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With returning customer revenue plateauing, the ecomm world is in for a rough ride — in Taylor’s words, “I thought ecommerce was through its worst period but I was wrong. There are some REALLY hard days upcoming and brands have not made the hard decisions to prepare.”

In this episode, Taylor and Richard discuss the upcoming ecommerce drought, the importance of cost management, and the key indicators of success in the next three months.

Show Notes:
  • Get the Ecommerce Diagnostic Toolkit for free when you join Admission:
  • The Ecommerce Playbook mailbag is open — email us at to ask us any questions you might have about the world of ecomm

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Hey everyone, Richard here. Before we get into today's episode, I wanted to briefly talk about our membership program admission. Now, for those of you who are unfamiliar with the admission program, it's a hub that contains all the tools, trainings, and templates that we use at ctc, all of which has been battle tested with real clients and our brands, no Guru BS here, and on top of that, You'll get exclusive access to one-on-one consulting with our team of experts.

You'll get exclusive group trainings, a private member forum to share insights or just trade war stories. And for a limited time, we're offering the e-commerce diagnostic toolkit for free to anyone who signs up for admission. So head over to, and get started today. All right, onto the show

[00:00:53] Richard Gaffin: Hey folks. Welcome to the E-Commerce Playbook Podcast. I'm your host, Richard Gaffin, director of Digital Product Strategy here at Common Thread Collective. joined once again as I always am. He's back, Taylor Holiday, c e o of Common Thread Collective. Taylor, how you doing today?

[00:01:07] Taylor Holiday: I'm doing, I'm well rested. You know, I got the relief pitcher coming in. Luke got some, came in and did a nice substitute appearance. We're trying to see if he's got, you know, the chops. I'd be curious what everybody thinks. Should we get more Luke in there? More tactical, strategic advice or not? What do y'all think?

[00:01:22] Richard Gaffin: Yeah, I know. Well, I'm, I'm interested to hear what the folks thinks. I definitely invited him, him to to pitch again or whatever the analogy is here. But yeah, no a welcome break from the, the podcast grind. I've had a few of them myself, but we're, we're back in it with both fee here because so last week, actually, maybe we should re start by just recapping.

Last week, Luke and I discussed a phenomenon that he was seeing in his clients and across maybe a range of his clients as well, which is this idea that returning customer revenue,

[00:01:50] Taylor Holiday: Yeah.

[00:01:51] Richard Gaffin: to flatline or it's getting close to flatlining.

[00:01:54] Taylor Holiday: Yeah.

[00:01:54] Richard Gaffin: and we discussed a little bit about how essentially that is the fallout what happened with Covid almost. Three years ago now.

[00:02:04] Taylor Holiday: Yep.

[00:02:04] Richard Gaffin: how the sort of, the way that's really put everything out of whack is really coming, kind of coming back to bite us. So we'll frame this podcast as another, yet another episode of Defend That Tweet because Taylor put out a very pretentious, or whatever the word is. Tweet, what is this?

May 12th. So as of this recording that has been last Friday, and here I'll read it out for the folks

quote. , I'm working on a bigger piece on this, but the last couple weeks have revealed a really ominous story for me. e-commerce was through its worst period, but I was wrong. There 

[00:02:39] Taylor Holiday: Yeah 

[00:02:39] Richard Gaffin: hard days upcoming and brands have not made hard decisions to prepare.

So a lot going on in there and, and a lot of ways to break this down, but maybe let's just kick it off by Taylor. What, tell me, tell us what's going on, 

[00:02:54] Taylor Holiday: Yeah 

[00:02:54] Richard Gaffin: and gloom and and what can people expect?

[00:02:58] Taylor Holiday: Two important pieces of context. For my reality. Okay. One, my job now at CT C most of the time, like when I get brought into a client meeting, or this past week, I flew up to Utah for a customer. Or when I come into a QBR r what I'm asked to present is sort of the macro view of what's happening across all of e-commerce, right?

Like this, like context, the container in which the individual brand exists. So it's like, here's the context in which you exist. Now, your strategist, your team is gonna speak to your individual circumstance within that broader context. So most of the time I spend my time trying to understand that context, what is happening around us.

And in the last three years going back to 2020, I've written a number of sort of like pillar prophecies, if you will, about what we thought we saw happening. Right When Covid start, I wrote this thing about how this was a moment to push all in. And we got that really right. I feel like, I feel like that piece was really right in, in April of 2020.

And then in March of 2021, I wrote, A piece that I called the the tempest and the tidal wave about some coming headwinds. And I think there was a lot about that, that we got right, in terms of iOS coming about some of the economies, things about cost and inflation. But I think there was something that we missed in that article that I'm realizing now, which is that all of the new customer acquisition that had happened in 2020, Created a safety net, a buffer, if you will, for the struggles of new customer acquisition, really for the, for the subsequent, let's say 18 months.

If we think about the Covid era, like the boom era, I would really define it as March of 2020 through May of 2021. Okay. That's peak boom because iOS comes the iOS privacy update happens in May of 2021. And then from there it's really 18 months of ambiguity of not just pure boom economy, but we're on the down slope of a lot of that crazy demand.

The market start of start softening. A lot of the tech companies start taking their hits and brands are struggling, right? And so 2022 is sort of smaller growth off of 2021, but really what I have seen now and, and oh, so the other really important context thing is that. Our own business, CTC and Bamboo Earth.

Okay, 2022, we took our medicine hard layoffs in both organizations cutting opex dramatically in both organizations, cutting cost of delivery or cost of service as much as we possibly could, and demanding inside a bamboo Earth's first order profitability. These were things that were not happening in 2020 and 2021.

And we early on. Now looking back on it, I feel good about having gone through that already because what I have seen and thi this, this came out of three different meetings with large customers of ours where I was sitting with their founders or CEOs or CFOs and looking at their p and ls and realizing that what has happened is a culmination of a lot of things that are going to make the next five months.

Really, really difficult because most people have not taken their medicine yet. And I'm gonna go through a few of these things. So I wanna talk about the things that I'm seeing. So one, we talked about the existing customer revenue down. Okay, so we're not gonna rehash that. Go listen to Luke's episode.

It's really important cuz it sets up basically the idea that this buffer is gone. Your sort of ability to extract additional margin because of your. Existing customer revenue is gone. It's down. So what does that create? Well, now all of a sudden everybody has to try to create. Incremental profit from their new customer acquisition, which means they either have to create additional efficiency out of nowhere, or they have to go find reduced costs in the, in their, in the pro, the way that, so they have to create more margin somewhere, whether that's through re reduced CAC or improved gross margin.

So here's the problem with that idea. That's not how it works with cac. You don't just get to decide one day that you're gonna substantially improve your efficiency and increase your volume because it's not like we were in an era where people weren't trying to get a better roas. Of course they were.

So if you just decide tomorrow that you're going to go and try to cut all spend, that is not first order profitable. What it means is less spend less topline revenue immediately. Now maybe a bit more contribution, but likely. It becomes a very difficult exercise, and for some brands they can't even get there.

And so right away there's this shift where as the existing customer revenue that was propping up your m e r that was propping up, your p and l begins to dwindle you now all of a sudden look at the only lever you have left to move, which is new customer revenue, and you can't get it efficient enough at enough volume to cover everything that's happening.

So that's the second thing that I'm seeing. The third thing is that, OPEX is ballooned over covid. Okay? And this is the thing that I've been shocked to see is that when everybody grew, guess what they grew. Just like when you start making more money personally, guess what grows? That lifestyle grows baby.

And this is, I'm talking about lifestyle inflation to the opex. Okay? So what is lifestyle inflation? That's a bigger office. A better office. Okay, that's, Hey, when we travel to that photo shoot, maybe sending five people instead of three. That's, hey, when we're having that vendor in, we're not ordering a pizza anymore, we're now ordering from the fancy healthy restaurant.

And that cost went from $74 to $189. And the sum of all these lifestyle inflation elements, maybe you started paying yourself a little more. Maybe everybody's salary expectations changed inside of the organization. All of those lifestyle inflation elements that came off the good times are still here and have not been reset. I've been into some big buildings and big warehouses and nice offices and you know, seen a lot of ancillary costs on the opex of these p and ls that it's time to go back and begin to pull back with a fine tooth comb. But that hasn't happened yet, and that likely means people too, unfortunately.

[00:09:09] Richard Gaffin: Yeah. So yeah. That's interesting. I mean, like the, the idea we were talking a little earlier or before we hit record here, about the way that the tech industry has sort of had to take its medicine as well. Like a lot, we, we were sort of the timing. Of the struggles that we went through were sort of similar to those of tech, but of course 

[00:09:26] Taylor Holiday: Yeah 

[00:09:27] Richard Gaffin: mind goes instantly to the like, let's say 2012 stereotype of the tech office with arcade and the ping pong table and the whatever.

And I think that there was definitely like a ballooning of that sort of behavior in terms of the way that people were sort of running the operational side of the business. And now, yeah, , everybody has to go back to, to square one again, back to the to speak.

[00:09:51] Taylor Holiday: and, and it's, it's no different. Like we have to think of this like our personal budgets, right? It's no different when money is abundant, and I don't just mean like revenue, but think about the cost of capital, the access to cheap financing. Credit lines, equity, capital, all of those things when they're abundant, leads to a sense of behaviors that don't require me to examine every decision that I make through the lens of cost, right?

You start to think about other things, you start to think more about the experience of it all right? And that's not to say that those are bad decisions. That's a very human process. I promise you. If you have. 10 million in your bank account, you're gonna evaluate the menu at a restaurant different than if you have 10.

It's just human nature. And I think part of this right now too is that the balance sheet is the third consideration here. So we've talked about the p and l a little bit and what's happening there, but part of why I think this is lagging too, is because of a few things. One, people raised equity capital that was cheap.

They have a bunch of cash. They got cheap credit facilities or maybe credit facilities that are gonna turn out to be a little more predatory than they thought. And then they sold a lot of revenue. They made a lot of money. They had a lot of cash coming out of 2020 and 2021. And so historically, if you have no cash, the the second you're gonna lose money for one month.

You start to take austerity measures immediately. You start cutting because you die otherwise. But when you can afford to lose money, it makes losing money more allowable. And that's just, again, a very human thing. If like, if I have excess capital, if I lose money one month, it's like, well, we should sit down and talk about this because this, this could be a problem.

And then after losing money for three months, you kind of go, yeah, we should really action this.

[00:11:33] Richard Gaffin: Hmm.

[00:11:33] Taylor Holiday: But when you have no money, the first time it happens, you action immediately. And so there's just a, there's a behavioral lag. To the response that I think is part of what we're experiencing and what I'm seeing in these businesses cause a lot of our customers to, to, to give context too. We serve what we call the not yet enterprise or NextGen brand, think of it as 20 to a hundred million in revenue. So these are not brands that are on their last dollar or struggling to survive tomorrow. They're brands that have built a bank role, they have a bank of customers. They've been able to survive in this era and have some safety net. But what it's caused in my experience is a lagging response to a present reality that their current cost structures no longer work. And that's the biggest thing I'm seeing is that the present cost structures, the present composition of the business, no longer works.

[00:12:23] Richard Gaffin: Yeah, so this kind of raises the question for me then, like there's of course a human element where you are in a sit in a, in an infinite cash situation or a free cash situation as it sort of 

[00:12:33] Taylor Holiday: Yep 

[00:12:34] Richard Gaffin: last couple of years, plus all of these things coming out of covid, it's inevitably gonna be human that you end up or, or that you stop thinking about costs in the way that you ought to, whatever, right?

But what are the ways. That we can, and maybe this is a little segue into a pitch for the diagnostic toolkit or whatever here, but what are the ways that we can sort of, because maybe an analogy we're using is that like people have been, or brands have sort of been in this hibernation state or whatever, where they've, they've stored up so much like a bear has eaten so much for the winter and sort up so much

[00:13:05] Taylor Holiday: Yep. Yep.

[00:13:06] Richard Gaffin: then when they come out, they don't have to hunt right away.

Right. Because they're, they'll be fine for a certain amount of time. so I guess I, what I want to ask is like, can brands identify that? Actually we are, we're in the safety net right now because I think 

[00:13:19] Taylor Holiday: Yeah 

[00:13:20] Richard Gaffin: like the issue. People land in 

[00:13:21] Taylor Holiday: that's


[00:13:23] Richard Gaffin: and then they say like, oh, we actually have, we have all these things you know, the loans, E R C, 

[00:13:29] Taylor Holiday: Yep 

[00:13:30] Richard Gaffin: So let's just continue as usual, it's business as usually because we have the cash to float it. But how do you discover that you're in a situation where a few months down the line, this could become a problem?

[00:13:40] Taylor Holiday: So what I'm seeing too is a lot of founders that have historically been disconnected from their financials in ways that like was okay because they were, there was so much margin of. Positive error, meaning like they were winning by so much that like having a ruthless discipline to every dollar wasn't really part of the process system that they built.

And that also includes the accounting systems. I have seen some not great accounting in terms of both the timing of it, how quickly it's completed and available to entrepreneurs to make decisions. The structure of it being disciplined about ensuring that it's on a true accrual basis and any cost that lag.

We don't mix cash and accrual in the setup that we really have a clear understanding of what parts of the p and l we're examining, what the targets are for each of those expectations. I'll give you an example of one that I've seen wild variation on, and when I probe at it, it's lack not always clear why.

So, one metric I look at all the time is what I would call net shipping revenue. So that's shipping revenue minus fulfillment and shipping cost monthly. So in other words, what is the customer giving me in revenue and what am I paying in, in terms of cost? And I'm seeing that one, those numbers are growing.

So the shipping costs are inflating. Or that they vary wildly without much clear understanding of why. And as you ask this is, this all goes back to offer design and merchandising too. Because I was talking to one apparel brand that there's a very clear distinction at the composition of the product and the box size that they ship with.

That changes the cost structure dramatically for shipping. But they're not clear on exactly how the merchandising of the website and the offers on Facebook affect how often they cross over that threshold. So when you think about calculating the actual margin of every order, when that threshold gets crossed, the margin's reduced.

Your CAC is no longer good enough, you're no longer for sure profitable. And this is especially hard for brands with tons of SKUs. It's another reason why like the idea of just running broad one campaign all your products is really, really hard to account for. Because you don't actually know what people are buying, where they are, what the shipping cost is, everything.

Versus having a specific site with a specific product that has a specific marginal outcome and you have variable shipping costs based on location. Now you've protected your margin. Right? And I think, I think Amazon is another thing that has just deceived people like I, this is really important. Okay, Corey, if we're gonna clip a TikTok clip this moment, your business is not Amazon.

Selling products on your website is not a loss leader from some alternative profit center. It's your only profit center, so you cannot sell products at a loss. You have to charge the customer for shipping if you can't afford to do it. If your C isn't good enough, you have to charge for shipping. And if you, if that you think that causes a decrease in conversion rate, the answer is to drive more demand, to figure out how to make the product more compelling so the customer's willing to pay for it because you just flat out cannot sell products at a loss.

That's not your business model. Don't let Amazon get in your head. That is not your business. You are not running that business. You are running a different business. And so I think so much, we've adopted so much of this idea that like the customer expects it. It doesn't matter. It doesn't matter. You can't do a thing the customer expects at a loss.

You'll go outta business. You have to make sure you're protecting your union economics. And I think that's another thing where we just kind of got lazy. It was like, well, customers like free shipping, let's just lower the free shipping threshold more and more. Oh, that worked. Our conversion rate went up.

Our top line revenue grew. And our margin tra and our shipping costs ballooned and our net shipping deteriorated, and we're just not connecting all those dots.

[00:17:31] Richard Gaffin: Yeah, no, another, another great example of getting used to a certain lifestyle, that's true, I'd say on the consumer end as well. You know, being used to the idea of like, yeah, instant shipping, my Uber to my door and it costs five bucks or whatever. But all those things are changing and so there's.

This sort of, epidemic of missed expectations maybe on both ends in terms of companies getting used to a certain way of living and consumers getting used to a certain way of receiving product as well. So I, do you want to say or bring up something? Well, yeah, maybe to my former question or, or to my original question about like, how do you spot.

That you've hit the safety net. How do you spot that this thing is about to happen before it happens? What are the leading indicators, I,

[00:18:12] Taylor Holiday: Yes. Great. Great question.

[00:18:14] Richard Gaffin: I, I bring that up as, as a way maybe of even kind of bringing in the, the diagnostic toolkit as well. I was having a conversation with an agency owner on Friday who just run the toolkit on her client.

She. in a situation where she, she sort of knew that there was something going on with the business, but was profitable on first order. Their ltv, she'd grown it by a significant amount, but there the brand was still losing, losing, losing. And after running the toolkit, it became clearer that their opex.

the delivery and cash conversion cycle. Those three metrics were outrageous. Like 

[00:18:50] Taylor Holiday: Yes 

[00:18:50] Richard Gaffin: so, so, so, so, so, bad. So there was no, no way to win. 

[00:18:54] Taylor Holiday: that's right 

[00:18:55] Richard Gaffin: of these decisions on the business operational end were made at a time when they had a ton of inventory, they were selling great because of covid, blah, blah, blah.

And now that just wasn't the case anymore. So how, how do you catch this? How do you, what do you 

[00:19:10] Taylor Holiday: Okay so

so here, here's how you do it. One, you manage your business through your cashflow forecast first. So most people manage their A, their businesses like this marketing dashboard, p and l. Cash flow. They move in that order. They'll look at, you know, whatever their dashboard is, their looker, their status list, their triple well, whatever.

They start there on day one. Okay. Then maybe they go look at the p and l monthly and they, some businesses don't even have a cash flow forecast. You need to invert it. The first thing you look at every day needs to be your cash flow forecast. Is it growing or shrinking? That's the, that is the only truth.

Anything else that claims itself as a source of truth is a lie, a deception, and a scam. Yes. And I know there's lots of websites that have that phrase on them. Single source of truth. It's a lie. That's not the truth. The truth is the cash. It's the only truth. Okay. As a business operator, every day, soak in your 13 week cash flow forecast.

If your bank account doesn't grow, nothing else matters. Nothing else matters. Okay. Number two then, is to move to the p and l. And in the p and l, all those things reveal themselves. Their opex reveals itself, right? Your actual gross margin. People are horrific at assessing their actual expected margin. Why?

Because margin changes on the base of two things, okay? One is the cost of production of the product. The other is the price at which you sell it. So what do people do that deteriorates their margins in ways they don't think about they discount? Okay. The take rate on your coupon, on your welcome flow, on your email affects your cost of delivery.

It affects your gross margin. Okay? So these things and how much in any given month? What I see is that people will to say to us, oh, my blended margin is 35%, will you just plug that in from the cost side of the equation? And I'm like, no, I won't. Because I also know that you change the s MSRP P of that product I have.

We now have intas the ability to track s r P changes over time and people will change the price of their product all the time without telling us and ask us to use a blended percentage margin. And I'm like, that's not real. This is why the net outcome is wrong. Right. And so we're moving from an era of generalization and assumption to an era of specificity.

Okay? And that is hard. And that requires diligence and it requires better accounting and it requires more clarity of cost. And that's what's, that's what's coming. And it's gonna be harsh and it's gonna leave a lot of, in entrepreneurs mind spinning to try and get back and reimagine the way that they manage their business because there is just too many places where we were wrong, or it's bloated, or we have unrealistic expectation.

And lifestyle cuts are the hardest kind of cuts. Paying yourself less money, laying off team members, you care about getting rid of that office like offices are an identity thing. I, and I say this as someone who had an office as an identity, the place you bring people to is a part of the experience that you've created.

It's this signal of this special thing you've created. Cause the website doesn't really do it justice. Well, when you have a 40,000 square foot web office, and it's cool. And there's like, It's rad stuff everywhere. It's a signal to people that you are important, and giving that up is hard. And so these things are not easy decisions.

They're really challenging.

[00:22:23] Richard Gaffin: Yeah. And, and in light of that, I think it's always Im important when, when we're talking like this or, or when we say things like, people are bad at, you know, x whatever, like, we are terrible at accounting, blah, blah, blah. We also have to say, include ourselves. We are people.

[00:22:37] Taylor Holiday: Oh, no, no, no. Most of my lessons, Richard, are my own failures. That's why I, I speak out of this. Yeah,


[00:22:44] Richard Gaffin: This is exactly what I'm saying. So what I think would makes sense then is like, let's step back to, we, we kicked this off mentioning C T C and, and Bamboo specifically obviously a Let's talk about the changes that were made. So you, you, we famously, let's say within the world of C T C.

[00:23:00] Taylor Holiday: Yep 

[00:23:01] Richard Gaffin: a thing where we solved it by figuring out 60 day LTV that maybe is not the case anymore or 

[00:23:07] Taylor Holiday: Sure 

[00:23:07] Richard Gaffin: important as it used to be. That's not the headline. The headline now is like, we had to figure out how to get this brand first order profitable, which I know has always been a struggle. So talk to me about, and, and our listeners as well, how, what were the changes made, specifically lifestyle, whatever,

[00:23:20] Taylor Holiday: Yes,

[00:23:21] Richard Gaffin: down and to figure out Aber Worth.

[00:23:23] Taylor Holiday: it was every part of the p and l. We laid people off. I think half the staff. I don't know the exact numbers, but it, a lot of people were let go. It sucks. We made bad decisions in terms of how much staffing we had relative to the revenue and profit we were generating. We had assumptions about the future and there was real human cost to that.

We found every available cost in the opex side of the business that we could reduce, whether that was software costs or outsource partners or whatever it, what it was, and we reduced them. So the opex we went after, and I think we went from over 25% down to closer to like somewhere to 15 to 17%. Like, and if your payroll, payroll needs to sit somewhere between eight to 15% and again, this is all contingent on the margin of your product.

One of the things that Amoo has is good margin, but so, so we were, we were able to get that down, pick up, you know, seven to 10 points of margin in the opex. The second one was cost of delivery. Like we, we found ways in which the production of our product and the shipping cost of our product were leading to less margin than we wanted.

Right. And so we went after looking at every bit of that from the, the raw material price of the stuff that we were buying to, how much of it we were producing it, how many people were required to produce it, where we were shipping it, how we were shipping it, all of those things. On the cost of delivery side, same thing.

And then cac, we just, we went full cost caps, no dollar was spent. If it's not break breakeven on first order. That's, that's the law. And that's a M E R. So it's an A M E R target that governs the spend, and we push as much volume as we can against that. A M E R target. And that is the rule of law. And so here's, here's, here's the secret, and this is, again, I'm speaking right now to a little bit more mature e-commerce business.

What I'm about to say is not true if you're a brand new business, but 20 to a hundred million, here's how you're profitable every month. Ready? It's really simple. The contribution margin on your returning customer revenue exceeds your opex. And your new customer acquisition is first order profitable. You can't lose money.

And so that idea that like the, the, the amount of people that you have and the cost of the system can only grow as long as your existing customer revenue can cover it. Okay? The margin on your existing customer revenue has to cover your opex. Then you can go be as aggressive you want as new customer acquisition at breakeven and you're still gonna be okay.

And then whenever you need to. You can extract more profit by taking more efficiency on new customer acquisition for a given period of time, or ideally even, you create a little bit of margin on that opex, that existing customer revenue to opex and that relationship became a thing. That it was very important to think about how we were growing the OPEX and what allows us to grow the opex when, what triggers for us the idea that we would hire for a new role.

Because a lot of times we just think about it as like there's, oh, there's a new job to be done. We would really like it if we had another person to do X, Y, and Z. And it's like, cool. But if the money doesn't exist for that person, unless you're gonna enter a period of investment, which is an intentional loss for the sake of future gains.

That's what an investment is, right? I give up money today for the sake of some future return, and you better be clear on when that's gonna happen. You can't make that decision. And so the, the, the principle for hiring, the principle for investment, the principle it just now there's a bar and it has to be cleared in order for that to occur.

[00:26:43] Richard Gaffin: Mm-hmm. . And actually, so that segues nicely into my next question, which is that you, you framed the decisions made in Bamboo over the last couple of years as as bad decisions. So in what sense were those decisions bad, 

[00:26:56] Taylor Holiday: yeah 

[00:26:56] Richard Gaffin: what sense were they just, nobody can com predict the future.

[00:27:00] Taylor Holiday: Well, okay. That's, that's a great question. I think they were decisions that assumed something about the future that was fool Hardy. How about that? was it assumed the future was gonna be like the present. Such that we were gonna continue to be able to access ca access more capital and we're gonna continue to access cheap debt.

And we're gonna continue to be able to, you know, drive massive volumes of new customer acquisition at this, you know, at a slight 60 day loss and not run outta cash. It assumed a lot about the future, which I think that's the mistake that I've come to. I've come to understand how hard it is to be right about that idea, right?

And when things are going well, it's really hard to as, and it almost makes you feel like a cynic or like some kind of bad person to be like, Hey, everybody, slow down the party. I'm not sure this is gonna last forever. Maybe we should be building up our storehouse a little more. You know? So I think that it's a really hard disposition to take that I think requires having lived through some of these struggles.

A lot of these are learned, and I wanna be really clear. I, if I sound like I'm speaking at you, just know that what is coming out of me is. The pain of having lived those decisions, office as an identity me, very much me, 40,000 square foot building that I owned with my three pl and a cool studio and a rat office and mini hoops and like all the things that I wanted everybody to come see cuz it made me feel important.

[00:28:21] Richard Gaffin: Mm-hmm.

[00:28:22] Taylor Holiday: staff. The amount of times I led with C T C has X number of employees as a badge of honor, that somehow I was doing something really important lots of times. Right. Not paying as much attention to the costs, kind of spending money, little too much travel. Maybe we didn't need that meal. Maybe that party wasn't necessary.

Me, I've done all those things. I've lived it. So I know, I, I hope you receive it as a deep desire to help you avoid any of the troubles that I've had to experience. Cuz, cuz you can, it's, it's available. There's wisdom available from the people who have gone before you.

[00:28:57] Richard Gaffin: Yeah. Yeah. Yeah. It, that's, it's interesting that you mentioned that, that specific thing about like the office and the staff and whatever, because 

[00:29:03] Taylor Holiday: Yep 

[00:29:04] Richard Gaffin: sense, like in, in boom times that austerity makes you sort of look like a scrooge, right? 

[00:29:08] Taylor Holiday: Yes 

[00:29:09] Richard Gaffin: you know, running your business. Intel or smart or whatever, however you wanna wanna frame it seems a 

[00:29:15] Taylor Holiday: Right 

[00:29:15] Richard Gaffin: like, oh, everybody, everybody else gets an Xbox, but my mom won't give me an Xbox.

You know what I mean?

[00:29:20] Taylor Holiday: That's right. right.

[00:29:21] Richard Gaffin: thing to overcome. And so it's just like a basic human instinct that you have to have the framework to show people to say like, this is why you can't have an Xbox and this is why that makes sense.

[00:29:31] Taylor Holiday: Right. And it's even harder to when that, when that thing, that the reason that you're saying isn't actually definitively provably true, right? So if I say like, someday it's gonna be harder, I might be wrong about that actually for a really long time. You know, in the same way that like right now, there's some likelihood that what I'm saying is wrong and that in the next three months.

There's some economic boom that's unanticipated, and we find cobalt mines underneath Kansas, and all of a sudden the United States is the richest country in the world. Again, you know, like whatever I, yes, those are all possible, but given the facts that I see on the chess board right now, and from the entrepreneurs I'm walking alongside, that there's some real work to do to go travel lighter because the demand isn't blowing in the same way.

You know? And I think that's really important.

[00:30:20] Richard Gaffin: Yeah. Yeah, definitely. I mean, I think definitely what we're pointing at is, is leading indicators that we can be reasonably certain are, are predictive of the next few months, barring something crazy happening. But of course, Covid happened. So that's


[00:30:33] Taylor Holiday: exactly. Exactly. And that's, that's been hard. The other thing too that I think is not talked about enough in our industry is that over the last few years, there were two major cash infusions in two businesses in the form of the P P P. In the form of the E R C. Okay. And both of these were essentially free money that were just given to businesses.

Okay. Set aside whatever political opinion you have of that, that most people received.

[00:31:00] Richard Gaffin: Mm-hmm.

[00:31:00] Taylor Holiday: And I know based on the number of lawyer emails inbound that I received that are right up there with the number of emails that I get from cold call service providers, like cold call service providers and lawyers willing to do my e r c filing for a, for a commission are, are, are the same volume in my inbox.

I know 

[00:31:20] Richard Gaffin: Mm-hmm 

[00:31:20] Taylor Holiday: prevalent this is and it's not talked about enough and it's propping up everybody's balance sheet and it's delaying the medicine. In lots of ways. So it, that's another piece of this that I don't think that's coming. Again, I don't think the United States government is going to issue another E R C or P P P here in the next few years.

But again, maybe that, I could be wrong, I could be wrong about that, but I would not plan. And if that, if your cash, if you go look at your cash flow over the last two years, and if you extract out those two numbers, is it positive or negative? And if it's negative, then there's something being hidden that needs to be solved for.

[00:31:53] Richard Gaffin: Mm-hmm. Okay. So speaking, speaking of things being hidden, this is just one question I had out of curiosity. When you were going through the process that you went through with bamboo worth of opex, paring down costs, what surprised you in terms of like, this thing is sucking money out of us and we had no idea?

Was there anything like that that really jumped out of like, oh my God, I didn't realize that this is an issue. And how did you address that?

[00:32:20] Taylor Holiday: I, I, I honestly think, and this sucks cause I am not, I'm not one to advocate for the termination of employees. I think people are the cost that you justify more than any other

[00:32:31] Richard Gaffin: yeah.

[00:32:31] Taylor Holiday: That in almost every case, and I think we're seeing this broadly, the reduction of workforce does not, the percentage reduction of workforce does not equal the same production in a reduction in output.

And, Efficiency is a necessity that when absent isn't often produced. Like when it, when the necessity is absent, efficiency is rarely produced, right? So if I give you 10 hours to complete a task, you'll take 10 hours. Like work fills the time that you give it. Whereas if I say you have an hour, it's like a lot like writing.

You're a writer, right? And the reality is, like, I've always been fascinated by journalists, right? Who have to turn an article in every night. And there are people that develop the capacity to do that every year for 20 years. Every night, write an article, submit it by midnight every night, you know? And then there are authors who take three years to write a book.

Neither is right or wrong, but the task will take the time that you give it. And I think that, that in a lot of organizations is, is sort of what happens is that you build a workforce, you assume the output of that workforce, but the reality is that same output, it's available at less. And I think I, that's the stark reminder that I have been. Who wen up to a forcibly in both C t C and in Bamboo Earth?

[00:33:47] Richard Gaffin: Yeah.

Cool. . Anything else you wanna hit on this?

[00:33:50] Taylor Holiday: No. I'm, I'm, I'm hoping to write with a bunch of data and sort of examples of what I'm talking about so it doesn't feel sort of, obtuse or amorphous. And I'm, I'm hoping it'll be out in the next couple weeks. So look for that on the CTC blog. I'd love if any of this experience is resonating true with you to share, reach out to us and we can help take the diagnostic kit.

It's a great way to help identify the places where this is hiding inside of your business. Go get your GQ score, share it with Richard, share it with us, we'll talk it through with you and let's help to sort of find the canary in the coal mine before it becomes too big a problem.

[00:34:22] Richard Gaffin: Cool. All right folks. Thanks for joining us. care, Taylor. Appreciate it.

Hey everyone. Thanks for listening to the E-Commerce Playbook podcast. Remember to rate and review, like, and subscribe, all that good stuff. Also, you can always get us at podcast common thread If you wanna ask anything about the world of e-com, you want us to discuss maybe issues with your business.

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