60 days and then dies in 180. Because the product's terrible and the customer support is terrible, the whole experience is terrible and then they die from bad word of mouth. So get rid of your $5 per hour tasks so that you can focus time and effort on the actual bottlenecks in your business. but don't do it through the expense of just palming off tasks without actually knowing where the standard is and how to KPI on that individual task and role. Let's talk about some actual applicable account structures. Should you spend on Google or Facebook? My recommendation majority of the time is start on Google. The reason why you should start on Google is because it's already high intent traffic. And there are less core skills as a founder required to make Google work. And that's probably the crux of it, right? Is that People can be out here and they can argue against what I'm about to say. And they can say, no, Facebook ads is better. It's like, yeah, Facebook ads is better because you have been doing Facebook ads for seven years. You know how to craft an offer. You know how to craft a creative, you know how to benchmark metrics. You know how to optimize campaigns over time. You know how to structure them. You know, all of these things. How hard would it be for a new founder to learn all of that? Incredibly difficult. What about Google ads? What do you, and. Sorry to Google ad -only agencies out there that are about to get. exposed a little bit but... The start of a Google ad account is nowhere near as hard to get to work as a Facebook account. And the reason being is that you're already placing on high intent users. If you're trying to sell a t -shirt on Facebook, there's thousands of people trying to sell t -shirts. You need to figure out what's your unique angle. How do we get creative that actually hooks users and gets a click? Then how do we structure? Who do we actually target? What are all these things? On Google, it's run a shopping campaign. Make sure that your Google Merchants Center attributes are dialed in in terms of you have all of the relevant key terms that you would want to rank for. That requires a bit of knowledge around keyword research and being able to set up a supplementary feed. But all of these resources are on our YouTube videos. You can just search up on BlueSense Digital how to set up a supplementary feed, how to optimize titles. You can just watch the videos in the next 40 minutes and get a pretty good understanding of how to set up a good shopping campaign. And then shopping is just gonna start serving on users that are already looking for your product. And it's as simple as that. And so Google is always going to be the better driver of ROI for time investment in the early days. Now, over the long term, Google is not the solution because Google ultimately has a cap on its scalability due to search volume restrictions. It also gets more and more competitive as you start to rank higher and gets more and more nuanced as to how to actually structure accounts. And so when I say that Google ads is easy, which is what some people might've taken away from this, it's not. It's actually very, very complex, but. You don't need to know those details at the scale that you're currently at. And you don't need to be that, I don't know, call it, for lack of a better word, expert in your field of knowledge within Google. Here's our best performing, what all of our best performing clients have in common. Number one, they all have gross margins above 70%. Number two, their returning customer rates are 30 % or above. And number three, they have organic channels outside of paid ads that are driving revenue. Something to think about. Do you need those things to get to 100K a month? No. Will you get there hell of a lot quicker if you have them? Yeah, for sure. And so if you're looking to 10X the business over the next 12 months, you need those two. Well, there's no doubt about it. If you're looking to grow by 50 % over the next 12 months and you're looking to get 100K a month in the next year, okay, you probably don't need them, but they're gonna limit your growth eventually. And so it's important to know that you really need enough gross margin to be able to... acquire customers profitably. And that's why optimizing for maximizing first purchase profitability is really important. And then having returned customer rates, having returning customers add so much profit to the P and L because there's no cost to acquire a customer for a second time, they just come back and they buy again, that the profitability of a business literally doubles. And when the profitability of a business doubles, guess what, have a bunch of free cash flow that they can go and spend on more ads. And if they spend on ads correctly, it results in more growth. And so becomes this exponential flywheel. And that's ultimately the crux of scaling an econ brand. And we have videos on this as well, which is shortening your cash conversion cycle. If you can maximize free cash flow on a month on month basis, shorten your cash conversion cycle, you will grow insanely fast. Because you were just buying inventory, spitting it out immediately into cash plus a bunch of profit, and then just putting it back into inventory and marketing. If you can do that at a very, very short cadence, so you can shorten your cache conversion cycle, you'll grow pretty quick. case studies for a while. Let me actually take a sip of my tea. For a while, we stopped taking brands on that were doing under 50K a month in revenue. And the reason for this is that in the first year of operating the agency, we did a analysis of all of our clients. And we looked at what clients take the most amount of time and drive us the least amount of revenue. And let's not get any more of that. A great logical reasoning to go down as a service -based business. In fact, probably also do this as an econ-based business with quantile and decile based customer. segmentation, but that is a complicated video, not for sub 100k a month episode. We stopped taking on these small brands. And the reason is they asked for so much. And this is the fundamental of service delivery that I think everyone learns, which is that the clients that pay the least of the worst clients to have, because they expect so much. And the leverage doesn't really exist there either. Whereas larger clients will pay immediately on time and their expectations are much lower. This is fundamentally always the case. There's a few exceptions, obviously, but. This is fundamentally usually the case. And so we stopped working with brands that are doing under 50k a month. We thought it's not worth it, right? They take up double the time we make 75 % less revenue. It's not a good allocation of resources to be able to maximize efficiency of everyone, the team, the company as a whole, the growth rate. We changed our opinion recently, which I thought was interesting. And this is what sort of spurred this entire podcast on this is why I'm making this. spoiler alert, you're probably not hearing this through an organic podcast directory, you're probably here listening to this through Sebastian or myself sending this directly to you because you do less than 100k a month. And we either reached out to you or you reached out to us and we probably can't partner together but you want some kind of roadmap as to how to grow. We started taking on these smaller brands because we started figuring out actually how to identify bottlenecks in growth of these smaller brands and immediately unlock rapid growth. And so I want to run you through the five small clients that we on boarded in the last 30 days. I want to run you through the revenue change and then what exactly we did, because you might have a common issue in your business that you can go and apply straight away. Number one, we took a brand from 40k to 66k a month run rate in the first week of working together. How they were under spending on Google, they were spending like $10 on a P max and$100 a day on Facebook. We just took 40 out of Facebook, put it into PMAX because it looked like PMAX was serving on cold key terms. And we have similar clients in that niche that we know Google way outperforms. Immediately, 68 % revenue uptick within a week. So have a look at your spend distribution across Google and Facebook. Look at your competitors. Are they spending big on Google? OK, you should probably spend more on Google. Number two, we scaled from 20k a month to 45k a month within the first 30 days. They had no conversion tracking on Google. pretty funny, but their conversion action was triggering based on website visitors rather than actual value. And so they had a bunch of value. It looked like there was a row as but it wasn't it was just triggering based on people visiting the site and attributing$2 in value every time someone visited site rather than someone that actually converted. They also had no retargeting. And so putting in retargeting across display and then across Facebook and then fixing the conversion action immediately two and a half x revenue within 30 days, which is crazy. But it just goes to show the importance of having proper tracking set up that's firing accurately. Number three brand went from 30k a month to 50k a month within pretty much overnight. What did we do? We doubled marketing budgets. We took out all of the heavy brand search within performance backs. We took out all of the heavy retargeting on Facebook and we went into cold and we doubled budgets into cold. We doubled down. Revenue has nearly doubled. It will double over the next couple of weeks, but it's nearly there. Next one we took from 10 K a month. So this is the smallest account we've really taken on in a while. Took them to 20 K a month. That was because they were splitting budgets across seven Geos and they were splitting budgets very, very thinly between Google and Facebook. So once again, consolidated spend cold targeting into one platform for these guys. It was actually Facebook funny enough. And it's because they have a ton of creative already and Facebook seemed to be working to actually drive new customer acquisition. redistributed consolidated down to two to three countries based on historical efficiencies, looked at the store level and the platform level doubled revenue in like a week. And then the last one here we five X revenue. So we went from three K a month to 16 K a month. And the reason here is that they were running just search ads, okay, not the campaign to be running. We have videos on this on our YouTube, which is called never run a search campaign for an e -commerce brand, never run a search campaign FYI. It's going to be the least efficient campaign you could run always optimized for shopping. And so they weren't running shopping. So it was as simple as taking their budget, putting on a shopping, top line revenue, five X overnight. So if your business isn't growing, it's because you're spending time on the wrong things. And understanding where the bottleneck is within your business is really important to being able to continue to facilitate scaling over the course of the next 30 to 60 days. It's important to understand that if you knew everything that needed to be known to grow your business, it would be at 100K a month tomorrow. At sub 100K per month in revenue, the constraint is always the business owner's skill set. I would almost argue all the way up to probably a million dollars a month. It's still the business owner skillset. The skillset required just changes. At this level, the skills that are required is to be able to scale customer acquisition and maximize first purchase contribution margin. You are ultimately a marketer and a financial operator. That's what you're at at this stage of the business. You need to figure out how can I market and advertise these products and get as much customers as possible. And then on the financial operation side, how can I maximize contribution margin on first purchase? And there's a million ways to do that, right? It's, increased cart value, increased units per transaction within a cart, increased prices. Maybe your pricing is wrong. allow for cross sells and upsells on site, improve the discoverability of the website. change the structure of offers into bundles, prioritize traffic, go into higher priced items, improve your gross margins just through better negotiations with suppliers and shopping around. Like the list goes on and on and on. And I could sit here for an hour and just do a podcast on how to improve first purchase contribution margin. And maybe I will considering it is such a big issue. But if you know how to do those two things, you'll go to 100K a month. you'll probably grow to 200k a month to be completely honest. And then the skill set starts to change. The skill set starts to become management based. How do I manage and effectively vet an agency in an in -house team? And then how do I effectively allocate resources within a half a million dollar a month business, which is very, very different from effectively allocating resources within a sub 100k a month business. That's why there's these phases of business growth. People say they're in different phases. It's And agencies love to sell this as well. And it's true. Like there was a, there was a true nature to this statement, which is that if you haven't worked on a hundred K per month ad spend accounts, you don't know how to work on a hundred K per month ad spend accounts because they're different from spending 10 K and the difference from spending two, there's different issues at these different scales. And I don't believe that to be a hundred percent true. I think a lot of things stay stable as you grow within the context of paid media. account structures. And that's like a very specific domain that I'm referencing right now. But within the context of overall business, I think that's absolutely true. The issue in getting to 10k a month is different from 50, which is different to 100, which is different from 500, which is different from 5 million. And there's a reason why and this is what I'll probably wrap this one up with. You want to make sure you're never in small business owner mindset fundamentally. And I was actually talking to someone the other day and I hope they're not watching this because they'll probably realize that I'm talking about them. And they said, he was in the construction business and he said, yeah, look, the business just isn't scalable. I've tried, I've been in it for seven years. I've got up to about five staff, but construction and renovation specifically was what he was in. It isn't scalable. And I sat there and I went, interesting. Like, why don't you think it's scalable? cause you have to, you just have to manage a bunch of people. interesting. Cause that's actually what I do every single day. That's the issue with scaling an agency. The fundamental of the problem that you're solving within an agency is not customer acquisition. Funny enough. It seems like it at the start, but that's not what you're solving for. You are solving for a talent machine, a hiring machine and a training machine. That is what an agency is. You need to be able to acquire talent and train them effectively in the shortest period of time to the greatest competency possible at the fastest rate across the entire organization. The best agencies are the agencies that hire the best people and train them to the best level of expertise. And we try to benchmark ourselves and Sebastian and I always talk about this. We always try to benchmark ourselves against the big four, big four accounting firms, because that is what they are. They are selling talent. They hire the best people and then they train them effectively over the course of 15 years to become incredible operators within the scope of their work. They're not in the business of acquiring customers. They get customers because of how excellent their service delivery is because of their hiring and their training. Do not get stuck into a small business owner mindset. This guy that I was speaking to, he was so confident in the fact that the business model was not scalable because scaling people was an issue. But then how do all of these large businesses even exist with thousands, tens of thousands, hundreds of thousands of employees? Who's managing them? Someone is, they figured it out. At the start, I was pretty worried. we had three people on the team and I was thinking to myself, geez, I don't, how is this going to scale? Like we're scaling people and even friends, ignorant friends. I'll give you that. Like don't have much context or competence within the domain of business. Say this is scalable, mate. You have to scale people like, and scaling people is very difficult. You should be scaling product and working with econ brands. I see that product is a little bit, easier to scale, but that's not true because it comes with its own issues. You are now instead of servicing to clients, you're servicing customers, which is a hundred X larger and comes with a hundred X different issues. If you have a limiting belief that the constraint of your business is not scalable, if you have a limiting belief that you can't get to 100k a month in the next 15 days, know that it's not true. Because you can. Because thousands, if not tens of thousands of people have done it. I have demonstrated in this video that I've done it twice with two of the four brands. And funny enough, it was the last two of the four brands. And so I was only able to actually achieve that through the skill acquisition on the first two. I got the skill acquisition. I figured out, okay, I eventually got there. And then I knew, okay, this is the roadmap to getting there. These are all the things I have to do. I have to scale paid ads, and this is the structure I need to use. And I need to not waste money here. And then I need to push the product in this way. And then I need to maximize average order value at first purchase contribution. And I know that I have to do all of these things. And if I do all of them, we go to 100k a month. Okay. What if I just do all of them within a five day time horizon and then do them all. brain goes to 100k a month within five days. And arguably, you could apply this to a million dollar $10 million $20 million business as well. Like there's a reason why some business owners or entrepreneurs come from a business that they've scaled to 100 million, they start another one, and then they're back at 100 million in like five years. And you're like, how did how does this guy just go from 100 million dollars 100 million dollars 100 million dollar business or $10 million or 10 mil to 10 mil business? Because the funny thing is, it's always the same size business, right? You never see $100 million business owner go and then start a five mil brand or go and start like a six mil brand will go and build the same size, same size, same size, same for these econ brands. For example, I was building the same size econ brands over and over and over again, but I was never able to really get above$150 to $200 ,000 a month because I didn't have the skills and know how to do so. And so instead of me going in my, in, transparently in my ignorance, rather than going and figuring out how to scale one of these econ brands to 500, which would have been the much better route. I went up, it's impossible. So instead I'm just gonna keep making more and more brands that go to a hundred. And so I was just doing volume on stores, going to a hundred K a month across all of these different brands. Cause that's the skills that I had where in reality I'll be in a very different position right now. If I just tried to figure out, okay, how do I go to 500 and then solve that issue on one brand? I would have seen exponentially better results through the. consolidation of focus into one effort. I hope this was helpful. If there's any questions on anything that I've gone through in this episode on how to reach $100 ,000 a month, if you feel like I didn't answer the question at its core and there's follow up questions, let me know. I'm more than happy to create a second episode on this, a part two, which dives into just questions off the back of everything that I've gone into. And we can get a little bit more technical. I could actually run through a few platforms. I could showcase how to align financial incentives with campaign structures. The list goes on and on. The issue is, is that I could record this video for seven hours and continue to sit here and talk. And so I'm cutting it here, but provide me all the feedback you can.