Breaking Down Bambu Earth’s Growth Quotient

Hey everyone, Richard here. Before we get into today's episode, I wanna briefly talk to you guys again about our membership program admission. So a lot of our listeners are admission members, but for those of you who don't know, it's a hub that contains all of the tools, trainings, and templates that we use with real clients here at CTC.

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[00:01:02] Richard Gaffin: Hey everyone. Welcome to the E-Commerce Playbook Podcast. I'm your host, Richard Gaffin, director of Digital Product Strategy here at ctc, and joined once again as I always am by Taylor Holiday, c e o here at Common Thread Collective. Taylor, how you doing today?

[00:01:18] Track 1: Doing well man, here for my checkup here to get diagnosed

[00:01:22] Richard Gaffin: That's right.

[00:01:23] Track 1: to help me break down all that ails me.

[00:01:25] Richard Gaffin: Yep, that's right. Exactly, this is sort of a, a clinic session here and so we have an exciting series of, of pods coming up. Over the next few weeks, what we're gonna do is run the diagnostic report. On a few different brands. We're initially thinking three. So today we're gonna be running it on Bambu earth, which is something if you've watched the presentation videos for the e-commerce diagnostic toolkit, you will have seen me running through at least the results page of this.

So what we're gonna do is I'm gonna go over that. And I'm going to, we're gonna kind of go through the results and I'm gonna press Taylor on what does this number mean? What can Bambu Earth be doing better? What is the advantage of using this diagnostic on your business? And then how can you take the results and turn them into action?

So, Yeah, so Bambu is, it's GQ score and, and if you're watching on YouTube, you'll see I have pulled up on the screen share here. The actual results pages is the PDF that you can export from when you're actually done. The assessment, Bambu growth quotient is one 19.7. And if you'll remember, if you've been listening for a while you'll know that our sort of benchmark. Growth potent score. The, the DUCKWEED score, so to speak. The, the score at which you cross the threshold into being a brand that can grow into any environment is one 30. So that means Bambu is right on the cusp, but there are certain things that can be done or perhaps that need to be examined diagnostically, let's say, in order to get to that threshold.

So, We're at one 19.7. Where can we make up those 10 points? Where can we start growing this? So, Taylor, let's jump into the, the table here. So this breaks down. Um, oh, go ahead. Yeah.

[00:03:04] Track 1: add one thing real fast? I,

thinking about one of the things that we think about with GQ is to think about the number being illustrative. Of the growth potential of the

[00:03:18] Richard Gaffin: Mm-hmm.

[00:03:19] Track 1: and that there would be a correlation between the score and the anticipated growth rate of the business.

Right? So, so when a, when a business scores in this one 19.7 range, the question is like, okay, well how fast does a business like that grow? Right? And, and I think this is, I wanna start with like Bambu earth as a little bit of context. So like last year in 2022, Bambu Earth did 9 million in revenue.

Okay. And this year so far, we're sitting here on May the 24th. We've done 5 million in revenue. So we are looking at closer to 12 to 14 million this year. So somewhere between 50 to 70% growth

year. Okay. And that's gonna be profitable growth. So that's not like, I would think of duckweed as being closer, which is one 30 being closer to that a hundred percent.

growth rate,

in this range, the 100 to one 30 is gonna be somewhere in the 30 to 70% growth, which is still really good. Now, as a smaller size brand, you, probably wanna see, you know, for the best brands growing north of that 50% ba, it was gonna be pretty close to that. So I think that to take these scores and try and tie them back to.

Illustrating growth potential and that translating into real growth inside of a business. And we'll talk about this over the course of this series where we're gonna examine three businesses that are growing at different rates, and we're gonna sort of explore this idea and the connection between your score and what that means, about that potential being realized.

And so I think. Bambu Earth like, and to contextualize this score, that's where we're at. Just, you know, full open kimono here. That's like, like we like to be with Bambu Earth. That's, that's where we're at. So that score sets that up for you as a little bit of additional context.

[00:05:06] Richard Gaffin: Yeah. Yeah. Right. Yeah, no, that's important. And, and other things maybe to, to point out too is like to explain again, what growth quotient is not, which is it's not necessarily a measure of the health of your business. Like if you have a low growth quotient score, it doesn't mean you're going bankrupt tomorrow.

It could, but it probably doesn't. Um, and then also, like there's, I. Although there is the anchoring in the objective truth of your growth rate, there's also an element here where the only person you should be comparing yourself to as far as growth quotient goes is yourself and thinking through to what extent can I, can I get this number up without worrying too much about other brands that I see that have numbers in, you know, maybe 200 plus, right? So,

[00:05:45] Track 1: that's right.

[00:05:46] Richard Gaffin: So we're gonna examine exactly how we can do that with Bambu right now and think through ways that we can bring that growth rate up to closer to that a hundred percent mark. So, so here's, go ahead.

[00:05:54] Track 1: I'll say as we get, as we dive into these results is I, I think it's the right score for Bambu Earth.

one of the things we did a lot with this score, Richard, is we, we sort of ran it on brands. We tried to sort of assess qualitatively how that mapped with our experience of them, their performance, to really hone in the algorithmic weights of each, each section.

And I think. This is right for Bambu Earth. Bambu Earth is a very good brand, but it's not duckweed like. There are things that need to improve in order to make it a true outlier. It's really healthy. You can run a good e-commerce brand at this level, but I think it, I think it appropriately considers us just outside of that tier of truly elite.

E-commerce brands. So I think it, I think it does a good job of contextualizing what Bambu Earth is as a business, which is a business that's running at 20% profit, that's growing at 50% a year. That's in that eight fig, low eight figure range. And that's, I think, a really good business, but not the elite of elite.

[00:06:48] Richard Gaffin: Yeah, no, that makes sense. And, and there are some pretty clear ways I think, that we can see where improvement needs to be made to bring Bambu to that level. Right Now, of course, executing that is a different story and, and that's also another. Consideration. But at the same time, I think one of the beauties of this is, and this is me patting myself on the back, kind of, but is that the way in which it shows the effect on the GQ score that the, that missed benchmarks have, and of course, exceeded benchmarks have as well. And so again, to to quickly review. The 10 duckweed metrics, the 10 core metrics that make up your growth quotient score. We have cost of delivery as a percent of revenue. That's basically variable costs. Opex as percent of revenue. That's basically fixed costs. Cash conversion cycle. How long you have to flow cash before you see a return on it? 60 day incremental revenue growth percentage. How much does a customer's value grow over 60 days? How much does it grow over one year? And then are you first order profitable? That's EF Aveta, nca. Number of distribution channels. Do you have too many eggs in one basket? Percentage of organic traffic. Are you over-leverage it unpaid? And then one year LTV to new cu, new to nca. How much does your businesses or does your customers value improve relative to the amount of money that you spent to acquire them? And then finally, the number of revenue peaks. How much of your calendar is being used to its full potential? Is maybe a way to think about that as well, right? So those 10. Characteristics, if you can hit certain benchmarks within them, create a scenario where you can grow closer to that 100% rate. So let's quickly look over here. Taylor, one thing that jumps out to me right away is the one affecting the GQ score the most is the percentage of organic traffic. So, The, the easy interpretation here is that this just means Bambu is over leveraged on paid is not getting enough organic. Uh, 35% of traffic comes from organic sources, rather, rather than the benchmark 50 resulting in a 15 point hit to the growth quotion score. So talk me through your thoughts on that. Maybe the reality of why that's the situation and so forth.

[00:08:55] Track 1: GQ Perfectly Nails our biggest liability

are leveraged on paid and. because this is so important, I think, for brands and brand owners to think about. We, we have been in the process, we've been, we've run two sale processes for Bamb Worth over the last, eight months. And we've been in final stages of closing on both of them.

And multiple that we were getting and the value that we were getting for those businesses was limited by this liability. We're aware of this, this inability, this, this provides, like when you think about an asset, Someone would be acquiring. They want to consider all the ways in which that asset might not yield what it wants.

And the reality is that the index of paid media in particular, Facebook is a channel risk associated with BA Earth. Now it's one that we feel really confident in managing because we're really good at it and we have a really good system for it. But the new owner may not have that same discipline or skill in a similar way, and therefore it's a greater risk for them than it is even for us.

And so, This, and the other thing about that organic traffic does is it significantly balloons when you have it your first order of value to new acquisition costs because you get more organic new customer acquisition that affects that number, which improves your one year L T V to C. improves all of the value propositions of the business when it's present.

When that organic demand exists, it's one of the most powerful leverages for growth that any business can have. and for Bambu Worth, it sort of definitely highlights this. Now, as we think about that as a business, I was, you know, I've been doing a, I've had a lot of conversations lately with SEO experts cuz I'm sort of exploring this service expansion for CT C and the best way to.

To productize it and think about it as a service. And you know, Andrew Ferris has this metaphor that he used forever as it relates to organic versus paid, which is organic traffic is growing, rice and paid traffic is going to the store and buying rice. And so, There's definitely a latent payback on the investment in organic demand creation, right?

It's gonna be a lot of upfront cost and work for something that's gonna pay back later. And so Bambu Earth and its current desire for profitability just hasn't yet decided to make that investment. And part of this is all like contingent on the window in which you're trying to maximize profit and things like that.

But were to take a step back and say, now made the decision to run Bambu for the next 10 years. I would absolutely make this the core thing that I would try and invest in trying to create and solve for, and I think that's what it highlights.

[00:11:22] Richard Gaffin: Yeah. Th this, it's interesting too, going over a few of these as I have in the last couple of weeks. It's interesting the, the stories that particular scores can tell as well. And so one thing that I think is interesting that you were mentioning just now is that there's a sense in which that this, this number for Bambu worth is propped up or rather The negative impacts are minimized by the fact that, you know, we're sort of the Facebook wizards or whatever.

That's kind of how we made our bread is at being good at paid traffic. And so the 35% organic traffic score, while it's a long term liability, we've been able to paper that over for a long time because we're good at Facebook. And that's actually taken us, maybe turned us away from investing in organic, growing organic sources the way we should have.

[00:12:06] Track 1: And, and the reality is, is that while there's a benchmark for these scores, there's no one way to comprise a business,

[00:12:13] Richard Gaffin: Yeah.

[00:12:14] Track 1: we have to make the choice that if we're gonna run this business this way, we have to be, we have to leverage the really high margin. Like that's an. Advantageous thing that allows us to do that and that we keep our opex clean.

So both of these things, like in terms of, if you think about sort of four corridor accounting principle, like 25% profit, 25% cac, 25%, cost delivery, 25% opex. Well, the reality is you can comprise those different ways. You can run 50% CAC and. CAC and

[00:12:41] Richard Gaffin: Mm-hmm.

[00:12:42] Track 1: Cost of delivery. Like that's a way to do it.

Or you could run, some people run 5% marketing cuz they have all the organic demand and they spend more on the people and OPEX and other, like, there's no one right way. But you have to be conscious your way.

[00:12:55] Richard Gaffin: Right.

[00:12:56] Track 1: we know our leverage point, we know the value proposition. We have high margin, we're great at

we're great at cost caps, discipline, that sort.

And so we build the system to produce for us in light of that reality.

[00:13:07] Richard Gaffin: Yeah, and, and maybe another way to think about it too is that like Bambu Earth can be a one 30 GQ brand without bringing that organic traffic number up. Like the, that's sort of the beauty of this as well, is that like, if you're exceed benchmark in certain areas. It can bring you to a point where your growth potential is os also still high.

It's just, this is more like a way to think through, these are the realities of this business and these are, if we can't, or maybe we're, you know, We're, we sort of understand that we're better at pay traffic or whatever, and we, we can make a decision to not invest in organic traffic growth and still be okay and still be growing because we're investing in other places where we might be stronger as well. Um, so as you, as we look across this table, Taylor, is there anything else that jumps out to you, has a story behind it? Or maybe like another way to think about it too is like, in what way does this. Split GQ spread the spread of scores reflect the reality of Bambu Earth as a business.

[00:14:07] Track 1: I mean, I could go through every single one of 'em

talk about the unique dynamics. So let's just, let's run it down. So

definitely an episode I would watch on YouTube if you can, or we're gonna post on Twitter now, long form. You can follow, you'll get that from at Taylor Holiday or at Common Thread Co.

But, but just going down the line, maybe we were, has such a unique position of all of it. So cost of delivery This is the, one of the core value propositions of this product category is that it is massively high gross margin. the actual higher percentage of the variable cost comes from shipping and fulfillment, like the gross margins close to 85, 90%.

Right? And so you have really powerful leverage, and that's what skincare mostly is. We produce our own product. So our actual costs are in the bulk purchase of raw materials and then the production of the product itself. So we actually buy the raw materials and we manufacture the product, which does get to, I'll jump to point number three on the cash conversion cycle.

Part of the reason we don't. We don't have a negative cash conversion cycle is because we bulk buy raw material, and that actually starts our ca cash conversion cycle. So we are buying, you know, actual, like, raw ingredients for making moisturizer. And so because it's so cheap, buy a lot of it and store it for a decent amount of time for production.

And because it's not expensive enough, the, the cash conversion cycle not being negative isn't a dramatic impact on us. And it's a little bit of the novelty now. Could we potentially solve that? And are there discussions about whether producing our own products worth it? Yeah, there is. And some of the buyers in the interactions didn't love that we did that.

And so

just definitely a thing to consider. But right now we're in a really healthy cash position. don't have a lot of liability in that place. And so it's not something we're aggressively having to go after or to solve for. So that's something to consider. Now, we could probably increase the growth rate by being willing to push customer acquisition costs up a little bit.

If we had a negative cash conversion cycle, it might enable us to faster growth. So that's like sort of that trade off. But that's sort of one of the novelties with Bamb Earth. We produce our own product. We bulk buy raw materials and we produce it. So you, anything you wanna ask about that

[00:16:12] Richard Gaffin: Oh, no, no. Well, yeah, I was, I was just gonna may maybe not ask particularly, but just sort of point out that, that, I think that raises a good point, which is that there's certain problems. Although it may have a negative impact on your growth potential, there's certain problems that are just easier to solve or more efficient to solve than others. And so the idea of like, yes. And this is maybe me coming from as somebody with, without operational experience, figuring out how to bring the costs or, or rather how to solve the cash conversion cycle problem for Babi Worth. Given that you're manufacturing all your own stuff, seems like a whole thing right at this point.

And there's other ways to solve for the bit, like, it seems like the organic traffic issue seems like a way easier and more pressing solved, even though there's, there's a lot of potential on the cash inversion cycle piece. Does that make sense?

[00:17:00] Track 1: Yeah.

I don't know. That either is easy. I think it's just like what is the biggest imperative and like

have a lot of cash, like we're, we have a lot of cash in the bank because the business produces like 80% free cash flow to ebitda, which is like awesome. Solving for a negative cash conversion cycle on a low.

Cost is not a huge necessity, right? So even though it's not ideal in terms of the, it's more of like, not necessarily the ease of problem, but just the hierarchy of them. So I, I would say that the organic demand, if I was gonna invest dollars into solving a problem, would be a more immediate. It would like move higher up the list for me.

So that, that, that's just sort of what I think about it. They're both hard. There's no easy problem necessarily as much as just like hierarchically relative to our present position. Which one should we solve and why?

[00:17:45] Richard Gaffin: Right. Um, okay. Go ahead.

[00:17:48] Track 1: Yeah. Cool. Continuing down. The next thing I was gonna talk about, talk about is opex, and I think we got into this a lot last episode,

to belabor it, but we've gotten lean and it makes a big difference.

And there were things that we didn't need and there was lessons that we learned and we managed the business in a way that like keeps us able to produce a lot of profit because our operating costs are low. Have a warehouse in North Carolina, but the rest of the company's remote et cetera, et cetera.

So, That's that's the reality that really helps us. We're lean on the people side.

[00:18:17] Richard Gaffin: Right. Um, and then actually I think it would make sense then to segue that into talking about retention, 60 day growth percentage. Cuz again, like we mentioned this last week as well, part of like the Bambu earth story that like if you're in the CTC community, you've probably heard a million times, is that the solve for Bambu earth?

The big unlock was. The 60 day retention. So we were losing money on first order. We thought we were getting killed. It turns out we were actually fine because of, of the way that the the customer journey was basically over that period of time. Now, obviously, the situation is different and we have to be lean, we have to be first order profitable. And our one thing, you know, I ran this a couple weeks ago, so it could have changed by now, but the 60 day incremental revenue growth percentage is actually below benchmark. It's almost there, but it's just a touch off. So that's sort of, go ahead.

[00:19:05] Track 1: I would push back. So this is where if I were to say you should change a number, I, I think the 30 and 100 are actually elite and the benchmark should be a little lower, like,

If I were, if I were to argue about any metric, like no way Bambu Earth at 28.87 in 60 days should be a negative score.

Like, that's a really, really

[00:19:24] Richard Gaffin: Sure.

[00:19:25] Track 1: actually. I think so. I think that I look at those and I go like, man, the 3,100 are like, that's, and this is the tension between this phrase benchmark, which to me sense like it, it can be. Understood to mean like the average score, or it could

[00:19:43] Richard Gaffin: Yeah.

[00:19:43] Track 1: to mean the elite score.

And I think you mean to mean it elite.

and that's fair. Think there's a, like, just like we did with CASA delivery where we went from 25 to say like, that's like two aspirational thirties really still really, really good. I think if we took these down to like 25 and 85, it would give a a, a view of Bambu Earth that I think is, is probably more realistic, but nonetheless, Both of these scores are part of the powerhouse that allows us to take break even on first order, which allows us to be aggressive about new customer acquisition growth, which allows us to constantly expand the existing customer revenue of the business over time.

just makes it so that p worth is a really safe growth story, which is we are disciplined that every month. We take as much new customer volume as we can at breakeven and allow the existing customer revenue to just keep expanding over time. And as long as we keep doing that, keep growing the active customer file, the business is gonna keep growing, the profit's gonna keep expanding.

And that, and that's, that's the plan for, for, for the business. And it's because of that L TV people love the product. They come back for it. We've got a good merchandising funnel where we go from mini kits to full size. We've got growing subscription. All these elements are components of the business that make the future look really good from a margin and revenue expansion for Bambu.

[00:20:57] Richard Gaffin: All right. That makes sense. Yeah. And, and I guess that the, the These, these numbers are not too far off. Even that elite benchmark score. Right? So the mi, the impact on overall GQ scores is minimal. Although we can also think about like, maybe, maybe it does make sense to change those, the benchmark at some point. But that being said, like we're still, like the one year growth percentage is 102%. Let me, that's, that's fabulous, right? Yeah.

[00:21:20] Track 1: Yeah, exactly. And so, so for those of you that aren't maybe listen or watching on video, what, what we're talking about is the, if you took the average order value, The incremental revenue realization over the subsequent 60 days divided by that initial A o V. So in other words, what percentage does your take rate from the customer grow over a period of time?

Right, so it's, it's basically a fixed period, L t v, right? So it's a, you know, a 60 day customer value. And that's what grows 28.87% in 60 days for bamb worth and 102% in a year. And, and those numbers are what inform the way we think about the next metric, which is our first order value. And we would use Big V value.

We're talking about net value here to connect to new customer acquisition costs. So in other words, how much money do we make? Versus what we paid for it. This is sort of a ROIC principle, right? Like return on invested capital, we invest a certain amount of money in acquisition, how much money do we get back on day one right away?

And you'll see that our score is 0.06, which basically means we break even and that is how we manage the business. We manage to a 1.4 a e r, which is break even on first order. As long as we maintain that, we know that all the future value creation is net profit. It's just gain. And so that's the goal, that's the benchmark here is can you acquire new customers at first order profit, it's all gravy from there.

[00:22:39] Richard Gaffin: Right. Yeah, I think, well, yeah, we, we sort of discussed that this week and last, so I think we can move on then to the next thr it's interesting, the next four metrics, and actually I would probably like, maybe we can go to one of your L t V to end c. As well because actually that that's, even though, you know, first order values just barely break even. The one year LTV and CED is actually pretty good with the benchmark being 0.5. You know, BA worth is at 1.43. So yeah. Is there anything to speak to that? To there?

[00:23:09] Track 1: so, so another way to, to express that. So there express is a

I want you to think about it like an investor. So, I want you to write now before I sort of explain this, think about what, how much money would you want on an individual investment in a year? So your, your personal financial advisor comes to you and says, Hey, I've got an investment opportunity for you.

The expected return is what percent in a year? Right? Now I'm gonna give you some benchmarks here. So like an index fund is sort of notoriously gonna return 8%. Annually on your money. And that's sort of like the gold standard, right? Bitcoin has had 10 year compound annual growth rate of like a hundred percent.

Like, that's like the greatest performing asset of all time, right? Like, so in this scenario, what we're saying is that a one year L T V, which is again, net value after cost of delivery after acquisition. Divided by the customer acquisition cost. So again, you invest customer acquisition costs, you net a certain amount of dollars.

The ratio of those is your return on investment. Now, if we were doing a true return on investment, we would do it after taxes and we would include a cost capital. So it's not quite roic, but it is this idea that if you can get a 50% return on that investment, that is like. every investible asset class in the world, Bambu Earth gets at 143% return in a year.

And when you start to think about new customer acquisition through this lens, it transforms the way you think about your business. we hold first order profitability and the customer value increases a hundred percent in a year, our return on that capital is 143% in a year. And for us, we're like, take every dollar we have and put it into that machine, maintain that ratio, and there is no greater return that we could create in our life as, as founders and owners of the business.

And so we want to keep fueling it. And that's that's how we think about it and why it's such a special vehicle the deployment of capital.

[00:24:56] Richard Gaffin: Okay. So then let's turn to the, the final three metrics here, which are, these are, at least according to this report, the ones that are having the greatest collective impact on Bambu worth's growth GQ and their growth potential. Right? So first is the number of distribution channels. We have two. The percentage of organic traffic we've already discussed a little bit. And then finally, the number of revenue peaks. Obviously the four peak calendar has been a cornerstone of our philosophy for a few years now, but Bambu is also missing in a couple days. So, so let's talk about these three and maybe break down first distribution channels and then revenue peaks.

Does that score seem fair, the way that it's affecting the overall score? And then talk through what the situation is.

[00:25:35] Track 1: These are. the other biggest limiters for Bambu Earth. I think number of distribution channels is are we in retail, are we in marketplace? Are we in any B2B distribution? And so we have. marketplace and we have DDC two, right? No wholesale at all. It's a huge potential expansion opportunity for us, but we're not set up to do it from a packaging standpoint, from a an in internal operational structure there.

We don't have a sales force. Like there'd be a lot of work to, to start to figure it out. But it's a limitation and it's a growth frontier that most businesses Are expanding to omnichannel distribution and that's a lot of revenue realization for brands. So, so it again, in the event that we're gonna hold Bamb Earth for 10 years, it's something that's certainly on the horizon and should be seen as a limitation of Bambu Earth for sure.

Or alternatively seen as like a good sign that there's a lot of growth left

[00:26:22] Richard Gaffin: Right.

[00:26:23] Track 1: And then in terms of number of revenue, you wanted to say something about that one?

[00:26:26] Richard Gaffin: No, no, no, no, no, no. You're good. You can go.

[00:26:29] Track 1: so the revenue peak, this is probably the one where I have the most problem with the internal Bambu earth team that distinguishes between.

How I would view it as a day-to-day operator versus maybe the team. And again, it's just, tend to be more of a traditional marketer. People don't like, I think I get painted as a media buyer a lot, but the reality is, is that most of the businesses that I've developed from. To when I was at Power Balance, like they all existed pre-Facebook and they existed in a very traditional marketing calendar world that I deeply appreciate.

I'm a big campaign story moment guy. When I run, if I were running marketing for a brand and I Bambu's website looks the same year round, it drives me nuts. Like I want them to merchandise and story tell around moments. Product releases, campaigns way more often. But right now it's like they've got a machine that's working so well that again, it's this trade off between an investment in the production that that would take to make those assets, to design those things, and the short term hit on profitability versus the long term value creation.

But and the other thing about Bambu Earth is I think these two peaks, and you can correct me if I'm wrong here, Richard are black Friday in January,

[00:27:32] Richard Gaffin: Yeah.

[00:27:33] Track 1: they're, they're, they're right next to each other. And so that creates this, this situation for Bambu where their biggest months of the year, December, January, then it's like try and survive the rest of the year.

And I think we could be a lot more thoughtful about planning some big campaigns around you could use International Women's Day, you could use Mother's Day, you could use new skin stories in the summer of the different challenges you face versus the start of winter versus planning different things that I think we could take advantage of that again.

If we go into 10 year building mode, I think that that part of building the brand's story and moments is another huge I, would say it is the second biggest liability to me when I look at this in terms of its ability to prove that they're a brand that's gonna connect with customers and drive stories and impact in disproportionate ways.

I think it appropriately ranks it as the second largest problem.

[00:28:22] Richard Gaffin: Yeah, no, I think it makes sense that there's, yeah, I think for Bambu, the two revenue peaks this, this actually may even be. Just sort of a quirk of, the way we're calculating it is might, the two revenue peaks might actually be November and December, in which case it's basically one big peak. And I think like a lot of you as you fill this out, will find that that may be the case, that it's simply a spike in the holidays and then the rest of the year it's just sort of business as usual. And I think we talked a little bit about this, uh, on the podcast before, but there's so much opportunity. The rea number one people reason that people buy is because the opportunity to buy now makes sense to them. Right. We were talking about like, do people buy our shorts because they have whatever fabrics and our, something wicking away, whatever. They don't, people buy shorts because it's summer and it's hot and they need them. Right. And so I think like that's, that's another huge advantage. Or, or huge. There's a huge potential there to harness the number one reason people buy throughout the course of the year. And it's definitely something that Bambu is missing on right now because these two revenue peaks are actually kind of.

As you were pointing out, one big revenue peak. Okay, so looking at this overall then, just as we sort of look at all 10 metrics, the way that we stack up against them, what what is the first thing that you would do? What does this tell you to do as, as far as action goes?

[00:29:39] Track 1: Yeah.

so I, I, I think there's a few things. We talked about organic demand, so I begin to build a plan around that. I think. The second thing really I would go to, cause I think it's the shortest term, easiest thing to fix, is to design a marketing calendar that creates story and moment to CR drive disproportionate.

That's a little bit more investment into merchandising. And, and, and think about merchandising just as like visual representation of the i of the campaign or product sale in the moment, it's what? Your website looks like at Christmas that frames the product as gifting. It like gets into a gift frame visual.

I would have some special packaging, some layout, some bundling, some different ways to present it too. Having a big summer campaign that has to do with whether it's how your skin's affected by heat and how we, again, I would just reorganize the products name the bundles different, come up with different ways to do it, different visuals of people and like the whole new model shoots and product photography.

All of that would be. thing that I would go to first and alongside that would be a content machine all of those skin problems, stories related to seasons that would form up the SEO and organic traffic strategy. So it'd be a connection between a marketing calendar initiative that outlines all the core drivers for purchase culturally trend moment, including product releases and promotions that builds a content strategy.

That drives SEO and tries to capture some of that demand for organic traffic and solves those two at the same time.

my primary mechanism cuz the rest of it. Candidly is really good. It's just really good. I probably wouldn't explore whole wholesale yet. There's just some bigger underlying infrastructure things that would be required there.

Amazon continues to grow as a portion of our business, so that investment, we, we've run out of inventory, we've gotta sort of solve the supply chain side of Amazon to make sure we don't ever run outta stock there.

so there's some, some work to do on that demand planning side for Amazon. That's also something to solve for, and that, that's really it.

That's, that's the thing to go after. In my mind,

[00:31:35] Richard Gaffin: Yeah, no, that makes sense. So, okay, so here's a, here's a question then, and this is not meant to call anyone out or whatever, but like, what's preventing that from happening? Right now.

[00:31:46] Track 1: these things tend to be like, well, so two things. One is we were in a sale process. Maximizing your TTM

[00:31:53] Richard Gaffin: Right, right. Right.

[00:31:54] Track 1: is really important. And so investing. Think about what goes into planning a campaign, photo shoots, production. Product photographer, like all this asset development that tends to be a front-end investment, latent value capture that's gonna like increase your opex for a bit.

And so it just was like sort of an unnecessary thing to do in the moment that we were in. And again, this all is this question that every business has to answer, which is in what window are you attempting to maximize profit? Because you want to realize your investment in the window that you're trying to sort of maximize that outcome for sale, whatever.

For us, it's like just the period that we were in deciding that we were possibly gonna sell the business led us to not make short-term investment with long-term

that's, that's probably why I also just think that like, I don't know that Dave, who's the president and, and Josh, I don't know that they.

exactly my methodology for how I would run a business if I was running the day-to-day. And obviously we're all in constant dialogue, but they're doing so well that I'm also, you know, there's a lot of space. Like I don't, I don't have authority over them. They're doing a great

them, and my way is not the only way.

And so, They're, they have space to operate and we chat and I think that they would, Ian, you know, who's runs creative, he's been my partner for a really long time, is he's probably more of a brand guy. Would like to see more of that happen, but at the same time, They've got a system and engine that's effectively driving profitable growth.

And so it's hard to feel like you need to fix that when you're producing, you know, annual growth at 20 plus percent ebitda.

really healthy thing to do. So we're sort of nitpicking here in terms of the things that have to be done,

[00:33:33] Richard Gaffin: Sure. Yeah.

[00:33:33] Track 1: like, if we wanted to make this, know, a hundred million dollar business, what would we need to do?

And I think that's where it would lie.

[00:33:39] Richard Gaffin: Yeah. Well, and that's a good indicator too of like how much interpretive work I think has to go into understanding what this chart means relative to your business uniquely. And I think that's also a good illustration of the fact that this is a measure of growth potential rather than a measure of like the health of the business.

Cuz as you're pointing out, Bambu is doing great and the fact that it's not, that it's missing. I mean barely, but missing the duckweed threshold or whatever is not necessarily an indicator that Bambu is in like a bad place or something like that. It's more that there are some pretty obvious levers to pull in order to expand growth.

But of course, you have to take into account everything that you know about the way the business operates in order to do that. Yeah. Cool. All right. Well, so. I think that kind of wraps that up. Is there anything else that you want to hit on this, particularly on bad worth on interpreting GQ scores? Anything else?

[00:34:32] Track 1: just that over the next three weeks, our hope is to, to start here with Bambu next week and the week after, we're gonna have two D brands on slightly different portions of the spectrum. We're gonna show you what a truly elite Duckweed brand looks like inside of it, and then we're gonna give you some brand that's facing more challenges to their growth and maybe's closer to flat or, or even year over year and, and sort of analyze the difference.

And I think it's just gonna continue to reveal the power of this. Algorithm, right? Like this idea that there are these key inputs and drivers of growth that you can go in action against. And you'll notice in here that like, and I'm, I'm a broken record on this, but there's nothing about how many iterations of ad creative we make.

Like, you know, like, not to say that that's not a part of our process. It is, we make them, but the underlying mechanics that enable growth are they're, they're genetic level. They're deeper than that

the attributes of the business that. You can go solve for, and you want to create the circumstances in which most of your ads are likely to drive the outcome that you want.

And I think that's the reality of what Bamb worth is, is that a 1.4 a m e r is not a high bar. That's not elite level Facebook performance.

I think it's like 40th percentile on our C T C data set in terms of. Our Facebook raws, like it's not this remarkable Facebook ad account, but it drives a lot of volume inside of a really profitable business because the underlying business makes it so that the requirement of the efficiency isn't that high,

and that's actually what you want.

You don't want your requirement of your ad performance to be astronomical because it's really hard to achieve and you wanna make it so that you're most likely to succeed most often.

we really are sort of trying to inform the world with this, this methodology.

[00:36:13] Richard Gaffin: Yeah, definitely. I think like this is, this is maybe one of the more tangible expressions of something that I think we've been trying to do, like a thought project that you've certainly been on for the last few years, which is that if you can establish a framework of basic truths about the world of business and the world of e-com, then the actual tactics you used to execute that.

Like that's, you can sort of do whatever you want and survive in whatever in whatever circumstance. Because if the only thing you have is, is to. Make more ad creative iterations without understanding why or what that affects. Then there's, there's no real point. But because it's easy and you don't have to think about it, people often. End up going to that anyway. But if you think about, if creating maybe a bunch of iterations of ad creative is actually a way to affect, probably FOB to nca, maybe a couple of other things as well as a tool that is in service of that. If you even need to be working on that, then that's a place that you should be putting effort and thinking about.

But, but you have to think about it in terms of this, in this sort of philosophical hole or whatever.

[00:37:14] Track 1: That's, a great way to sort of frame it. It affects one-tenth of these numbers,

right? Maybe you could a argue that offer design affects L T V two and I would buy that, but that's not creative iteration testing. Like it affects one-tenth of this.

And so I, I think that's where it feels like when I say creative's overrated.

What I mean is not that it's not important, but it's that it's should be treated as one 10th of the problem. You know, like, and I think if you put it into that context, then it really makes sense. And, and, and oftentimes it just bad math, like

[00:37:42] Richard Gaffin: Mm-hmm.

[00:37:43] Track 1: the illustration I try and do with people is this idea that like, So I have a Twitter account, right?

I've been tweeting for a long time. Let me, let me see real fast. If I can tell you over the course of my life how many tweets I've sent. Oh, I, I thought it told me this, but it's, it's gotta be in the tens of thousands

that I've sent. Okay. Bambu worth, we've been around, you know, seven years.

We've probably created thousands of ads, maybe not tens of thousands. if you said to me, tey, your growth strategy for your Twitter account, is that the next tweet you write? Has to be better than every tweet you've ever written before it.

My likelihood that the next thing I write on Twitter is gonna outperform all the 10,000 things that came before it is like zero.

The likelihood is about zero. The same is true for your ads. The likelihood that the next ad you make is gonna outperform every ad that we've ever made in Bambu Earth is basically zero. Right, and I don't want to be beholden to my gro growth strategy contingent on the idea that I produce like 0.1 1.001 percentile outcomes.

That's like a, that means you are very likely to fail.

so instead, what I wanna do is create the circumstance by which I don't need my next tweet or my next ad to be better than every other ad before it. In fact, I've got a lot of ads that I think are still really good, and in fact, most of my ads, if they're average, I grow, just like if my next tweet is average and I produce enough of them, I keep growing.

I don't wanna have to produce these massive outliers. And so I think that's, that's what we're trying to create is this circumstance in which you are likely to repeatably succeed by doing average things that's, that's actually what we want to happen.

[00:39:18] Richard Gaffin: Right. Right. Yeah, that makes sense. And, and of course, like the worst version of that scenario is that you're trying to create a 0.001% outcome. And if you were to create that outcome, it actually wouldn't matter that much because it's not the most urgent thing to you right now. Right. And that's to,

[00:39:32] Track 1: and like your margin still wouldn't be that

[00:39:34] Richard Gaffin: yeah.

Yeah, yeah. Exactly.

[00:39:36] Track 1: You wouldn't, even when you didn't, you wouldn't capture that much value because you weren't in the right position to do so because you had, you know, not enough inventory, cuz your cash conversion cycle sucks. Like that's, that's, that's why this is so, that's such a great call out.

Richard, is that like, even if, even when you do produce that outlier results, are you in a position to take advantage of it and reap the benefit of it necessary? And if not, then you're, that sucks too.

I think it's a great call out. I would really encourage everybody to go get this score. It's, it's simple and will highlight for you actions to take immediately and to help your whole team frame up a set of KPIs that you can action against as an organization.

From your ops team, to your marketing team, to your retention leader. Everybody has a role to play in improving this score and improving it will improve your business.

[00:40:17] Richard Gaffin: Great. Well thanks folks for listening. We'll see you next week. But as always, we appreciate y'all listening and to tune in next week or over the next few weeks as we go into. Back into the diagnostic assessment with a couple of other brands to show you the breadth of what can happen and the sort of number of strategic interpretations that you can have of this product. But of course, as always, we wanna see your GQ. We want you to get this, we want to find out where you lie on this chart. So, ahead and get it.