Maximizing Growth Through Your CFO Relationship, with Matt Putra, CEO at fractional CFO firm Eightx

Transcript

Our transcripts are generated by AI. Please excuse any typos and if you have any specific questions please email info@digitalshelfinstitute.org

Lauren Livak Gilbert (00:00):

Welcome to unpacking the Digital Shelf, where industry leaders share insights, strategies and stories to help brands win in the ever-changing world of commerce.

Peter Crosby (00:23):

Hey everyone. Peter Crosby here from the Digital Shelf Institute. Lauren Livak Gilbert has been trying to get a CFO on the podcast for over a year. It's one of the most pivotal relationships you need to have to drive success and manage in tough times. And she finally found one who was ready to talk omnichannel Turkey, Matt Putra, CEO at fractional CFO Firm Eightx joins the podcast with tough advice and a passion for building a bridge between finance and the business to make the p and l shine. Matt, welcome to the podcast. We are so excited to have a CFO on the podcast. We're so grateful. Thanks for being here.

Matt Putra (01:02):

I'm so excited to be here.

Peter Crosby (01:05):

And we talk so much about how in order to be for omnichannel organizations to succeed and work, they have to work with partners like finance, legal and supply chain, and that collaboration is critical to achieving the business outcomes that everyone is looking for. So your perspective is just going to be super valuable and especially in this environment, there's so much concern about where to spend your next dollar and they're usually knocking on your door to try and figure that out. So let's start with when you're working with one of your brand team clients, what is the approach around managing commerce and marketing spend? How does that conversation go?

Matt Putra (01:49):

Yeah, it's varied at various levels of sophistication depending on who I'm working with. But I would say the first thing that we need to do is establish common language. So obviously as a CFO and when I work with CEO, we're looking at the p and l all the time, and that's really what matters. So what we need to do is show the marketers how to bridge from a p and l back to the metrics they care about. So how do we bridge conversion rate, CPM, click-through rates, how do we get all those things matching up to the p and l? Once we can do that, we can have a conversation that really makes sense.

Lauren Livak Gilbert (02:29):

I really love that you said common language because I think especially from the brand world, right? They're going to come to the CFO and say conversion and the CFO is going to be like, well, I think that means this, and then the brand team's going to say, I think that means this. So when you're working with a brand or maybe when you were beginning kind of in your role, was there anything that was helpful for you to upskill more of the brand language? Was it just talking to them more and understanding where they were coming from?

Matt Putra (02:57):

For me personally?

Lauren Livak Gilbert (02:59):

For you personally and just maybe even in general, so the brand team can come with something that can help educate you.

Matt Putra (03:05):

Yeah, great question. I would say it took me quite a while when I started in eCommerce and Omni because I came from a private equity background, so it took me a bunch of time to figure out how do I speak their language and how do I come to them rather than just sort of waiting for them to come to me. Part of it is I have always wanted to understand the drivers of a business. So some people will do a forecast and they go, well, last year was 50 million. This year should be 5% more. So it's going to be whatever the number is, 52 and a half million. And that's how we do a forecast, well, I want to know to get 52 and a half million. What do I have to do? What does the business have to do? And so figuring out how much we have to spend, and so how do we know what that is? Well, how much do our customers cost to acquire? Okay, well if I spend this much, I should acquire this many more customers. Well, what does that mean for the marketers? How do they understand that? Well, they got to have this many ads and they need to get this many website business. So just trying to unpack all the drivers of revenue I think was a big part of it. And then now I can walk in with a toolkit to help us all get on the same language, but it took some time to figure out.

Peter Crosby (04:17):

So really you're coming to the table as a partner in this effort to it sounds like sort it out together in a way rather than this is what you have. I'm out of here.

Matt Putra (04:31):

Well, so a great point. A lot of CFOs and even some we've taken over for have said to the marketing team, you have 700 grand a month, spend it or don't, but that's all you have. And that isn't helpful because it doesn't unpack again what actually makes you money. And it's not a bucket of money. It's actually a confluence of a number of things, creative and all these things. One place I took over for the outgoing CFO had said, you have 700 grand a month to spend on marketing, spend it or don't, but you don't get more. When I came in, I said, we can start 700 as a baseline, 700 means this much in CAC, this much in the CAC payback timeframe. Ideal LTV is this. And so if you hit a blended row as a X, you can have more money if you keep at that, you can spend as much as you want actually. And so what we did with this client was they ended up spending 30% more the first two weeks I got there and they actually made 300,000 more in EBITDA within the first three weeks that I got there just because I went from a bucket of money to driver-based forecasting being like, again, if your CAC holds at this level, acquire as many customers as you can is one way to look at it.

Lauren Livak Gilbert (05:44):

And if you're thinking about those key metrics, so you just mentioned some of them, if a brand is listening and they're trying to better partner with their finance team, what would you say are those key metrics for them to focus on, to translate with you that would help them unlock more money to start?

Matt Putra (06:01):

Yeah, so I'll start with the one that everybody hates, and this is blended roas.

Lauren Livak Gilbert (06:05):

So

Matt Putra (06:05):

This is literally the best. Nobody likes it, everybody thinks it's stupid, but this is literally the best one for you to get on the same page as a CEO and CFO. And here's why. When I look at an income statement, I can see net revenue, I can see cost of goods, I can see advertising, and I can see the bottom line blended ROAS is a calculation based on the income statement. So you go net revenue divided by ad spend. So I know that if my budgeted revenue is a hundred million and my budgeted ad spend is let's say 50, just for a number 50 million, my blended is two and I'm profitable at that. Well now if you just hold a two, I'll let you spend more money because I know at a two I'm making money. If you keep growing ad spend at two, I will make more money.

(06:53):

So we start there, we always start blended roas and always I pick a fight every time I bring this up with people, especially when I work in a brand because they don't get it. But it's the easiest metric to explain to a board, to CEO to A CFO because it's right there in front of them. The trick then is going upwards to the upstream marketing metrics. So there are a few that are really important. One is your blended CAC. So everything blended right for the most part. What does it cost you to acquire a customer and what do they order from you? So then you got to go blended CAC. That's what it cost. Acquire a customer again from all channels, including organic start there. Now you know what their average order is, you should be able to find that in your Shopify or Woo or anybody will have it.

(07:38):

So if your blended CAC is 50 and your A OV is a hundred, so now you figure out what your cost of gets sold and your shipping is, right? So let's say on a hundred dollars, your cost of goods is 20 bucks. So you have 80 left and your shipping and payment processing and all these things is $50. So now you have $65 left and your CAC is 50. That means you made $15 on a customer. Well, if you can acquire one more customer for 50 and you get 15 bucks, every customer you acquire makes you more money to the bottom line instantly. So if you can keep acquiring at 50, acquire as many as you can. Now we know that you can't, it doesn't work in practice, the more you acquire, the higher it gets. But we can then set a floor. So I'll say you can acquire as many customers as you can so long as we get $10 from each customer, fine.

(08:32):

So now the marketing team knows they can track blended CAC to the day to the hour that it's a metric that they understand, they can track it. So then they know I have license to acquire as many customers as I want at a blended CAC of 50 to 55. Great, it's a great place to start. Things get more complicated when you have strong LTV because sometimes it's worth acquiring somebody at a first purchase loss and things like that. But again, you can work back from blended row has to blended CAC and give people very clear guidelines, very measurable, trackable, indisputable guidelines because conversion rate, disputable click-through rates are disputable, but blended CAC blended row is not. I know the number. If I look at it on a blended basis, even nca. So new customer CAC, that's still disputable because you're relying on Hiro or triple whale to tell you what the number is. Blended CAC is not total ad spend divided by total new customers. If that number holds, spend as much as you want.

Lauren Livak Gilbert (09:32):

So can we talk about blended ROAS for a second because I've never heard it called that. I know roas, I know I roas. There's a lot of different kind of acronyms out there, but I haven't heard blended roas. So talk about how you think about ROAS in general and then do you ever have conversations about incremental ROAS or is that what you mean by blended ro? I don't think it is, but I want to clarify.

Matt Putra (09:53):

Good question. I use the term blended because I try to be very specific in my language because the term ROAS can mean a lot of things to a lot of people.

(10:07):

When I walk in a room, and you would know this, you say roas, someone could think, oh, new customer ROAS or paid only ROAS or whatever. So when I say blended roas, what I mean is you pull up the income statement net revenue divided by variable marketing that's blended because it includes revenue from organic, it includes revenue from paid, it includes revenue from other things. And if you're omnichannel, you would segregate e-commerce. And not of course, but it's on the income statement. And that's why I like it. And again, I use the word blended because it means from the income statement basically. And I don't want people to think about this in terms of paid only or that kind of thing, at least not at this level. Does that make sense?

Lauren Livak Gilbert (10:51):

Yeah, no, it does. Thank you.

Peter Crosby (10:53):

So I am bad at math, so lemme just ask a follow up to that, which may be all of our audience gets because they live in math, but to me the term is return on ad spend, but yet you're saying it's not all about the ad spend when you have a blended roas. Am I missing something? Great

Matt Putra (11:14):

Question. Yeah, great question. So you're right. And this is why we need to add this blended to the front part. So return on ad spend, again, some people would take that to mean what revenue comes in from the marketing efforts specifically. And if you're doing a hundred million a year in e-commerce, you might be able to figure out from your North beam or whatever that 70 million is from driven from ad spend, 30 million is organic, and so then the calculation would be 70 million divided by that 50 that we talked about. That would be your sort of strict return on ad spend. The reason we don't use that, I don't use that number to start with, is because that 70 million is theoretically kind of fuzzy. We don't really actually know for sure. We think we do. We think we're close and sometimes we are, sometimes we're not. So I use blended because again, it maps straight to the income statement. But you're right, the return on that spend with if you're strict about it would be just the revenue from marketing efforts.

Peter Crosby (12:15):

But the clearer outcome to the business is by relating it to the income statement and including all sorts of income in that.

Matt Putra (12:28):

And part of that is just because your CEO and a lot of times the CFO will not understand that small distinction and because they can't see it on an income statement, you'll lose them and you'll get less money from them. So if you want maximum budget from your cfo, you say, Hey, I want to spend another a hundred thousand dollars a month on ads next month and the blended OS today is two, it's going to decrease to 1.9 when I do that. But if I do that, you're going to make this many more profit dollars. The CFO can tell if your experiment worked from the income statement and it's a way to get them on board. If you go my return on ad spend, which is the other one, which is money from marketing or revenue from marketing, less money spent in marketing, or if you go more sort of abstracted, they don't follow all the time and you'll get less money because they can't follow along the math because what they see is an income statement. Most of the time if you have an e-commerce specialist, they should at least have some understanding of the upstream metrics and how they relate or build that bridge for you, which we do. But if they don't, you're going to lose them and it's a surefire rate to not get the budget that you want.

Peter Crosby (13:42):

So speaking of budget, the budgeting and planning process in a modern omni-channel organization, particularly in this environment with so much uncertainty and geopolitical blah and inflation and all of that, I'm wondering on a standard processing, how do you approach budgeting and planning and then if there's any color to add about what that looks like these days?

Matt Putra (14:12):

Yes, of course

Peter Crosby (14:13):

That would be really helpful.

Matt Putra (14:14):

The C-E-O-C-F-O and perhaps the wider executive team, maybe even the board will or maybe investors, everyone will have expectations of what the business should grow in terms of top line year on year. So let's say you're doing a hundred million to maintain our valuation, you need to grow 20% or more per year. So next year should be 120 million. So first off, we start with a very simple, what do we expect? What would make us happy? Great start there then. So that's 120 million. Then you need to, again, best in class, you should look at industry reporting. You should be talking to people, you should understand inflation, you should understand where interest rates are going and how consumer sentiment is looking and all these things. And you should then create a view on is 120 million reasonable given the confluence of all these factors? So it may or may not.

(15:05):

If your market is shrinking and you expect to grow your revenue, what that means is you're taking market share from others. So then you have to ask yourself the question, are we good enough to take market share from others? If you think you are, great, leave the expectation at 120 million if we're not temper the expectation or figure out what else you can do. But then if you're not okay with tempering it, you then have to figure out what the team needs to do to be better. But anyway, let's just start here. So expectation from senior team board, whatever market research, that's the first step. Then what you have is you have essentially a top down forecast, at least on the revenue side. So from there, from the top down, we'll know typically what cost of good sold is. We'll know theoretically what our shipping costs will be.

(15:55):

So then you'll know essentially your contribution margin. We know what we want to spend on advertising. So then you'll know from a top down perspective, C-O-C-F-O perspective, what should the business do from contribution margin and contribution margin is revenue minus all variable costs. Okay, great. So then the CEOC FFO will look at your fixed costs and we'll say we will allow this much escalation in fixed costs this year, and this is our net profit target. So this is a top-down forecast. It can be done in a few weeks to a month. If you're good and you work quickly, and if you have consensus among the senior team from there, you then give this to various teams and you say, this is what we want the business to do. Now your job, now, again, this is a bigger business. So you have hub departments, you then need to build me a bottoms up, meaning we've said from here, this is what we want.

(16:47):

Now you need to go, is this freaking possible? Basically, right? So you'll go to the marketing team. Let's say for let's here Omni, you'll have e-commerce, you'll probably have retail. So go to those two teams, say, based on our forecast, e-commerce should do this much revenue. Retail should do this much revenue. Show me the math in the driver basis. So e-commerce will say, good returning customer rate needs to be this. We need to acquire this many customers. They need to stay for this long LTB should be this. We need to spend this much on marketing, we need to have this many websites. They need to break it all down. And when you break it down into those driver-based metrics, it shows you whether the emperor has closed or not. Because I've seen this before where the CEO says 120, and you look at the metrics and you go, we need three times the site visits.

(17:34):

That's not possible. Okay, so then you got to go back to the CEO and say, we're not going to get three times as late visits. This is not going to work. And so then we temper expectations or we don't. Retail team will go, wow, if I have to do 20% more, well that means I need to close X number of more stores or doors or I need to drive sell through faster or raise prices or discount less. They have to break this down. And again, you're relying on very smart people in these departments. So VP director level people, but they'll come back and they'll say, well, we think this is possible or we think it's not possible. So now you have sort of a gate where you have your top down and initial bottoms up from these teams and they match or they don't. And if they match, sweet rarely happens, but awesome.

(18:21):

If they don't match, you then need to really ask yourself as A-C-E-O-C-F-O, are our expectations possible reasonable? If there were a requirement, the e-commerce and the retail team might need to say, I need more money from you, or I need more staff, or I need more dialing software, all these things. And so then you begin to go back and forth. So let's say on first pass the bottoms up doesn't match the top down, then you say, what do you need for this to be true? And they will come back and they'll say, well, to hit your numbers, I need this, this, and this. Great. So now you have a top down that matches the bottom up, but with more costs than you thought. Now you run that, did you still make the profit you thought you would or is the profit too far gone? And so then it becomes an iterative process from there. So again, that's the best in class process. Described it very shortly, but it is a lot of iteration once you do that first kind of go round, most of the time they don't match on the first go round. We've had that. I've seen it once in my career where I did a top down based on market growth and everything and then the two bottoms up from both departments match perfectly, which was great. And lo and behold, we're not hitting them right now. But,

Peter Crosby (19:43):

Well, I guess that's kind of where, and I don't know if you can blame it on those things, but then doing that in an environment as volatile as what we're in now, what is the approach when what other forces or internal forces intervene and things have to change?

Matt Putra (20:03):

So the one thing we know about a budget or any forecast is that any one version of it is wrong. You are never going make a budget and hit it on the nose. So what we believe at my company and when I work with bigger companies is that you need to have three versions minimum. So we'll do the one where we eventually iterate enough so that we agree, great, stick a pin in it, that's our board approved budget. We do need to then make a budget where things are a little better than we thought because of such and such driver or things are worse than we thought because of this risk or that risk. And if you make three versions, again, all three of them will be wrong in and of themselves, but if you make them well, reality will be caught between the three somewhere. So allows you to understand how you would react if reality is beginning to go closer to the worst case one or the best case one. And so again, you have to make three scenarios and then you just forecast very regularly during the year basically.

Lauren Livak Gilbert (21:11):

And I really like the point you're making about bottoms up. So in my past career I did some ZBB zero based budgeting, which I think

Matt Putra (21:18):

Is

Lauren Livak Gilbert (21:18):

Very, that's exactly what we're talking about. But I think the beauty of bottoms up is when they don't match, you can go back to each tactic and understand exactly what you need to remove or how you need to think about it differently. Where in traditional bucketing where it's like, Hey, you have 120,000, just go spend it. You don't know those details. So I call that out for brands because even if you don't do bottoms up today, it's a good practice to start with your team because then you really understand the levers that you need to pull to get there. And then you can also get your goals and objectives aligned to that with your team. So it was a trend a while back to do zero based budgeting and do more bottoms up. I think it's more of a standard now, but I think this is good information for brands to know if they've never been involved in this process because it's so helpful to the interworkings of how all of their jobs ladder up to the broader end goal.

Matt Putra (22:16):

100%. Don't get me wrong, it's hard.

Lauren Livak Gilbert (22:19):

It takes a while to, it's

Matt Putra (22:21):

Hard. It takes a while. I think I've never done one in less than three months probably. Yeah, exactly. Right. And so

Lauren Livak Gilbert (22:27):

And your first time is way harder the

Matt Putra (22:29):

First time. A fucking nightmare. Yes.

Peter Crosby (22:33):

I see. I love being an explicit podcast. Thank you so

Matt Putra (22:35):

Much. Sorry. You have to edit that out then. Yeah,

Peter Crosby (22:38):

No way. We'll just mark

Lauren Livak Gilbert (22:40):

It.

Matt Putra (22:41):

Yeah, but it's really hard, but I guarantee to anybody that's listening, it is the best way to do it because if you just do a top down, the emperor may not have clothes and you might end up with a ear that people didn't buy into and you don't know what you need to anyway. So yes, your OKRs can ladder in, like you said, all these things if you do it properly.

Lauren Livak Gilbert (23:02):

A hundred percent. Okay, so let's chat examples. Do you have any examples of brands that may have spent more money and that paid off or they thought about things differently or worked with you differently? Our listeners love examples.

Matt Putra (23:16):

Okay. Yes. So the one I sort of mentioned it in a little bit detail near the beginning, but they were a CPG company based in Canada. They were doing roughly 70 million when I started, and they had a CFO that had to leave for whatever reason very quickly. So they found me, and when I walked in, the marketing team said, Hey, as I'm doing my discovery and all this, the marketing team was given 700 grand a month and they could spend it or not spend it, or most of the time they would try to spend it because marketers don't want to spend the money. Well,

Lauren Livak Gilbert (23:50):

Because also concerned that if they don't spend it, it gets taken away.

Matt Putra (23:53):

Yeah, this is a good point. So they'd spend the money, and then I looked at the return on ad spend on a blended basis, and I said, wow, we're actually doing pretty good. We're probably pulling off a four and a half five on a blended R as. And what that means is that it's actually very high for a business that wants to grow. So I said, well, if you're doing four and a half and five, and I obviously have to break down their gross margin and shipping costs in this, but theoretically we could be. So the next level of customers that brought in, if they were brought in at a blended barrel was of three-ish, we would still make money on them. So I said, well, here's the income statement, how it looks today. Here's a couple ways it could look if we spend a hundred grand more or 200 grand more, and this is what profit would look like in those scenarios, and this is how you track the blended roas.

(24:44):

And I said to the ceo, I want to give them more money. And so that was in my first week, we made that for them. They spent, I don't remember how much more they spent, maybe a hundred grand more, but they ended up making 300 grand an additional EBITDA from that decision just because again, we use driver-based constraints rather than just a bucket of money. And we just took the reins off when they were, again, if your CAC is better than this and your blended ORs is better than this, spend as much money as you want. So when they spent it, they got closer and closer to the ranges where I didn't like, but when they hit it, they had to pull back. And as long as they did that, we made more money every time

Lauren Livak Gilbert (25:27):

To spend money to make money.

Matt Putra (25:29):

Well, yeah, the reason for that thing, of course, there was another client where they took a very long time for me to convince the CEO that they should be spending more money. They have a blended as of nine lower gross margins though, so they had to be a bit higher than normal. And I was working on this guy for six to nine months basically, and I said, we need to spend more money. He's like, I don't believe you. And I was like, well, here's the math and here's how we're going to track it and I could track it daily for you. And we finally brought in a marketer who did math that I could, anyway, it was awesome. Very, very good marketer. And we started to spend money. And for us, if we acquire new customers at a ROAS of four, we still make money. It's incremental. We started to make more money, get more customers, they stay longer. We have more LTB, more returning revenue. All these things, their returning customer revenue is going down, but it's a good thing because they're acquiring new customers as well.

Peter Crosby (26:36):

And so did that CEO, once you finally convinced and did you get the appropriate amount of gratitude and recognition that you deserved?

Matt Putra (26:46):

Yeah, yeah. We have a great relationship. They're in San Francisco, and so we just move really fast. And so it's not like we just sat around and gave it to their hugs or anything. But yes, we have a very good relationship. I trust him, he trusts me. And

Peter Crosby (27:06):

That's really the important things here are building that trust. And it sounds like the process that you put in place on both sides of the equation are meant to build that trust. And as you said, shared vocabulary and testing, learning, being able to report daily if necessary, is an important part of building that trust, I would imagine.

Matt Putra (27:32):

And for them, actually, we had to go all the way into North Beam to help make the case because the Google revenue was so good, Google attributed revenue. But when we got North Beam, what we found is that it was the customer journey looked like this Facebook, Facebook, Facebook, Facebook search on Google Buy. So when we spent more on Facebook, we got more Google searches and more purchases. So we actually had to go all the way into the attribution and North Beam and things to

Peter Crosby (28:01):

Understand what the actual triggers were for the increase. Fascinating. So Matt, to close out, I'd like to dig in on brands that are struggling in this current economic environment. And with that happening, what are the areas that you look to be able to right the ship and get to a place that's a safe operating

Matt Putra (28:29):

Environment? Yeah, this is very tough right now, but there are a few areas that I will always look at. So first of all, we look at operating expenses. Is there just any fat in there? Are there people you don't need? Are there people that you need the role but the person's not doing awesome in it? You have to be pretty harsh in this environment. If you think about sports, if you want a championship team, you need literally the best players. And so find them and pay them appropriately. But if they're not performing, maybe they don't stay on the team. So people always look at people. Another big one for me is inventory. So most brands most of the time are over inventoried, and I'm pretty confident in saying that. And most brands most of the time don't cut the bottom performing skews often enough. So if you've ever heard of a whale curve or for those who don't know, I'll explain it.

(29:29):

But a wheel curve basically starts here and rises, then flattens and then drops. And what this is, is you can use it to map a number of things, but in this particular case, we look at profit per skew. So the first 20% or the highest performing 20% of your skews create about two to 300% of your profit. The middle 40% is zero contributing, the bottom 20% is destroying a hundred to 200% of your profit so that you end up at your profit. Okay, so what can you do? Well cut the bottom. Performing skews, of course, if they don't sell well, if they don't have high LTVs, if they don't have good margins, if you cost so much, advertise for them, just cut them, don't hold them. And then can you boost the middle performing ones? So inventory is a big one because if you think about it, you just have bags of cash on a shelf and if the bag of cash is on a shelf, you can't use it to run the business.

(30:25):

So I am a big fan of cutting inventory, reducing inventory, especially skews that don't perform and talked about team inventory. Marketing is a big one. There are a few arbitrage opportunities left in marketing. The way I see it today, one of those is top of funnel marketing. People don't tend to do that. If you look at the story of Chubby, the Schwarz company, I know a couple of the founders. And what they figured out was that if they did unattributed top of funnel looking for impressions or clicks or whatever, you can't track it to revenue, but it does drive revenue in a 90 to 120 day window. And what they found is if they could get people engaged with just interesting content, their margins grew over time. They didn't shrink. Like most people's, their margins grew because most people are not in the market for your product at any given time, but when they are in the market, you want them to think about you.

(31:27):

So anyway, top of funnel marketing is a big arbitrage opportunity because people won't do it. Social commerce is probably one that people aren't doing hard to track. And then again, creative velocity is one, can you make a lot of creative if you're not making, I met a guy recently who had 750 ads live in his ad account, which is a lot, and he grew from zero to 15 million in two years and is profitable in doing that. So those are probably the three things we look at with marketing. Are you doing a good enough job compared to what other people are doing today? And then, yeah, it's just operating expenses. You might, most people need to trim down. Most people most of the time need to trim down. Do you just have people doing things that are nice to have and probably not have to have using offshore staff as one? Things like that.

Peter Crosby (32:20):

And I dig in on a couple of things there that just made me curious. The creative velocity piece are you seeing and how are you seeing, I'm thinking of AI as a real, should be a real accelerator of that. What are you seeing in your brands in terms of investing in ai and how do you think about introducing that and managing it from a CFO perspective?

Matt Putra (32:48):

So from what I can tell the companies that are doing the best, and these are often younger people right now, they're growing really fast. They're very lean. They have three staff. They're using AI heavily. They're doing a lot of marketing with ai, vibe marketing, they're doing images, static images with ai. They're trying all the video things that work. I don't know where people are at with that now. Bao three might be one. They're doing a ton of AI in marketing. And the bigger brands don't like that because they're like, oh, the consistency is not so great. Well actually a shitty ad might outperform a good one. Do you know what I mean? If there was an example of this where somebody spelled lose L-O-O-S-E and because there was a mistake in the ad, the ad did better than the one that was

Peter Crosby (33:41):

Called that depresses the crap out of me. It does.

Matt Putra (33:45):

But this is the thing, right?

Peter Crosby (33:46):

Peter's a stickler for spelling

Matt Putra (33:50):

And so just throw shit against the wall because what we don't know, I don't know what you're going to click on Peter, but Facebook will tell me eventually if I throw enough random stuff out there, Facebook will figure out which one you like. But I'll never be able to, if I sit here and I go, what is Peter going to click on? I'm not going to know. So just throw stuff out there and the people I see doing the best are throwing a ton of ideas into their ads library a ton. Like I said, this guy had 700 ads running in his and he only had 15 million I believe in revenue at the time. That's a lot of ads. My big client at a hundred million, they had 50 ads in their ad account. And I'm like, guys, you have to do better. So it's so important and they're not going to be the best quality, but I don't think something might catch your eye or my eye or whatever. And Facebook will find that

Lauren Livak Gilbert (34:41):

Maybe spelling errors would be caught by you, Peter, you'd be like, no,

Peter Crosby (34:47):

I flip through to tell them and then I'd buy their damn product. Exactly. Exactly. Well, that's nefarious. And when you talked about cutting the bottom 20%, when I hear you say it, that seems like, well, duh, of course you would. But I think what I would love to know what the internal team or psychological or whatever dynamics that would not make that happen as a matter of course, what are you running into? What's happening inside an organization that makes that not already sort of standard practice?

Matt Putra (35:24):

I have only won this argument once, and I have it with everybody I work with, and I've only won the argument once. People do not like to do this. And even the time that I won it, I wrote a memo to the CEO in April 22, and they cut them all in 2023, late 2023. So it took a long time. So why most people think that they need to have a bunch of different things for customers to buy and will increase their A OV or they'll have cart bumps or upsells or they need to advertise this to get this person to come in. And giving that up is very difficult. I think there's a major sunk cost fallacy in this. There's probably a bit of ego, not in a weird way, but I thought this would work and it's not working. And so it's maybe a bit like cutting one of your children if you bring in a skew that you worked really hard on to develop.

Lauren Livak Gilbert (36:23):

Matt, can I just that it's that one. If I can pinpoint any from my brand days. It was that you had a brand team that poured their heart and soul into this skew, into this new innovation and they were so bought into it. And to tell that team that you're just cutting it after all the work they spent, all of the product launches, the influencer content, the amount of work that goes into the skews, I can tell you that's probably one of the biggest reasons why they don't cut

Matt Putra (36:55):

Probably. And then there's also the point where it's like some of these skews are selling some amount, right? They're not doing zero typically. So if they're doing zero, they'd cut them. Yes, but they're doing something. If you're doing 10 million a month, a million dollars a month might be made up of these SKUs. That's a lot of money. So you go, oh my God, I'm going to lose a million dollars in revenue a month, but you're going to cut two of your planners and you're going to stop holding 5 million in inventory and paying 10% of that to your line of credit. So there's a lot of this stuff, but it's very difficult for people to understand. Second. And then the other problem is we're talking about second order costs, right? Meaning it's not directly iceberg on income statement iceberg. It's like to hold this skew, these three people have to touch it. And so it's very hard to convince people that those exist Currently for me, I haven't figured it out yet, but it's the baby one. They still revenue. Yeah, but again, I've only won the argument once, to be honest.

Peter Crosby (37:54):

But damn, it's still your advice.

Matt Putra (37:57):

It is, it really is. And I've been trying to figure out a way to quantify it, and I've been doing a ton of research and I have not quite figured out how to quantify the savings yet. I'm working on it though.

Lauren Livak Gilbert (38:08):

But it's one of the signals of the fact that most brands are more short-term focused and so that it hurts their long-term growth, right? A lot right now, even in this environment, are so focused on short-term gains and that's actually hurting them in the long-term. But it's because of the way that they look at their finances. It's the way that their metrics, there's so many more systemic problems that affects in order for you to change something like that. But if they don't, they're just going to keep chasing those short wins and you're not going to make big investments, what we just talked about, that will actually help you in the future.

Matt Putra (38:42):

So this is a good point. I worked with somebody in the UK and they were going to launch a new product line and I was like, please, please don't do it. And they said, why? I was like, well, your marketing team currently is focused on one product line. You launch another one, they're then split focus. This one that you have is barely scraping the surface of what you could do in terms of a company, but you launch another one. Now they're just thinking about two things rather than one thing. So anyway, they still did it, but they cost them a lot to do it, and they probably could have done better if they didn't do it. If they poured all that time energy into the existing one, it would be doing better now. Now they're going to do fine. But yeah, it's still my advice. It's still the right thing to do, but it's really

Lauren Livak Gilbert (39:25):

Hard.

Matt Putra (39:26):

Kimberly Clark, so I used to work with the senior VP from Kimberly Clark at one of my clients. They're very, very structured. So they do a bunch of research. They launch a s skew. If that s skew in six months, doesn't hit a hurdle, they cut it. It's not up for discussion, they just cut it. And again, obviously that's how they got to where they are today, Kimberly Clark, but very, very strict about the performance.

Peter Crosby (39:51):

Well, Matt, just thank you so much for bringing your CFO Brain to this podcast. It's such an important connection to make for our audience. And I know everyone has their finance people that they have relationships with, but to have sort of an outsider come in and provide some guidance on how that conversation might be able to improve is really helpful. And if anyone got tickled by any of this and wants to reach out, what's the best way to get in touch with you? Is it LinkedIn or go eightx or what's best?

Matt Putra (40:25):

Yeah, there's a couple ways. LinkedIn is great. I'm on their LinkedIn. Just look up Matt Putra. My website is ww www.eightx.co, eightx.co. Both of those two places we respond quite quickly. LinkedIn, you'll probably get the fastest response.

Lauren Livak Gilbert (40:41):

Great. That's how I found you, Matt. So thanks so much for coming on the show. Perfect.

Matt Putra (40:44):

This was awesome, guys. I love talking about this stuff.

Peter Crosby (40:47):

Thanks again to Matt for all the financial wisdom. If you're near London, you could gather a lot more wisdom at the DSS Summit Europe on October 16th with an action packed half day thought leadership and networking event for industry leaders. Request your ticket at digitalshelfinstitute.org/DSS Europe. Thanks for being part of our community.