EP #355] [ENG] - Top strategies to manage teams when scaling a business - Matt Putra

EP #355] [ENG] - Top strategies to manage teams when scaling a business - Matt Putra Unknown Speaker: Welcome to The Ecommerce Lab By Ecomcy. This is the place for everything related to Amazon private label and e-commerce. Learn exactly what you need to start or scale your business. Get insights from the top industry experts who will discuss the latest trends and best practices in the world of Amazon. From choosing products and sourcing from a supplier to setting up your Amazon account and marketing your business, you will hear it here. Let's get started. Here is your host, Vincenzo Toscano. Speaker 2: Hello guys. Welcome to another episode of The Ecommerce Lab By Ecomcy, the place where everything related to Amazon, FBA, Parallel and Ecommerce. My name is Vincenzo Toscano, founder and CEO of Ecomcy and today we bring another special guest. His name is Matt Putra and he's the managing partner At edX, where they specialize on essentially everything that has to do with fractional CFOs, which essentially means helping you with all your finances when it comes to running a business. And today with Matt, we have a very interesting topic, which is essentially how to deal around integration of teams. Because of course, finances are very important. We're also going to touch on that. But more importantly, is the team that you have essentially on your organization and how we make sure that essentially they integrate efficiently so you can achieve your goals and keep scaling the business forward. Matt, pleasure to have you on the show. How are you doing? Thank you for being here. Speaker 1: It's my connection. Maybe it's not very good. Speaker 2: Yeah, it was breaking up for you. Speaker 1: Sorry. Speaker 2: Can you hear me? Can you hear me? Speaker 1: I can hear you, but it's pretty choppy. Um, and I wonder if I switch to my other computer. That might be helpful. Speaker 2: Okay. Because sometimes I can see from my side as well that you sometimes freeze as well. Speaker 1: Yeah. Yeah. Yeah. You freeze for me too. Um, could you, could you put the StreamYard link in the Google Meet and I'll join from a different. Yeah. Speaker 2: Thank you. Speaker 1: Sorry. Unknown Speaker: No worries. Speaker 2: Hello, guys. Welcome to another episode of The Ecommerce Lab By Ecomcy, the place of air related to Amazon FBA, private label and e-commerce. My name is Vincenzo Toscano, founder and CEO of Ecomcy. And today we bring another special guest. His name is Matt Putra. He's the managing partner. At 8X, where they specialize on everything that has to do with fractional CFOs. So essentially everything that has to do around the finances of your business. And today's topic is going to be more than finances, actually. We're going to be talking about how you can handle all the operations in terms of how to handle your teams, how to make sure they effectively communicate among each other, and more importantly, how we can achieve that this translating resource for a company. So Matt, thank you so much for being here on the show. How are you doing? Speaker 1: I'm good. Thank you so much for having me. Speaker 2: Thank you. Thank you. It's a pleasure. So maybe just give us, you know, a more lengthy introduction about yourself, the company. Then, of course, let's dive into this conversation. Yeah, sure. Speaker 1: Sounds good. Yeah. So I used to work as an investment banker, private equity, and honestly, corporate just was draining. And what happened is a friend of mine in an e-commerce business asked for some help. I helped them. We did some modeling. We made some changes and they made a bunch more money. And then I just started working with this friend and some of his friends. And that's how my business got started. And that's how I got started working with ecommerce. And that was six years ago. And now we've worked with more than 100 brands. We manage more than 600 million a year in revenue. And we're helping people make more money, be more profitable, have more cash, all those things. Speaker 2: Awesome. Love it. So let's dive into today's topic, which is, you know, essentially before going live, we were talking about, you know, the importance of things and how to integrate this effectively. So, you know, tell us more about the philosophy that you believe in and do you guys work with when it comes to edX and the things that you guys see with your clients when it comes to, you know. Speaker 1: Got it. Yeah, so the main premise for us is that profit is not a math issue. It's a humans and alignment issue. When you think about when you've made an annual budget or you've made a plan in Excel and it didn't work out, well, question, why? What happened, right? It's because you have all these people in your company and you have departments and teams and other leaders and without true alignment, we go off course. And when we go off course, we lose money. And so for us, we have a really strong belief that again, it's not a math issue, it's an alignment one. And so we work with people to bring alignment in their companies. Speaker 2: Love it, love it. So I guess in terms of alignment, let's start with that. I think that comes down also to the mission as a company and I think a lot of people really struggle to define that in the first place. So how would you say some people can start with that foundation to make sure that the team really resonates with whatever they're working towards, you know? Speaker 1: Got it. So the foundations of alignment, I would say, If you want to start from step one, the foundation of LLM is making a plan. And I always recommend people have sort of a 10-year big vision, but then make a plan. What are we going to do in the next year? What are the top three focuses, one, two, three focuses for the next year? And then communicate those to your teams. After that, make sure the whole team knows about it. Talk about it once a month. Make sure people know. They can repeat it back to you. And the next big thing is to get your marketing and demand team in line with the plan. What do we need to do as a marketing team? What do we need to do as a demand team to go and hit the plan? From there, you work with your supply team. Supply marketing says we're going to do this much in sales, this many customers, these SKUs, these markets, these channels. Supply team, what do you need to do to facilitate that or the operations team? What inventory do you need? When do you need it? Do we need new SKUs? Do we need new suppliers? What's the shipping times? Make a supply plan. From there, obviously, finance, right? Check the marketing plan, how much do they want to spend, what channels, what are the SKUs we need to buy, get the marketing team aligned, supply team aligned, then finance checks on a cash flow, on a margin basis. And when those three teams work really well together, that's the foundations of alignment. And the next part, step three, is for those teams to meet monthly in a regular cadence to check against each other's math. Are we still on track? Do we still need the same inventory? Do we still have cash? And as long as they're talking regularly, the business will be profitable. It will make money. Speaker 2: Love it. So now we're talking about teams, right? And I would like to briefly touch on that because when it comes to teams, especially when you're getting to build a team, when you're going to start developing all these interactions we're talking about, It's difficult to know which one to prioritize first, right? Because at the end of the day, you might encounter, as you mentioned, you have the marketing team, you have the team that deals with inventories of things, you have the team that maybe deals with backend operations. So then it's difficult, especially if your budget is limited, to know, from a financial event point of view, where you really can be the most impactful in terms of moving forward. So how do you deal with that as well and what do you recommend? Speaker 1: Got it. So in terms of prioritization, um, so if we assume that you have a product with pretty good margins, okay, uh, let's say above 70% gross margin, uh, meaning, uh, price minus, um, costs minus inbound shipping, um, 70%. I would say the priority needs to be on growth. I'm the marketing and demand side and the reason why is because if you can't sell, there's nothing to supply and you can't pay the operations people. So for me, the focus is making sure there's enough money to drive growth and revenue. Once that happens, and then of course, so if the priority is growth, What do you do with supply? Well, just buy enough of your core hero SKUs. So again, when you're starting, you have one or two products. Stick with one or two products. Keep your life simple. What happens is people try to expand their product catalog too soon. Then you need to add supply people. But if you don't do that and you stick with one or two hero products, maybe a couple of colors or something, or a couple of variations, you don't need a supply team. So, focus on growth first. Focus on revenue first. Make sure your marketing team understands margins and profitability, your payback periods, your LTVs, because if you can grow with profitable customer acquisition, you've solved the biggest problem that exists. Maybe when you're multi-country and multi-warehouse and all these different things, you need a proper supply team. But yeah, I would say always start with growth. If you keep a small product catalog, you don't need super brilliant people to run the supply. Speaker 2: Yeah. And now when we run back starting with the product, given that, you know, most of the people actually watch this and hear this podcast, you know, sourcing is pretty much one of the biggest expenses when it comes to really essentially prioritizing the allocation of your resources. So on that side, assuming that we're talking from the perspective of the team that essentially has to make the decision making in terms of which product to prioritize and which one they shouldn't prioritize, like, From a KPI perspective, I guess, what are some of the things you recommend this team that's in charge of the supply chain should be focusing on? Because there's so many things. You can go down the route of focusing on the profitability, or it could be down the route of the scale, or down the route of awareness as a brand. Because sometimes, product is not always profit or revenue. It could be other things. So how do you define that? Speaker 1: So for the supply team, So the first thing to do if you have a bit more complex company is you have to categorize your SKUs into A, B, and C. So A SKUs would be where the most volume is and the most profit is. B would be second, C is third. So less volume, less profit. We always prioritize having stock of our A-level SKUs. I still think it makes sense to sell out once or twice a year. Now, if you're on Amazon, maybe we don't do it that way, but if you're on Shopify, maybe sell out once or twice a year. People hate selling out, but I think you hate bankruptcy worse. So let yourself sell out once or twice a year. Prioritize the A SKUs. How you decide something is an A. Well, if you look at your sales, you know, classic cliche, right? 80% of your revenue is 20% of your SKUs. Those are probably your A's. Now, you do need to review those top 20% for profitability. If there are some SKUs that destroy profitability, you would maybe, but maybe they give you an entry to LTV. Maybe you have to kind of think about that. So you can look at sort of LTV by entry product. But I would say, yeah, I would say your A SKUs are those top 20% and then the top profitable ones and prioritize purchasing those. Again, you look at the demand plan. We're going to sell this much of revenue, this many SKUs. Then you make a plan, make sure your A SKUs are able to come in. Then you have to check with finance. Do we have enough cash to purchase B SKUs? Do we have enough cash to purchase C SKUs? And if you don't, don't buy them or push them back or whatever. So that's the main thing for the supply team is prioritized A SKUs and don't have more than, I mean, again, you have to figure out how much you need for safety stock. But typically, you know, like shipping, like order to receipt timeframe, plus maybe a little bit for variation, maybe one more month other than that. So if you have more than four months inventory of something, it's going to be a problem. Unknown Speaker: Yeah. Speaker 2: Cool, cool. Okay. Yeah, I think actually I align 100% with that because the 80-20 rule, right? Like you hit most of the time for brands, especially ecommerce, you have 20% of the stock that brings 80% of the revenue and people sometimes try to prioritize all the catalog at once. It's very important that you have instruments in place that you can, as you mentioned, tackle that and make sure that you put your eggs where they can be the most impactful for your business, you know. Now, that brings me to my next question. Like, of course, talking about teams and which goes side by side with the finances brings me to, of course, we had the supply chain, but then if you want to scale, right? What team can be the most impactful or the type of teams that can be more impactful is usually the operational side of things that have to do either with the catalog and everything that's done from an optimization point of view or the team in charge of advertising as well, right? So when it comes to that, how we also make sure that those two teams are aligned with what this scale is essentially the goal in terms of what we need to achieve, how we make sure that from a CFO perspective, let's say I'm in the CFO or I'm hiring a fraction of CFO, we make sure that the budget is issued evenly across all those teams as well. Speaker 1: So this is our big focus as a company now. How do you make sure these teams see the same forecast, see the same reality and work together in lockstep? So the way that you do this is it's a monthly cycle. Okay. So week one is demand. Now, obviously we assume that the owners of the company or the executives have set like an annual budget. So in the first week you do your demand meeting. There's research done before the meeting where you look at what did you sell last month? Was it on forecast? How are we doing? But the demand meeting is to set the demand plan for the next three months. So how much will we sell? Of what SKUs? What marketing do we need? What promos are running? And we fix that demand plan. The second meeting of the month is next week. It's a supply meeting. So we review the demand plan, the marketing plan. Now we have to look at our supply plan. So at the week preceding the meeting, they're looking at what's on order now. What do we need to order? Are we going to sell out? What are the timeframes? Is there issues with the factories? All these kind of things. And then on that supply meeting, we say, yes, we have enough to meet the demand or no, we don't. Obviously, do we pull this order forward? Do we push an order back? All these different things. Then we have a finance meeting. And the finance goes, okay, I have your demand, your marketing, your promo plan. I have the supply plan, the purchasing, the payments plan. And we put it all together into what we call a unified forecast. The unified forecast obviously has the year's worth of budget. Then we roll forward from the demand plan. We drop in the demand plan, the promos, all the things just drop into this unified forecast. We drop in the supply plan, and then we look and see, do we have enough margin? Do we have enough cash? And if we don't, we go back to the teams and we fix the plan in that finance plan. So order less, do another promo, and you make all these decisions. And then the fourth week is the executive sign-off. So we, as three teams, we present to the executive team and we say, We're going to do this plan for marketing, this plan for supply. We have enough cash. We have enough margin. This makes sense. We're on track with the budget and the executive team goes, okay, go ahead. And we start the whole process over again next month. Then we go review again. So marketing, supply, finance, executive. And if you meet together in a cycle like that, you avoid problems where supply is working off an annual budget and they're going to be buying, buying, buying, but demand starts to drop and they don't notice. So they overpurchase or let's say demand starts to go up and they underpurchase. You'll avoid a lot of those problems if we get people meeting weekly. And here's the thing, right? People want agents, people want automations, people want softwares to do this. What we have learned is that conversation, human to human, is the real fix for all these things. Speaker 2: Yeah, I think the most important thing that we definitely had to take out of this as we keep discussing is how everything has to be connected as a full loop, right? Whatever the supply teams does, the account managers have to be aware of and then the marketing team have to be aware of because I think where most of the companies, at least we have worked with, end up failing is where each department is being isolated from each other and the decision making comes from KPI is high up that this KPI is not essentially being tailored to the needs of each independent team, right? So then everybody's kind of not aligned with what really is dynamically happened as the business of all those skills, you know? Yeah. Unknown Speaker: Cool. Speaker 2: So now another thing I have as a question is another big issue with the team kind of, Integration especially associated with the finances is especially and we're seeing that this year. We're seeing how companies have been more and more in a struggle when it comes to a cash flow perspective. And of course, now we're talking about scale, but sometimes we also have to talk about the inverse, which sometimes means we need to become more efficient. We're actually damaging or affecting the scale or the momentum we've been getting as a company. So as a company, when you start having a team of 10, 20, 30 people, what is also some of the recommendation you might give to people here? Like, OK, I want to reduce my cost, but I don't want to reduce the speed at which I'm growing. How do you know how impactful each of these teams are being? Because at the end of the day, the more people you have, the more amazing it becomes. And you don't really know which are some of the key pieces, really, that are making the whole machine work efficiently. Speaker 1: Yeah, that's a very good question. I have a couple examples where I work with a company that grew really fast. So here's one. I work with a company that went from zero to 60 million in three years. And then when they started hitting that 50 to 60, they started hiring more teams, they brought on more SKUs, they hired very competent executives. But in the meantime, a competitor went from zero to 200 million. And what the difference is, the competitor had a smaller team. They had less SKUs. So they had more budget for growth. And so most of the time, I find that a business slows down because they add complexity, they add skews, they add people where if you stayed more focused, you would do better. Another counterpoint to this is a good, a very wonderful client of ours, um, is doing eight figures with 35% profit. They have a very small team. They have barely any SKUs and they're going to exit for nine figures in the next year. We're working, but we're finding an investment banker right now. Because they just don't do other stuff. They just do the thing that they're good at and they've done it for years and years and years and years and they refuse to do other things. And so they're so, so, so profitable. They grew 40% prior year, 25% this year. We're going to get to 30 again the next year. And they are wildly profitable. Now they have 85% gross margins, which is wonderful if you can find a market where you can do that. But they've been doing the same focus thing for eight years. Um, and so that's where you create life changing value for yourself as a shareholder is focus. So what I would say is Do the thing you're very good at. Don't try to do a bunch of other stuff and be careful adding team members. And here's another thing I learned. When you add a supply chain team, they're going to be tinkering with supply chain all the time because you pay them to do. They will try to add more stuff. They will try to add more warehouses. They'll try to add new suppliers as a backup. That's what they're trained to do. So you have to sort of untrain people in old ways of working to keep them very focused. Speaker 2: Cool. Now, going into everything that has to do with focus, a big conversation has been around, you know, the integration, for example, of AI, right, which I think in both ways is helping us both, of course, make a team more efficiently, but also from a financial point of view, also being, you know, more effective with the limited budget a lot of our companies may have, you know, sometimes Now we're seeing that what require you to have a 20 people team, you can do it with a 10 people team. That means it's a direct impact in a positive way on profitability. So given that you work with so many companies and have with, you know, the finances of things, like how do you associate the AI shift in the way some of the teams are structured? What do you think are some of the trends people is going to see into 2020 that people should be aware of? Speaker 1: Yeah. Um, I'm only just starting to see teams change, um, in the lower mid market, uh, because of AI. And the first big shift of that was Google's nano banana pro. Um, we are seeing more efficiency, but AI can't do a lot of there's so AI can do high level thinking and it can do low level execution and there's a big middle ground it cannot do. That changed with Nana Banana Pro. Now, the average ecom company or even the best in class ecom company should not need photographers. Probably not anymore. You don't need lifestyle shoots. You don't need to do product shots. None of that anymore with Nana Banana Pro. And that's the first big shift I'm seeing. The first wave of cuts to jobs and contractors I'm seeing is that. I think we will see more job losses for some folks, but more efficiency for companies as well. I think, I mean, you know, AI is coming, but there's still a big middle ground of things that AI cannot do. Like, AI can only just start making spreadsheets just, and it's not very good at that yet. It will come. It will make it better. Coordination though is a good one. So we, you and I talked about in the, in the meeting room, like admin tasks, so reporting and reports and those kinds of things. Yeah. Those can all be done with AI. Um, yeah, it's coming faster, but there's not been a lot of, yeah. Speaker 2: Yeah. I think that's why I wanted to briefly get your take on this because I think, In a good way, what is going to happen is that companies that couldn't make it before because margins were so tight, now they have a chance because some of these tools are making the barrier of entry so much lower. And I think if you are effective in terms of, which is what we've discussed so far, in terms of how you structure the teams, how you prioritize for your location, and combine that with really achieving your goals as a brand or as a company overall, you're going to have a much easier journey moving forward in terms of scaling the business forward. Cool. So I guess to start bringing the conversation to a closure, like, I mean, we've been talking a couple of things. We talk about the culture, how to make sure people align with the culture, defining goals, defining which team is more efficient than the other, where to look at the budget based on that, what's some of the high-level KPIs we can think of when it comes to that, how AI is impacting the whole landscape. So I would say, what would be a last maybe point that you would like to add in terms of this topic that you think could be meaningful for people to be aware of? Speaker 1: I would just I just want to reiterate that you know profit is not a math problem. You can map it out on a spreadsheet but you can't accomplish it on a spreadsheet. You have to get your teams talking and you have to stay focused and if you can do that you'll make a lot of money. Speaker 2: Love it, love it. Thank you for that. So I guess, you know, this is at the end of the day, just a tiny part of really, you know, the whole topic around, you know, especially finances, which is what you guys specialize on. So tell us more about, you know, you guys, how people can reach out and maybe, you know, have a deeper conversation because I think especially what you guys do, which is a fraction of CFO is something that a lot of people should be really looking into. Like, you know, finances are the blood of your business and I think you guys can add a lot of value there. So tell me more about that. Yeah. Speaker 1: That's great. Yeah, so yeah, we work, we basically can handle your finance department for you. So we can do the accounting, we can do the planning. We will actually, so when we talked about that four-week cycle, we will run the whole four-week cycle for you. We'll do the data prep, we'll do the data cleaning, we'll present to your demand team to make decisions, marketing team, we'll present to your supply team for them to make decisions. Obviously, we own the finance side. We'll do all that for you. And the reason why is, again, we just get to work with a lot of companies, see a lot of things, we know what we're doing. We offer a complimentary call if you want us to take a look at your financials and tell you where there's savings, where there's opportunity. Something we love to do is we'll do that for you. We'll put a link below and you can chat with us if we can help. Speaker 2: Awesome. I appreciate that, man. Yeah, so it's been a pleasure to have you on board. Thank you so much. I'm sorry about it. You guys can find all the information here. See you in the next one, man. It's been a pleasure. Thank you so much. Speaker 1: Thank you so much, Vincenzo. This was great. Speaker 2: Okay. All right. Thank you. Bye. Unknown Speaker: Thanks for listening to The Ecommerce Lab By Ecomcy. Be sure to subscribe so you don't miss an episode. While you are at it, we would appreciate it if you could leave an honest rating and review on Apple Podcasts, Spotify, or wherever you listen. That will make it easier for others to find out about the show and benefit from it. Want more? Visit our website at www.ecomcy.com where you can get your first consultation for free or find us on Instagram, Facebook and LinkedIn at Ecomcy.