Welcome to the inaugural editions of The Ecommerce Playbook.
Each week we’ll be releasing a podcast from the frontlines of four DTC brands — the numbers, struggles, and growth.
Why? Two reasons.
Number one, because operating these businesses at Common Thread Collective (under the banner of 4x400) gives us the unique freedom to share real-life lessons, data, and insights that rarely get made public.
Number two, because this is the podcast we always wished existed — a step-by-step journey behind-the-scenes that tells the truth. The high highs and the low lows.
Subscribe below if you don’t want to miss out …
These first two episodes were recorded the week before and the week after Black Friday, 2019. To be honest, I wasn’t sure if I could get full approval to be this transparent.
Thankfully, CTC and the board at 4x400 caught the vision. So, here we go …
It’s a week and a half before Black Friday.
We currently have $112,000 in the bank. I’ve got $300,000 in outstanding liabilities between credit card bills and AP. I’ve got a $70,000 a month payroll, plus rent, and a few other little things that I have to be able to hit.
If you do the math, you will recognize that we are in a position where we need to sell a lot of stuff.
I’m Andrew Faris and I run 4x400 in the midst of the Common Thread Collective ecosystem. I tell you that information to kick off the beginning of what’s going to be an ongoing story of what is happening at 4x400.
At 4x400, we currently own three brands [now four] and we are running them ourselves as an agency. Personally, I came from the agency side — I was the head of strategy at CTC and then moved over to lead 4x400 over the last year and a half or so.
Since we’ve done that, we’ve had our ups and downs along the way. We have started and shut a brand down, acquired a few brands, and scaled brands. And in a lot of ways, there are really great stories to tell.
We started with Slick Products which we quadrupled in size the first year: from $250k to a million dollars in revenue. This year it’ll close to double again if it doesn’t exceed that (depending on how big Black Friday and Q4 is).
Second, FC Goods we acquired in the middle of 2018 and that brand did about $500k last year. That’s after not really even existing before; it was just sitting on the way side of the founder. This year we hope to do about $2M for FC Goods.
Last is Bambu Earth, which we acquired in March. It was doing about $100k a year. Now, thanks to some recent successes it’s on pace to do ~$700k this year.
I wanted to start by putting you into my mental and emotional state of mind as the person who is primarily responsible for leading these brands.
I want you to feel with me as we step into Black Friday …
What I’m feeling right now is that I have outstanding liabilities. I have less cash in the bank then I would want. And, I am depending on holiday strategies to get me out of this.
To be frank — I’m not totally surprised by the position that we are in and, in some ways, we could have changed our position entering into the holiday. We could have taken on a little less debt. We could have spent less money, slowed down our growth, and played it a little bit safer.
But, we’re after outcomes for 4x400. We want to grow and ultimately sell brands. To do that, we want to do it profitably; but to do it profitably means we have to keep the growth engine moving quickly.
And as this year has gone on, what’s happened is: Slick Products has grown a little bit. FC Goods has grown quite a bit, and that’s been really good. Then, we acquired Bambu Earth and for the first few months, it really didn’t get anywhere at all.
Over the course of this year, we have seen cash flow be negative for a few months in a row. We have put ourselves in a position to say we need Black Friday to be big.
Not just Black Friday — the entire Q4. The cash position that we’re in going into Black Friday is not that pretty.
Yet, our projections are strong. We’re going into this with clear eyes about what our ad spend is going to be and we did all the research over the last couple years.
If you’ve paid attention to CTC’s content over the last couple of months, you’ve seen huge volumes of research based on millions of dollars spent at holiday to figure out what we think is going to happen this year.
We’ve built our projections, we’ve done a lot of prep, and what I want to take you through right now is the one key strategy for each of the brands we own that’s going to help take us out of this hole.
Starting with Slick Products, which sells wash products for off-road vehicles and for street vehicles. The biggest moment of focus for Slick is actually summer. It’s not really a gifting product, but we have a good offer Black Friday, so I’ll try to make this moment as big as possible.
For Slick, we’re doing basically two things.
The first is a site-wide discount where we’re going to offer people 25% off absolutely everything on the site. We had recently raised our prices, which actually helped us get some margin back on a discount like this.
We’re also launching that sale a full week before Black Friday to try to capitalize as much as possible on a big moment like this. We think the Slick customer is pretty responsive to a discount and that we can maximize the moment by offering a good discount.
To prepare, we’re taking a full week running with our ad creative to know what creative or offers are working best. That way, by the time we get to Friday, we can really be locked in our best creative, best copy, and make those big moments as big as absolutely possible.
At the top of that, just like anything we would advise you to do, there’s an AOV focused bundle to drive people to spend more money per purchase. That’s the key for Slick.
Next, FC Goods.
It’s an amazing gift product, wallets out of vintage baseball gloves. FC Goods is going to make 75% of its revenue this year between Father’s Day and then holiday essentially, so huge portions of women buying for the men in their lives thats a lot of our customers.
FC Goods doesn’t discount. We repurpose vintage baseball gloves and part of that story is that we have to go to collect all these gloves. We want to continue to give the impression (which is true) that there’s a limited supply and it takes a lot of work to go get them.
Since we don’t want to discount, we’re going to offer free monogramming on all of our products from Black Friday through Monday, so they can get it personalized to make it a better gift. That’s a $25 value to the customer against a $150 value.
We’re also launching new products on all four days (Friday, Saturday, Sunday, Monda) with a different product launched each day so that we can capture as much of the holiday gift-giving intent as possible, including some high AOV products.
FC doesn’t expect to see a huge spike Friday to Monday, so much as an ongoing big wave going all the way through from November 15th to December 15th. We are even starting to see that already.
Last, is Bambu Earth.
Bambu Earth sells incredibly clean skincare with a real focus on what it means to be truly beautiful because of the way that you were made and not because of what society tells you. Our founder Amber Hawthorne is really passionate about that message and about clean products.
The focus for Bambu Earth is going to be to maximize both AOV and LTV at holiday this year, so there’s going to be a free gift with purchase. It’s going to be a specific product that we know when people get in their hands, they love it and then come back to buy it again.
So, we’re going to a free gift with purchase on all orders over $150 on Black Friday and then a different one on Cyber Monday.
That’s the strategy for each brand. We’re sitting here today needing it to work, not knowing if it will work:
Three different offers for all three brands, because they’re pretty different customers for all the brands.
We’re prepped. We’ve done our projections. We’re sitting here looking at the cash flow and we’re really hoping it works. We’re excited for you to come on the journey with us.
Alright, I’m back giving you the second update in this content series about what is going on with 4x400, the holding company for the brands that we at Common Thread Collective own ourselves.
Last time I talked to you, I told you about how we were in a cash crunch.
We basically had $300k in liabilities against $120k in the bank, plus a $70k payroll — and it was a huge challenge in front of us. That was going into the Black Friday, Cyber Monday weekend.
What I told you was we needed to have a big Black Friday, Cyber Monday weekend, and I told you all of that because I know that a lot of you can relate. I know that a lot of you went into BFCM weekend this year going:
“This has to be big for my business to work.”
Otherwise, it’s going to create major ripple effects, major changes. You start to think immediately about pivoting or firing people … all kinds of things like that, that come up when you run into challenges.
There is a kind of anxiety with entrepreneurship and with leading this side of a business that I think it’s hard for people to relate to who don’t quite know what this is. Like, one of my friends who works for Boeing and 150,000 employees or whatever it is. Not to say their jobs have no stress. They certainly do.
But, there’s just a different kind of deal with a small team asking, “What does the P&L look like today?” or “Did we make enough thousands of dollars (not millions of dollars)?” or, “Whatever it is to move the ball down the field a little bit farther and get us a little closer to our goal.”
Sometimes that goal is just stability itself. And so for us, Black Friday, Cyber Monday looks like a pathway to stability in an early stage of growth.
All four of 4x400 brands are really in the sort of like two-million-ish range in revenue, against enough cost on the front end. Not that we run big. We run relatively lean but not super super lean and we have a decent-sized team (about eight of us).
We also are trying to create pretty large outcomes. So that means that we try to put enough resources into that to make that happen.
But, that means at this stage of business there’s a fair amount of fixed costs, against not quite the revenue numbers we’re trying to get to.
You probably know what I mean, when I say that right?
Over the long-term, we want to create $10 to $20 million businesses. And as you grow a business to that size, the assumption is that the costs don’t scale with the revenues, in all kinds of different places. Sometimes your COGS get cheaper. Sometimes the fixed costs get lower, things like rent.
But, it’s a little bit of a fantasy. As businesses grow there are costs that are unforeseen and I’ve been there before. There’s more money to be made over the longer-term if you can just kind of get to that stage.
So, what the anxiety represents for me in this stage of business for 4x400 is are we going to be able get to that phase without having major giant shake-ups? Can we actually get the ball down the field far enough, essentially to stay in the game?
Maybe I’m mixing my metaphors at this point, but I want to give you the sense of anxiety that I felt about Black Friday, Cyber Monday.
Even as we had planned on getting into a little bit of a hole to get ourselves back out of it, in particular one of our brands FC Goods is very much a holiday brand — so we expected big big holiday moments, we projected that and we projected to be slower at other times a year, but that means that we really need to deliver on those moments.
Here’s a big takeaway for me from Black Friday this year that I saw across the board: our brands, CTCs, and everybody else ...
Maybe because of how far back Black Friday was in the year this year — two of the days of Black Friday weekend actually made it in December, which is just very late in the year. I think I had some effects, but here’s what I saw:
I hope you experienced that too, but I was just blown away by numbers I was seeing all over the internet, all over our clients’ accounts, all those kinds of things between CTC, 4x400, everywhere.
It just seems to me, that as people had anxiety rising, like I experienced, at the same time there’s also really big outcomes being created on Black Friday, Cyber Monday weekend this year.
I’m going to recap where we landed and tell you what I’m thinking about what’s coming next.
By far the biggest of those over that weekend was FC Goods; again it’s a gift product and we very much frame it that way as people love it as a gift.
We had an interesting thing happen, I mean some of your business probably experienced the same thing. Most of the way through the year we’re about 80% male customers, but then in the big-gifting moments were about 80% female customers.
That tells us right away, that at those times a year people are buying it not for themselves, but as a gift. Once you get to the big shift towards female customers lots of women, in particular, talking about buying for the dads and brothers and boyfriends and husbands and those sorts of things. Not that women can’t use our product, but that tends to be what they’re buying for.
FC Goods Friday (biggest revenue day ever) did $40k — well, $39.5k.
Which of course are little moments of frustration as somebody running a brand, because you just want to see that number get hit.
Then Cyber Monday we did $45k. We released a new product every day of the weekend and we did a relatively small discount, FC Goods doesn’t really discount and that I think worked pretty well.
That’s kind of the post-mortem on that. Having just the ability to get free monogramming on your wallets as well as to introduce people to new products throughout the weekend was effective.
It gave us reasons to email people. It gave us reasons to get free traffic to our site from email addresses collected throughout the year. All that delivered.
We ran those things at roughly 4:1 efficiency of revenue overspend while ramping our spend significantly, relative to what we normally would do. I would say that really worked.
Slick Products and Bambu Earth both did almost exactly the same amount of revenue for the weekend. About just over $80k, both of them.
And that’s interesting too, right? They’re not obviously gift products for either of them. But Slick had a big sale, Bambu Earth had a gift with purchase sale and I would say both of them in their own way did pretty well, setting ourselves up for the next kind of moment.
Slick has been around for a little bit longer and we know that customers love discounts and so we offered them a discount. Bambu Earth is in an early, early stage where we’re trying to acquire as many high-value customers as possible and reap the value of it on the LTV.
People use that product for skincare. They come back, they buy it over and over and over again.
Three businesses that are in really different places as we shift to the next phase definitely helped my cash situation. Ultimately, you’re looking at just under $300k for the weekend, which we feel really really good about.
Again, two of those brands basically didn’t exist, or we didn’t really have them until the middle of 2018 and early this year.
The question now is what’s next?
This is like another part of leading brands and businesses that is incredibly brutally frustrating. Before you have any moment to celebrate, that actually all three brands did their biggest revenue days ever. Bambu Earth did 30k on Black Friday after doing $11k for the entire month and Black Friday last year. It’s just the outcome is so much bigger than where the brand was before.
And yet, if you’re anything like me, what that immediately does for you is makes you think, “What’s next? What do I have to do next? How do I get there?”
So, I’m thinking about two things. One, “How do I max out the rest of the Christmas season? Two, for next year, “What is going to happen with the cash flow? How do we keep ourselves from getting outside of this cash crunch?”
What I want to end on today, before I go into anything that’s coming next, is this … stop for a second, take a deep breath, and enjoy victory if you experienced it.
It’s really, really hard to maintain the level of urgency, of passion, of effort that you need to sustain entrepreneurship and leading businesses over the long run.
One of the real keys — for the sake of your own health, your team’s health, any of those things, and for the sake of enjoying what you do — is to stop, take a breath, and if you had a big moment pat each other on the back, high five, cheers, whatever your style is, and just tell yourself “good job.”
It’s a lot of hard work, you’re depending on big outcomes and for me and for my team, we’re just all stopping for a second, looking at the cash and going “Okay, we’re somewhere.”
We might be digging ourselves out of this hole. We’re in a much better place than we were a week ago. Let’s stop, say good job to everybody and go from there.
Andrew is the CEO of 4x400, Common Thread Collective’s holding company that acquires, launches, and scales ecommerce brands. Over the last year, he’s helped lead three of 4x400’s brands to over 400% YoY growth. If you’d like to connect with Andrew about all things DTC, reach out via Twitter or LinkedIn.