Get weekly guidance from the world’s greatest nine-figure executives, ecommerce marketers, and DTC-content creators. The minds behind Ridge, HexClad, Simple Modern, Lomi, Pela Case, Jones Road Beauty & more — curated by Aaron Orendorff.
Share
5 Ways To Make MORE Profit & Q4 Inventory
Published about 2 months ago • 9 min read
It’s not the money you make.
It’s the money you get to keep …
🤑 Mehtab Bhogal reveals 5 ways to make your DTC business more profitable.
📊 Connor MacDonald shares his “worse-but-better” Sheet + Loom.
🎁 Matt Bertulli has an honest conversation about Q4 inventory planning.
🤯 Reza Khadjavi goes BTS on Motion’s $30M raise and a new (free) ad tool.
Plus, this week’s top-five trending news with links and executive summaries.
We welcomed Dara Denney as our Chief Evangelist to advise on product and train the next generation of creative strategists.
We had +18k registrants for our 2024 Creative Strategy Summit featuring the best minds in DTC advertising.
And finally, we announced our new, completely free product: Creative Research.
(More on that in a minute.)
Looking back, three things have contributed the most to Motion’s growth.
Picking the right customer
Serving the DTC community
Expanding the product itself
Motion’s earliest adopters were the elite, best-of-the-best teams in performance marketing: Jones Road, Ridge, HexClad, and True Classic — to name a few.
Marketers forged in the fire of results.
With thin margins and scientific measurement, our customers operate at a different level than advertisers in larger, complacent industries.
Another tailwind that has helped Motion grow is that we didn’t grow alone. An entire ecosystem freely shares what’s working on Twitter, in newsletters (like this), and at events.
With Dara as our Chief Evangelist, we’ll stay focused on the community and find new ways to educate + serve.
Finally, a new area for Motion.
The “Operators” often talk about their next big product lines. Whether Ridge adding rings and luggage or HexClad venturing into consumables, expanding is key to growth.
Excellent terms or pricing with a vendor can transform your business overnight.
Get on a plane I’m always surprised by how many companies haven’t visited their suppliers. Meeting face-to-face makes you an actual person and surfaces opportunities that would otherwise be invisible or impossible.
Find redundant vendors Existing suppliers will rarely negotiate in good faith until you turn them off. For sourcing, you should be speaking with 30–40+ vendors per product.
Understand their cost structure Exporters have access to government-subsidized cheap financing, especially in China. And they hold products at their cost, not yours. So, ask them to hold more finished goods on hand.
Reduce costs without asking Instead, make a “new” product together or reengineer existing products to remove waste and reach a lower price point — this is due to “big-man” culture in other countries.
Quick Wins
Get better net terms. Use contracts to generate a sense of fairness. Provide suppliers with an updated demand forecast.
2. Price Increases
Makes the business easier to run; higher prices fire your worst customers and attract higher-quality customers.
Raise prices (or test) Some businesses can outright increase prices. Others require testing. Keep in mind, there are usually “cliffs” — as in, I can raise prices 15% without losing a lot of volume, but at 20%, I might lose a lot.
Reduce product quantity Whether you want to call it “shrinkflation” or “price pack architecture” (i.e., dropping the no. of items in a bundle from 5 to 4 without dropping the price), it’s all the same. It tends to work much better than price increases, too.
Unbundle “freebies” At one company, we found removing a lot of the free services and add-ons that used to come with kit products, then displaying them as upsells, resulted in what amounted to a ~20% price increase on that product line without impacting conversions.
Ship less for free Increasing cutoffs for free shipping forces more gross profit per average order due to how ecommerce shipping dynamics work. You can also increase shipping costs for anything under your free cutoff.
Quick Wins
Change your return policy. “Force” minimum pack sizes, kits, or bundling (e.g., True Classic packs + buy more, save more).
3. Sense of Urgency
This is one of the main jobs of a founder and immediately gets more out of your employees: 15%–30% jump.
Set short deadlines Long deadlines never work. If there is a long deadline, break it into short sprints. Question all dates given and the logic for them when an employee gives you a date.
Wipe out non-value-add tasks Employees make a list of what they are doing each week, then look at how much is not adding value. That work can be automated or given to a cheaper employee. Always ask what action items are coming out of meetings.
Never give out too many resources Time, money, people. Be precious with these. Creative solutions won’t happen when people think they can just pay for a SaaS instead of learning to do a vlookup.
Quick Wins
Bake a sense of urgency into your core values and fire everyone without it. Use the EOS GWC Tool — it’s free.
4. Wasteful Marketing
The benefits of cutting wasteful marketing are self-evident; most revolve around one form or another of “brand.”
Eliminate branded search This is particularly true on Amazon, where something like 98% of branded searches result in purchases from that brand. Similar on Google, where you should use brand exclusions and negative keywords.
Don’t fall for big-brand defaults The biggest spenders on ad platforms aren’t DTC, direct-response marketers. They’re genuine enterprises, and that’s who the platforms are built for. Non-conversion objectives are money pits. So are ads that never achieve first-order profitability.
Distinguish brand from “brag” That’s Sean’s phrase: “Brand marketing is just BRAG marketing.” A less binary take would be to separate one-year EBITDA growth from five-year goals. If you’re focused on the former, brand marketing won’t help.
Quick Wins
Most marketing experimentation is waste; money should be allocated towards more shots on goal for product + PMF.
5. Send More Emails
This last one is really tactical. A lot of small or medium brands — especially those still run by the founders — are guilty of it.
Just send more emails.
If you’re sending one a week, start sending seven. Even send twice a day sometimes.
It will not hurt you. People won’t unsubscribe en masse; they’re not going to care because they won’t notice.
You’ll see revenue go straight up. And it’s virtually free revenue. You can run a holdout test if you want. But you don’t need to.
It works literally 100% of the time. If it doesn’t, you can complain to me on Twitter, and I’ll send you something.
And if you’re looking for a minority equity partner or a buyout, drop by our website: Karta Ventures.
We’re flexible with deals — profitable or not profitable. Either way, we’re happy to jump in and take a look.
Can We Have an Honest Conversation About Inventory & Q4?
I’ve probably had a half-dozen calls with brand operators over the last month on this topic alone.
It’s clearly top of mind.
Depending on your category (lead times might suck), you could already have Q4 locked and loaded. If that’s you, perhaps this will help you with your next major seasonal boost period.
Every year I see marketers very publicly complain about clients running out of inventory.
Their preference is that you have unlimited amounts so they can scale with no limits. Perhaps it’s an incentive thing. More likely, it’s a misunderstanding of how consumer brands take on risk.
Inventory is revenue.
It’s also risk … sometimes life-threatening.
This year, we’ve taken a more conservative stance on buying inventory for Q4 at Lomi.
Partly because of the instability of 2024 so far and partly because we have a new generation of products coming in Q2 of 2025 that we’re looking to do a hard-cut over on.
This is the thing about inventory …
You have to be looking much further out than your current selling season.
You have to decide how you want to perform during the season, but also how you want to exit the season to set the next.
As you well know, momentum matters in this game we’re playing.
If you buy too little inventory, you leave potential revenue on the table in the busiest season of the year.
Buy too much, your balance sheet could go underwater.
It takes a very disciplined and often experienced operator to leave potential revenue on the table.
I’m in this camp. I’d rather not wind up where I’ve got too much cash locked up in inventory that didn’t sell.
Anybody saying otherwise hasn’t been in that kind of squeeze situation before.
I am 100% okay telling customers, “Sorry, we ran out. We’re just too popular.”
This has always been a net positive for my brands.
It’s also why we went to an on-demand, vertical manufacturing system for Pela Case.
With our SKU variety, we couldn’t exit a busy season unscathed. We needed a better way to scale that business without taking on business continuity risk (i.e., death).
This Q4, my advice to all operators is: Don’t be a hero.
If you run out and customers can’t buy from you, that’s not a lost customer forever. Don’t let someone tell you otherwise.
Be calculated. Be prudent.
You can’t thrive unless you survive.
Connor MacDonald
Head of Growth, HexClad
How to Make Money With Worse Results
Over my eight years at Ridge, we’ve had one consistent belief: Results get worse over time.
It could be rising costs, saturating audiences, iOS 14 kneecapping Facebook performance, or maybe just a healthy dose of pessimism.
To help you calculate how much money you can make at how bad of results …
When Throne Sport Coffee launched earlier this year, we knew that Patrick Mahomes acted as its lead investor. Thanks to public filings, now we know that the functional coffee brand raised a total of $8M. In addition to Mahomes, a dozen other professional athletes and public figures also participated in the round.
2. General Mills Prepares For Acquisition Spree: Food Navigator
One week after selling its yogurt division for $2.1B, General Mills CEO Jeff Harmening says the company is looking for bolt-on acquisitions and smaller-size assets. In 2024, General Mills acquired a few pet care assets, but watch for them to focus on acquiring high-growth cereal and snack brands.
Daily Crunch, a leading producer of sprouted nut snacks, raised $4M in Series A funding from Launch Tennessee and several strategic individuals. Founded in 2020, the Tennessee-based company retails at over 16,000 stores across the U.S.
4. Tupperware Files for Bankruptcy Protection: CNBC
The once-iconic Tupperware has filed for bankruptcy protection due to slumping sales and a large pile of debt. If Tupperware obtains court approval, the company will continue selling its products while it looks for a buyer.
Ami Colé, a clean beauty brand that launched in 2021 (and earlier pioneer of the lip-oil trend), just secured funding from L’Oreal’s corporate venture arm, BOLD. Ami Colé also announced its storewide launch at Sephora North America.
THE Q&A
We’ve just begun work on our first large-scale piece of original research — creating a tool + vendor stack for each from of the 9 Operators and Marketing Operators brands.
Here’s the question …
What revenue tiers would be most helpful to categorize recommendations for the apps and agencies?
Less than $1M in annual revenue? $1M–$10M? $10M–$100M? $100M and beyond?
Hit reply and let us know!
With thanks and anticipation, The Operators
PS: Special thanks to Motion for backing us as a sponsor even before day one.
Sean Frank, Matt Bertulli, Mike Beckham & Jason Panzer
Get weekly guidance from the world’s greatest nine-figure executives, ecommerce marketers, and DTC-content creators. The minds behind Ridge, HexClad, Simple Modern, Lomi, Pela Case, Jones Road Beauty & more — curated by Aaron Orendorff.
This one is for the people … 📊 Cody Plofker on the three stages of paid growth for 7–8 figure brands 🤯 Drew Arciuolo unloads everything you need to grow via organic social 🔥 Top-5 stories from this week’s trending news with executive summaries Cody Plofker CMO, Jones Road Beauty The 3 Stages of Paid-Media Growth As much as I love recording with the Connors, it’s easy to forget our stages of growth aren’t “normal.” If you’re 7–8 figures in annual revenue, taking advice from 9-figure brands is...
Wow. Last week, Sean Frank took over the newsletter to unleash Ridge’s +$100M partner stack. In it, he wrote: If you like the format, I will do a stack graveyard of every shitty partner ever.10 replies, we’ll do it. The responses poured in. The people have spoken. And Mr. Frank has agreed to release the graveyard. But before the s*** list … Today’s newsletter is the single most-detailed, most-helpful, most-culinary, most-“donkey”-free list so far! Connor Rolain HexClad, Head of Growth...
Strap in. This one might get bumpy. For the first time, Sean Frank (CEO of the 9-figure juggernaut Ridge) is taking over the newsletter. If you haven’t experienced Sean before … He does not pull his punches. Nor is he “safe” for work. He is, however, a brilliant operator. And a genuinely caring human who pours himself out to help others. Here we go! Editor’s Note: This is the fourth of five technology and agency stacks — one for each of the Operators’ brands. Once complete, we’ll compile them...
