Hi everyone. And welcome back to the podcast this week. So today I've got a really exciting guest for you. We have got here with us, Steven Duke from Wayflyer. Now Wayflyer are one of the fastest growing and exciting finance platforms for e-commerce businesses. So Steven has kindly come along today to help us demystify all the ins and outs of financing, your eCommerce business growth. And he's gonna talk in a bit more detail about the option of taking finance rather than going the investment route or the bootstrap route as well. You should walk away from this episode with a really clear idea of what options are available and what you might need to put in place and plan. If you are considering taking some kind of finance to grow the business.  So, Steven is the global head of marketing at Wayflyer. Before Wayflyer he worked at let's get checked a DTC healthcare company that he grew to an eight figure business and ultimately a unicorn. So suffice to say he knows a thing or two about the world of eCommerce. Now in the last three years, he's actually spoken to over 400 of the world's best eCommerce businesses and learned about the different ways people are , funding, or financing their growth. So there'll be a ton of value here for you guys today,  so Wayflyer by way of introduction, since being founded in 2019, have provided over a billion dollars to over 1500 of the world's top eCommerce brands. , and Wayflyer customers have recorded over 13 billion in revenue in the last year. So a pretty impressive, growth that they've had as a business and a pretty important part of many, many eCommerce successful growth has been being able to access finance in this way. So welcome along, Steven. It's great to have you here. Thanks, Jessie. How are thanks? Yeah. Good. Thanks. We've just got COVID in our house, so we are just working through that, but I haven't caught it yet, so we'll see. Cool. So I would love to start off by asking you. Why do you think eCommerce businesses even need external funding? Some businesses say they're doing fine as they are. They want a bootstrap. They don't want any, you know, any other maybe risk involved. What do you think are the,  reasons to think about getting external funding? . Yeah, so I think there's one main reason. What I always say is that e-commerce businesses are great businesses for a couple of reasons, but have one big problem from a finance perspective. So the really good things from a finance perspective about an e-commerce business is that.  you tend to have really good profit margins. Right. So typically, you know, you're looking at north of like 50, 60% gross margins quite often. Yeah. And like, if you're running so well, that can translate into 20, 30% net margins. And so like, that's an awesome, awesome business. And then the great thing as well is like how scalable they are. So if you get a product it's working, you can easily scale.  without having to hire, you know, dozens and dozens of people or yeah. Like build out new product ranges. And so they're all the really good things, but there's one big drawback, which is that e-commerce has a massive working capital problem. So I can tell you a bit about. Why that exists and then why that means that they very often need external funding. Yeah. So working capital is all about, you know, how you manage your cash flow. Like the day to day, week to week the money that's in your bank account, making sure that you can pay your wages and pay everything cover all your expenses that are coming in. And the reason that e-commerce has a working capital problem is all actually because of the suppliers.  Most e-commerce businesses are getting their goods manufactured, usually in Asia, particularly in China. And they don't get terms from their suppliers. Right. So what that means is that they often have to pay upfront for all of their products. Yeah. Before they get made and before they get shipped and definitely before they sell them. So that means that they have to put out all of this cash. Before they're ever making any of their sales. Yeah. Right. And so if you are fast growing, if you're particularly, if you're a seasonable, seasonal business, you're actually, you are always trying to invest ahead of your growth, which means that you have this massive working capital problem. And so that's often why a lot of these businesses need to go out. It's really to buy.  that's the main reason you have to buy stock and to buy. If you're outta stock, you, you know, you're not making any money. And so that's the biggest reason that we see people needing external funding and interesting. Yeah, because it's like, cuz the marketing should give a positive return on ad spend. Like if it's not, then you know, you'd have to have VC backing behind you. If you are, if every transaction is losing you money, then that's something to worry about. So the fi the marketing in a way funds itself because cash and equals cash out. So that's interesting. Yeah. The point is there's this huge outlay of the product. And does that differ a lot from other industries versus eCommerce? Like. You say that eCommerce has a problem versus other industries? Are you saying that they don't have the same outlay up front in the same way? Yeah, totally. So a couple of examples. If you're a software provider, like if you're a SaaS business, right. First of all, you don't have to buy goods. Like your main costs are actually just your salaries. And so they're actually pretty consistent month to month. Yeah. And then when your customers pay often, they're paying upfront. So you'll see every time you subscribe to something and they're always like, oh, you know, annual get, get the annual bill and it's cheaper. It's like, why do they do that? That's all to solve the cash. Problem or that's all to make sure that their cash flow is good. So they're able to do these things where they get all the money in upfront, and then they have the costs come out over the course of the year. And there's lots of businesses similar, like, you know, education, business, or courses, businesses, or lots of agencies are actually similar depending on the payment terms that they give to the companies that they work with. Yeah. And, and so it's so just about kind of the cash conversion cycle and it's a, a particularly tough problem for e-commerce. Yeah. Interesting. And I imagine more like bricks and mortar when we're established businesses can negotiate because of  the number of products they're buying, they can negotiate better terms than a typical startup e-comm can with a supplier. So, yeah, that's really interesting.  Exactly. So, so that's why they need some money from somewhere. Yeah. Why the external funding route versus taking investment versus. I dunno, growing really slowly and building up your cash reserves in that way. Yeah. So I think there's unpack that. So the first one is some people just don't want investment. They don't want to work with external funding providers and often like that's completely fine. Right? Cause it's a trade off. Right. It depends on what you're actually aiming for. And some people are actually very happy to. You know, grow slower, just keep things kind of ticking along. Maybe they don't want it to be that bus big of a business. It's really just more about it being a lifestyle business. And that's, that's perfectly cool. Right. And that works. If you're relying on. , you know, using your own cash. It's really, really tough. Like, it's really tough, especially if you're trying to grow, because if you're growing, you're having to buy more stock now than sales that you have now. Right. So if I'm thinking about, well, how much am I gonna sell in, you know, February or March next year, if I'm growing, it's gonna be a lot more than what I'm selling today. So I need to buy way more stock. And then when you think about. External providers, there's actually a lot of different options, right? So I think including using your own cash, like I have seven different options that people can use to actually like fund their business and go through each one of those and kind of there's different trade offs, right? Depending on what stage you're at, depending on what you need the money for, depending on what your own goals are. It's really like, there's no one perfect answer. And what we find is most people are using a combination of the more changing them by sacred.  yeah. Yeah. Interesting. Yeah. Yeah. I spoke to a founder the other day. Who's grown quite significantly and he said, you know, bootstrapping was so stressful because it felt like he was always, you know, just one bad check away from complete collapse. Whereas having finance can give you that peace of mind that you can get through a slightly tougher period as well. Where, if your forecast doesn't quite match what you, what reality, you know, happens in terms of the sales, cuz we all know how hard it is to predict how are the paid, how is paid social gonna perform how's Google gonna perform what's happening out in the world today. So just having the availability of credit can really take the pressure off and make you be able to focus more on the long term picture. Right? Totally. Okay. Totally. So that's actually on, on that point. So what we say is. You know, we advise people to be holding a 12 week cash buffer. Right. So if your sales stopped tomorrow do you have enough cash in your bank to like cover your expenses for 12 weeks? Yeah, right. And so that's just, if you have that, you've got peace of mind, right. That, that if something did go wrong, you know, it's, it's not like you're gonna have to like, should, yeah. Yeah. I've heard that as a rule of flat thumb for lots of business types, three to six months, like cashing the bank, if you can. Yeah. Okay. So what, what options are available to them then? Yeah. So we've got, you know, I like to categorize it into like seven options. The first one is, use your own cash, keep it, you know, stay bootstrap to talk about that a little bit. The second one is credit cards and this is where a lot of people will, will start off. Especially for their marketing spend. Right. Pretty much everyone is using a credit card of some description. Yeah. Then we've got your classic bank loans and I can go into like the pros and cons of each of those. The fourth one is raising equity investment. Right. So this is whether it's VCs or just like a family friend. Private equity. The fifth one is crowd funding. This is something that's been like pretty popular. Can also be a pretty good. To, to raise some money. And then the last two are inventory finance, which has been around for quite a while. And then the seventh one is revenue based finance. And I think we'll probably spend a bit of time going into that one, particularly because that's what we do at Wayflyer mm-hmm And probably I say the most popular one is for most of the fast growing businesses. So they're kind of the seven that I think about it. Having to kind of chat about the pros and cons of specific ones if that's helpful, Yeah, just give us a quick run through cuz that's quite interesting. I think for a lot of listeners, this might be new for some of them. They might know a few of them, but not, you know, haven't really thought through all the different options. So yeah. Just give us the like top kind of pros and cons for each. Yeah, yeah, sure. So let's start with credit cards, right? So credit cards are great because one they're usually easily available even. Quite early, early doors. The second one is if you pay them more fun time, usually you don't have any like fees or interest rates on them. Right. So that's that's great. Then there is actually also like a really nice personal benefit, which is if you've got a good points plan, you can actually earn like some nice rewards off them as well, which can't board. But the, the downsides of them is that.  if you, the, the fees can rack up and the interest rates can rack up like pretty, pretty quickly if you're not able to pay them off every single month. Right. So they do come with high interest rate charges. Yeah. And then also. Usually the funding amount will not be that high. Right. So usually if you're growing, you're gonna cap that out eventually, and you're gonna need way more money than what your credit card's gonna be available to do. So I think it's like really good way to, to buy ads. And especially in the early days, it's it's a really good source of capital if you can pay it off and you know that you're confident you can pay it off before the interest rates. But then as you grow, typically, you're gonna expand past that and neither the sources, a couple as well. Yeah. Then the next one is, is bank loans, right? So this is kind of the classic one. Pretty much every business owner is gonna think about, oh, well, I can just go to my bank and, and get a loan. If you can. Great. That's typically what I say to e-commerce businesses. Whoever the big challenge is that. Banks actually won't provide loans to e-commerce businesses. And for two reasons, one is they don't get them. They don't understand how e-commerce businesses work. If you're in a restaurant or a cafe, they're like, oh, okay, I get it. Like, I can understand your business model and they're happy to fund it. Yeah. The second one is that if you're in eCommerce business, you don't have many assets and banks want assets as collateral so that if you don't pay them, they can take the asset. Whereas like you.  most businesses like you don't own any massive fixed assets typically. Yeah. Like your, to are, are your stock, which is quite small. Yeah. So typically they're not readily available. But if you can get them, they can be quite good. But again, you just need to be careful because like,  one they're, they're a massive time drain quite often. Like you're talking about like writing business plans and big loan applications for like often months on end and then they can come with like pretty complex like terms and confidence and everything like that as well. Yeah. Yeah. Well, I keep going. Yeah. Yeah. Okay.  so I think the, so we talked a bit about credit cards, a bit about bank loans. The big one that people talk a lot about is obviously getting equity investment, right? Yeah. And so. This equity investment can work really well, but for certain circumstances. So what I always recommend is that use equity investment for investing in your long term growth and be very careful about how much equity you're giving up. Mm, definitely because it's your a few reasons, ultimately, it's your business. You're the one who's gonna be putting the blood, sweat and tears into it. You wanna own as much of that business as. The investors. Sure. They'll give you cash, but they're not putting in the work. They're not living and breathing this business every single day. And so if you sell 20% of your business, that 20% that's gone, you're not getting it back. There's 20% of all future profits. There's 20% of your ownership. If you sell the business, stand the line 20%, that's it. That's gone. And it's going to the investors. It's not. And so it can be very tempting. If an equity investor comes to you and offers you this nice cash injection, but you really need to think about what's the long term cost, because short term, yeah, you don't feel like there's a cost, right? Cause you don't notice it, but there is a big, long term cost. I've seen this multiple times where you've had businesses you've had really, really successful exits. And then you ask how much did your own at the end when you sold it? And they own a fraction of the business because they've just sold so much of it to equity investors along the way. Mm. Second downside is just control. Right? A lot of people getting like start their own businesses because it's what they wanna do. They wanna run their own thing. They wanna have the creative freedom to go, like build the products that they wanna build and go after the mission they wanna have. Once you take on equity investors that gets more complicated. Right? They've got skin in the game now they're good. They wanna see a return on their capital and you're gonna have to manage that. It just be, it just adds a different layer of complexity to it. Yeah. All that said it can work really well. If you've got a business that, you know, you wanna grow and you're confident in selling a small amount of equity, if it's a good deal, if it's an investor that you're comfortable with, if you think they actually bring something to the table, It can be a really good idea. And what I would say is just make sure you're investing that money in long term growth. So make sure it's in going into, you know, product development or building out your team or like long term growth strategies, don't get it and spend it on marketing or spend it on stock. That's stupid. Mm. Okay. Interesting. And what, you know, in terms of taking investment, like, what are the main sort of categories and investor that you see? Like you've mentioned friends and family there's like VC funds. Like, do you see there being a big difference between them or is it all much of a muchness? That's a good question. I mean, I think they come with like with different trade offs, so The big thing to be aware with like VC firms is that typically they will want they need really massive outcomes from their investments for it to make sense because how they invest is, you know, they'll put 20 investments in and they're just reliant on one or two of those being massive. And then it doesn't matter if the rest didn't fail. So they're gonna want you to go for broke. And so that's something you need to be very careful of. If you're taking on a VC investor, they're gonna push you to be. 10 X a hundred X size that you are. Yeah. Right. Friends and family. They're not gonna want that, but they're probab depending on who your friends and family are. they can often be like super controlling or demanding, right? Yeah. Because like, they, it could be a panic portion, a panicky, and it could be a large portion of like their wealth that they've put into this. Yeah. And so they're going to be probably knocking on your door and like, so how's this month sales going, you know, how's this week sales going, are you ready? Like this? Can I get my money out? Whatever else. So, yeah, again, depending on who they are, but just another trade off to, to think about And then I, I, I think probably some of the best ones are like, when you can get like strategic investors. So either individuals who are in your space, right. Who are maybe running a bigger brand than you. And they're just like a few more years down the line. Typically like if they're high net worth, they can be quite nice because they're not as panicky as you said. And they're actually bringing something to the table, right? Yeah. They're able to help you with introductions to retailers or they're able to actually advise you that can be pretty be. Yeah. Interesting. Cool. And then is the last one revenue based finance? Yeah. So the there's a co I mean the, the other two, which I don't think are worth spending too much time on is, is crowd funding. I think everyone's pretty familiar with that. It can work well. And, and then inventory finances, something that used to be involved, but not really anymore. So this is where kind of, you can go and use an inventory finance provider to basically. Fund your stock purchases. But the, the drawback with that is in eCommerce. The, because you have quite high markups, the value of your stock is, is not that much. Right. So if I'm buying, like if I'm gonna sell, say $400,000 worth. Product the stock for that might cost me a hundred thousand dollars. Yeah. Right. And an inventory finance provider will only finance you based on the value of the stock that at your purchase price. Right. Not at what you're gonna sell at that. So you're gonna trade off. You're gonna get a lot less money, basically. Yeah. Right. And so, so the last one is revenue based finance and revenue based finance is how I would say the majority. Of the top e-commerce brands are now funding, their working capital needs. Yeah. Yeah. And so what revenue based financing does is it kind of takes like the best bits of all of those other funding options that we talked about and kicks out a lot of the bad bits. Yeah. Right. So what's good about it is firstly, it's super fast, right? So we assess your ability to get funding. Based on the actual analytics and performance of your stores, we plug into like your Shopify store, your Facebook, your Google, and we're actually able to make a decision super quick on whether you get financing or not like within 24 hours. Which is amazing. No like month long application processes. The second one is that it's repaid as a percentage of your. . So when you get, if you were to take a hundred thousand dollars from whiteflower, it's not that we say, oh, you've gotta pay us back. You know, $10,000 every month for 10 months, what we actually say is we agree on a certain percentage of your sales that would be used to pay back the money. Right? And then once it's all paid back, that's it you're done. The benefit of this is if you hit a slow month, if you have a slow week or whatever it is, if you hit a bit of. You're not taught. We're not saying, Hey, you owe us the 10 K this month. Where is it? No, we're just taking a percentage. And so it's all about being like very aligned with your cash flow mm-hmm  cause we know that eCommerce businesses have, have pretty lumpy cash flow. Yeah. And then the third thing is, is like you can actually get quite a lot of money through revenue based financing.  we understand e-commerce businesses. All we do is actually provide funding to e-commerce businesses. That's it? That's our game. And so when we look at the analytics, we're forecasting your sales, we're not like the inventory finance providers who are looking at the value of your stock. We're actually saying, oh yeah, we know you're gonna sell that for $400,000 and we're confident that you're gonna do it so we can give you a lot more money and we can do it at a lot better rates, purely, just. We actually understand the risks and the probabilities associated with eCommerce businesses. Interesting. So I'd love to dig into that more because it's, for me as a, you know, agency owner expert in the econ growth space, I'm always looking at a brand's financials from a like cost per acquisition basis. And we're trying to give them a lot of guidance on like, What's good versus the industry, but I'd love to hear it from you from a more finance perspective. Like what are you guys looking for in terms of performance of an econ and what should they be aiming for in terms of KPIs? Yeah, yeah, really good point. So a couple of things. So we do have, first of all, we have like a minimum threshold of revenue that we look for. And so that's about 20. A month. Yeah. And so if you're below that, unfortunately like just revenue based financing is not yet an option for the reason we do that is because we need consistency and we need to, we need predictability in like future revenue, right? Yeah. So that's the first thing. Average monthly revenue above 20 K a month is like a good start. Yeah. A after that, what we're looking for is basically just like the basics of like a strong financial position. So what we mean here is just the fact that, you know, You've got some cash in your bank account. You're not like constantly overdrawn you're you're showing basic financial hygiene, I would say in terms of like how you're managing your accounts and how you're paying, how you're paying your suppliers and all this sort of stuff. And you're not constantly just living off and overdraft or overdrawn. Or like credit cards. And then we do also look at exactly the types of metrics that you look like you look at. So your C your LTV your, your return and your ad spent, because that all builds a picture for us, unlike how sustainable a business you are. Yeah. And our ability to like, forecast your future sales, which is what gives us confidence. Yeah. We don't have specific numbers because it's different for very, for every industry, right? Yeah. So we know that different categories will have different C to LTV benchmarks. Right? Yeah. We know that some of them it's actually like for some categories, it's all about the first purchase. This person is never really gonna come back and buy another. I don't know. I'm trying to think of something like if it's a massive home and F home home furniture and furniture store, right? Like how often are you gonna. Your sofa, your cell phone, right? Probably not like several times a year. Yeah. So therefore we know, okay, this is all about like the returning your first purchase. However, if it's something like dog food, then we're like, okay, this person's coming back every single month. So then we're analyzing it a bit differently. Yeah, yeah. Yeah. Interesting. I mean, that's interesting to me, like I'm surprised actually that the bar is quite low, quite easy to get to cuz you can boots strap to a 20 K revenue. Pretty easily. If you've got a good product and you've got a good idea about branding and, you know, get some good advice on your marketing. So get to that bar to get to that bar. I would say someone would probably need to invest. I dunno, 20 to 50 K of their own money first to get there. And then, and then from there you can get finance. And as long as the business model works and the product market fit is there and the market wants what you need and there's scalability, then you can take finance to actually grow. So it's not, it's like the barrier to entry for econ is still pretty low when these financing options are available. It's interesting. Yeah, totally. And what we find is like, once people hit that. They're actually able to use Wayflyer as almost their only source of funding. So we have, we have a lot of companies will basically use us for all of their inventory purchases. So they will just say they, you know, they'll even sit down with us and say, Steven, you know, here's what my next, like 12 months of inventory purchases looks like I'm gonna need to buy 200 K. And the 2nd of February, I'm gonna need to buy 400 K on the 3rd of May and we'll say, okay, perfect. And we'll put a plan together. To get them the cash that they need at each one of those points. And so they're basically just don't need to worry about having the cash for their inventory purchases. They know that they can use way flour to get the cash, make the purchase. And then when the products come in, the sales are there and then they're paying back as a percentage of sales. So it, it all just works out for them. And so we've had like customers who could take, you know, 14, 15, 16, like tranches of funding. Because they're just thinking about us as just like the working capital solution that allows them to buy inventory, spend on marketing, whatever it is that they need to. Yeah. Yeah. Yeah. So interesting. And what, so if, so at that minimum level, just talking about that, so minimum 20 K revenue, what sort of borrowing would open up at that point when you were at that very early stage with very common business? Yeah. It's a good question. So typically so it's all dependent on the performance and the growth rates, right? So we don't like, it's not like a set, we don't do cookie cutter, like funding. Yeah. And typically a good benchmark would probably be you.  in each trench somewhere between 50 to 60, 70% of your monthly revenue. Right? So if you've got 20 K monthly revenue, you can assume you're gonna get somewhere between 10, 15 K of, of funding. But then what will happen is you'll be able to get that quite frequently. Right? So over the course of the year, you might be able to draw that down four or five, six times, depending on how fast you're growing and what your performance is. Yeah. And so that's why when you're comparing it to a bank loan. So I say, oh, well again, if the bank will give you money, the bank will gimme X. It's like, sure. But they'll give you that now. And they're not giving you any more money basically for the next two years. So the next three. Yeah. Whereas like our initial fund funding amount might be smaller to start, but what it means, but you can actually draw it down like multiple times a year. Yeah. Interesting. And how do the interest rates compare with you guys versus bank loan versus well, credit card we obviously know is high. If you get into not paying back, but compared to a bank loan sale, you guys similar, is it more, is it less. . Yeah. So, so typically we're gonna be a bit more than a back loan. And the reason being is that we don't take collateral. Yeah. So we don't take, we don't take any collateral or any, so you're taking more risk security, so we're taking a lot more risk, but then the, the flip side of it is for the business. They're also accepting a lot less risk. Yeah. So if you're getting funding from the bank, you're gonna have to put up some assets. If you don't have assets in your business, you might have to put up personal assets, it might be your home, right. That's a, a big risk to put up if your business doesn't go well. Yeah. So we're not, we're not taking that risk mm-hmm  or the business isn't taking that risk when, when they work with way far. So, and what we do is we just charge a flat.  so it's not actually interest based, so it doesn't matter how long it takes for you to repay us. Right. Right. What a bank wants to do is give you as much money and lock you in for as long as possible so that they're earning interest on it every single month. Yeah. Whereas with way flour, you know exactly how much you'll pay and the rates like our fees are typically somewhere between, I would say two and 5%. So if I give you a hundred K and it's a 3% fee, you're gonna pay me back a hundred, 3000. And it doesn't matter whether it takes you two months, four months, six. It's always gonna be 103,000. So, you know, in terms of dollar amount, you know exactly how much you're gonna pay back mm-hmm  interesting model. And is that similar to the other, other businesses doing a similar model to you guys? Or is this quite unique to Wayflyer? So there's a couple of other people who also provide revenue based financing. I think where, where we stand out is actually on the rates that we're able to provide. Is one of the biggest things. So we have ourselves, I mean, we have to raise the money from somewhere. So we have raised money from really big, like tier one financial institutions, like JP Morgan. So, and what that allows us to do. And because we're able to get that at low rates, we're allow able to pass that on to our customers. So, right. We've basically spent ever since we were started, we were like, okay. Our goal is to get the best e-commerce brands in the. So that we can then raise debt at the best rates, which we can be passed on to our customers. So, yeah, that's actually, that's the really one of the biggest things that we do. And then the second thing is ran flexibility. So we talk about, you know, how you are gonna need different amounts of money at different points throughout the year. Like it's, it can often be very lumpy, seasonal business if you're running an e-commerce brand. And that's a big thing we do is we actually structure our deals all around that. So there's no cookie cutter stuff, which you might get from other providers. We're actually gonna look at exactly what you need and when you need it and then tailor it to that. You get the money that you need, but you're not paying for any more that you don't need. Right. You don't be paying for money that yeah. That you just don't need in your business. You don't need your Christmas stock now. So why I borrow the money now? Yeah. Well, you do need it now. True next year. You won't need it for a while. Yeah. Yeah. So interesting. Okay. And do you guys Like, how do you advise like eCommerce businesses to put together forecast? I mean, that's something in the agency. We do a lot of helping our clients figure out what they're gonna get as a return on ad spend and their, and also what their kind of baseline organic numbers are. And trying to predict those into the future. Do you guys have any tools or tips on how people can figure out what they expect their business to need? it. It's a really good question. And I, I don't think I have any any magic answers for you. It's something, actually, we talk about a lot. I was talking to a guy called Paul Wadi, who is whiteflower strategic advisor. And he also works with a lot of businesses in Australia, helping them to exactly this right, to forecast out their cash flow. He actually has some pretty good tips. So he's.  what he says, that forecasting is really hard. So don't try and be perfect with it. Mm-hmm  but revise it very, very often. So he was like build your 12 month budget, but then revise it every single month. And he was like, until you get within 5% of your forecasts, you're not actually forecasting accurately. And I think that's actually a really good piece of advice. He is like, don't build your forecast for the next six months and then just never leave it there. Leave it there every month. Okay. How did we do against this month's forecast? If we were out, why were we out? What kind of assumptions did we get wrong? Okay. Let's fix it for next month. How can we improve? Okay. We're still 10% out. What can we do better the next time? I think that's the best thing, because things are just changing so quickly now that like your forecast gets outta date very fast. Yeah. Yeah. That's interesting. Yeah. I mean, we are, our team are really good at forecasting. Like the return on ad spend, we're gonna expect, we use seasonality. We look at like the trip, you know, what cost perplex we've seen, what conversion rates we've seen. We put in assumptions around like how much we think will improve the conversion rate, how much we think the return on ads spend can be improved. And then we crunch all that together. We've got a template for it. It's pretty awesome. Anyone who's listening to the show and wants a copy of the template. I'm very happy to share it. So just get in touch by the website, little plug there. But yeah, that's a free tool we have developed and it's pretty amazing. But then what we find the trickiest to forecast is like the organic uplift from the paid media. So, and especially now that like, iOS 14 has made things even more muddy. So it used to be that you could say, well, that was the track sales. And then everything else that wasn't tracked is your organic. So now, you know, some of that organic could be having come from your advertising, but also there's the other nuance of like, as you grow, your organic will grow because your word of mouth will grow and people will just come back by their own means without having seen an ad. So that's what we find the hardest part to forecast. We can forecast the results of the ads, really predictably, but how the rest of the business will be impacted by the ads. In addition to what we can see in the tracking and what we expect is the uplift is really hard. And so I do feel for our clients and for brands trying to figure out, you know, in 12 months time, what will our sales look like? It's. It's not an easy job, especially with attribution being so difficult. Now, 100%, 100% super, super difficult. I mean, I think the one thing that I would add to kind of this conversation around forecasting is you, most people will have a revenue and expenses like their forecast, like their profit loss. Not everyone has a cash flow forecast and that's super important. If you don't have one, you have to get. Yeah. Yeah. That's something that we, as an agency, we've never tried to provide because that. We're we are, we are predicting the marketing and the results of the marketing, but we can't. Yeah. , we're not financial analysts much as we'd love to be. So yeah, caveat on my template. It will help you predict what your marketing will provide you in terms of revenue, but it won't tell you what's left over in the bank and how much  how much you need to borrow that's for sure. Okay. I have one final question for you before we wrap up, unless there's anything else you wanna add after that, but you must have a good nose for like what a good e-com, you know, looks like from a financial perspective. So if you were looking at a business and you were looking at their numbers, you know, say it was a friend down the pub or whatever, and they showed you their numbers, what would you be looking for that you would say that is an awesome e-commerce business and their numbers make sense, versus that's a worrying, you know, those are worrying numbers where that's probably not gonna work out in the long term. Mm, re really good question. I think I'm, I'm looking at a couple of things.  right. Some of these are gonna be super basic, but like it's actually what matters and it's not sexy. So the first thing is like gross margin, right? Like what can you, cause cause all of these e-commerce businesses are essentially built on your ability to generate gross margin quite often, like through your ability to build a brand. Right? Yeah. And so that's the first one I'm looking at. I'm really looking for like high gross margin, anything. Six above 60, 70% is like really strong and really strong 60 to 70. Okay. Okay. You heard it here? Yeah. I mean 50 is okay, but borderline right. And then anything 40 and under is gonna be really tough. Wouldn't you say? Yeah, exactly. Well, because like, you probably know more than anyone, right? Like marketing costs are, are expensive. And they're going to, they're going to eat into your, your net margin. Yeah. You know? Yeah. And so I think that's the next thing I look at, right. Is like how much okay, great. You've got that, that good gross margin, but how much of that? Can you translate to your, to your bottom line? And that's gonna be like, how efficient are you operationally, but also how efficient are you mainly from a marketing perspective. Yeah. Right. And so that's that's really, really, really, really important. Yeah. And then of course, we're gonna look at like C to LTV, which is kind of one level down, but just like, how good are you out acquiring customers and how good are you at getting them to come back and purchase more from you and grow their lifetime value for you over over time? I think that's the big, the big difference really between the like good companies and the great ones is your ability to like retain customers. Yeah. And to really expand. Their lifetime value over a 6, 12, 18 plus months. Yeah, absolutely. Yeah. I think that's what we see with our clients as well. The ones that are really dialed in on their retention, marketing, getting people to repeat by those are the ones where the numbers just become healthier over time. So we see that organic sales number, you know, versus how much of the traffic is coming from paid. It's going up and up and up. And so the business is just becoming healthier and healthier and there's just. Yeah. There's no substitute for having an army of customers who wanna buy from you on repeat. I would say that. Yeah. So, okay. And can you be concrete with me? I know I'm kind of forcing you into a corner. So what would be a good CAC to LTV ratio? And for those who are new to these kind of terms, CAC is customer acquisition cost. So we're talking about how much it costs us to get the customer to buy for the first time, rather than, you know, that's not just your CPA. It's your first time customer acquisition cost. And then LTV is lifetime value. So it's all the revenue generated from them over the lifetime since they've made that first purchase. So what would be a good ratio do you think? And what would be a dodgy one? Yeah. So I think when caveat is kind of what I was saying earlier, right? So is it a business that's actually dependent. On repeat purchases or are you trying to make all your money off that first purchase? Like that's just a win distinction end. Yeah. Yeah, so like beauty food even fashion, those are like more towards the long term LTV, whereas like large items like furniture or single purchase items. Would be more like you have to yeah. You have to make the money on that, on that initial purchase. Yeah, yeah, yeah, exactly. Look, I, I think anything above like five to one is like, is like really, really strong. Right. So, yeah. I think that's, yeah, that, that's where like, if you're doing above that, like you're. You're generating five times the revenue from the cost that it takes to acquire a customer. I think that's, I think that's good. Yeah. Okay, cool. So as, yeah, cause we analyze a basket of eCommerce businesses. I think there's two 50 in it's in this, this database called stateless and they say on average marketing efficiency ratio, blended row is across the industry is about five. So that, that number is kind of similar to your C to LTV ratio. It's a little bit different, I guess, but it gives you a kind of rough indication that like one fifth. Of the business is being spent on, on buying media and you're getting five times of that back at the end of every day. So so yeah, that's kind of roughly what we tell our clients is like, they need to aim somewhere near there. If they're kind of much lower than five, then they've probably got a problem. And if they're higher, then they should be scaling harder.  yeah, yeah, yeah, no, Def definitely. I think that's a good that's definitely a good way to look at it. I think you're getting, yeah. If, if you are getting that, I think you're doing, you know, you're doing a good job right now. Yeah. I mean like the one caveat I would call out right. Is like, we always look at this C to LTV, but it's like everybody has very different opinions on how you calculate the LTV part of LTV. Yeah. Some people are just like, this is just gross revenue. But.  there's a lot of schools of thought where it's actually, no, it's like your gross profit, like after tax from like is actually the money that you're going to be able to take home from these customers, like over the course of their life. And so like, that's one thing I always call out is like, when people are comparing it, it's just like, just make sure you're comparing, like with like, and that whatever way you're calculating, LTVs the same way as you know, the benchmark that you're comparing yourself to a huge difference. Right? Cause if you're only making actually 20% profit at the end, At the end of everything then you've got, yeah, you've gonna have to take, it's gonna take a long time to get to five times the cost of requiring acquiring the customer. Yeah, I mean, a few of our clients use a tool called life timely, which predicts the lifetime value over time. And it looks at the where that customer was acquired and what that kind of break even point is. Have you seen any other, any other tools you'd recommend or anything that makes it easy to calculate lifetime value? So in terms of forecasting no, I, I would say, and, and I always, I always tell people to like, be like, be conservative with your, with forecasting out TV, right? Yeah. Cause it's very easy. It's I I've done it before. Right? Like it's very easy. You build your models and you're like, oh yeah, I think everyone will, you know, come back once every three months. Like why not? And then, and then it doesn't happen. And suddenly L TV is like, you know, fractions of what you thought it would be. So we. Actually at whiteflower. So what, we, we also provide some marketing analytics software to our customers. So because we're kind of ingesting all the data to be able to analyze their ability to take finance. Yeah. We have a lot of this data on K and LTV and whatever else. So we resurface it to them through our dashboards. But again, it's actually, it's not forecasting LTV. Right. It's just like, this is the LTV of the cohorts that you've acquired to date so far. So yeah. But you know, so it's, it's gonna be less than the ultimate LTV they are. Of course some fraction are gonna come back. Buy more in the future, but you know, that it's real. It's real. Yeah. And so it's your, it's your base case? It's your most? Anything else as a bonus? Yeah, exactly. Yeah. Cuz if you looked at L'Oreal at the LTV of their customers now, since they've been around for decades and decades, it's not them that just went busted anyway, a makeup brands that's been around for years say, you know, their could be thousands. But when they were first started, they wouldn't have been able to bank on those thousands of dollars that a customer would ultimately spend with them. So it's about being realistic. Yeah. We used to, when I was at Etsy, we used to do a lot of forecasting around lifetime value, but we always used a two year. So we knew that customers would stay longer than two years, but we, we based our marketing decisions on a two year LTV that we could predict that, you know, they'll stick around for two years and this is how much we'll make from them over that time. So therefore we can afford to spend this much to acquire. Yep. So yeah, I think two or three years, it's probably safe. Really? Isn't it? Isn't it. Cool. Okay. Well, I learned tons today. I'm sure our listeners did as well. Is there anything else you would like to add or advise before we sign off? No, I actually, this is a really good conversation. So yeah, if anybody does have, you know, questions or wants to reach out to me about. How they're thinking about financing their brand more than happy to have a chat. So yeah, maybe you can drop my, my show. Yeah. Awesome. Yeah. I'll put all your details in the show notes, but yeah. Do you have a main place? People can find you whether it's email or social media. Yeah, so I think this is email, so it's just my name. stephen.duke@wayflyer.com Or else you can get me on on Twitter at @stevefduke.  awesome. I'll put those in the show notes. Great to have you on the show . No, thanks a lot Jessie.