Struggling With eCommerce Cash Flow? Watch This

What's your name? Tate Rudman. Okay, what's your business called? VRTX Socks. Great, and what do they do? We sell grip socks for hybrid athletes. And what would you say is your one biggest pain point, problem or challenge with your business right now? Cash flow. Cash flow, okay, cool. Would it be great if we could fix that in the next 12 minutes? That'd be brilliant. Have a seat on the business bench. Thank you. Cool, tell me about cash flow, what's going on? We are stuck in a cycle of having to buy stock and then selling the stock, not having the cash in quick enough to buy enough stock to match the demand. Okay, and where else does cash flow show up as a problem in VRTX? I suppose one of the places would be keeping on top of invoices that are coming in. Okay, so we've got buying stock, invoices, where else are the cash flow problems would you say? Could I lead the witness? Please. So what about paying yourselves? Is that challenging? Yes, it would be if we haven't got to that stage just yet, but if we were to. Okay, so you haven't got to that stage yet because there isn't enough cash or just because you've made a conscious decision to recycle a cash in the business? We're currently putting everything back in. Okay. Yeah, we can grow effectively to scale. Okay, give me a science of the problem then and be specific. Where is your cash flow at the moment in terms of raw numbers and then where would you like it to get to? What would you like? How much is coming in monthly? So monthly sales, how much it costs to replenish your stock and then how often you're having to do that in order to make the business work at the moment. Okay, so let's go off February because March had the issue. So in February, we turned over about £22,000 and that would have sold roughly about £5,000 to £6,000 worth of stock. Okay, and what margin have you got at the moment on your sales? So it's £3 for a pair of socks and we sell them for £15. So you buy them in three, sell them for £15. So that works out at roughly... It's 5x. Probably about an 80% gross profit margin actually, which is really quite good at the moment. But the net profit side of things is slow or lower. So 25% is still a good net profit margin. So it sounds to me like it's almost like if you had four quarters in a row where you sold out of your stock at those margins, you would then have enough of a buffer to almost be a quarter ahead. So you could do a full order based completely out of cash you've got in the bank potentially. One of the challenges when you're doing a physical product business is then recycling that stock. The longer you hold that stock for, then obviously you're losing money at the same time. So then it's almost like that cash is dead, it's sat on the shelves until you can actually sell it. So would you say you're doing everything you can at the moment to sell those products faster as well? Yeah, we're putting as much money into advertising as we possibly can at a profitable level. And then we're obviously looking at other retention exercises as well in terms of email campaigns and flows. Okay, so you've got a regular cost going out with ads. Email campaigns, I know you work with partners as well who advertise their stocks to their clients. Okay, good. So we're starting to get a bit of a picture here about the mechanics of the business, where the money flows in, how it flows out of the business. What else have you explored in terms of turning over that stock faster? So one of the things that we want to look into is setting up a proper affiliate program. So that would be where people would get a percentage of any sales that they make themselves. So that's something that we want to do. Potentially still dribs and drabs though, isn't it? It is. And TikTok shop is another channel that we want to look to. Who's the biggest person, would you say, in high rock space at the moment? A guy called Danny Ray. Okay, and does Danny Ray have his own sock brand or any partners that help him out with his outfit? I think he works with MyProtein. Okay, so he has a sponsorship relationship with MyProtein. Yeah. But what about socks? I think he actually currently wears our competitors. Okay, interesting. So, I mean, there's probably lots of people in high rock space, I would imagine, who are at a similar sort of level or have... I mean, how many followers does he have? I can't remember exactly, but it must be hundreds of thousands. Hundreds of thousands. So can you imagine if you ended up striking up a partnership with somebody like him, who would then, you know, maybe once a quarter, once a month, mentions a bit like Steve Bartlett has on, you know, when he's doing his diary of his CEO. I mean, he used to very unobtrusively put a bottle of fuel on the table whilst he was interviewing somebody. Now he just does a blatant advertisement because obviously he's an investor in that and he links it through in his description and things like that. But imagine if you could get just a small handful of people like that chap on board as partners who would then be, you know, advocates for your brand. All of a sudden, you could be getting a thousand orders, whereas, you know, you're getting those several orders a day, but all of a sudden you do a campaign with a partner and you get a thousand orders in or two thousand orders in for pairs of socks. Yeah. You know, that could be an entire bucket load of socks sold, you know, one contain the load of socks sold in one campaign if you get it right. Yeah. And again, you don't necessarily need to pick off the biggest people. It could be that you pick off, I don't know, 10 influencers with maybe 50 to 100,000 followers. Yeah. So they're a bit more accessible and they're willing to kind of get involved with the brand. You've also got the likes of, you know, James Smith has got the New Tonic brand. So there are influencers out there who are looking to partner up with brands like VRTX and help them to take it to market. Okay. How comfortable and confident are you about building those sorts of relationships? I think that side is something I struggle with more. Okay. I am more comfortable in creating content and running the ads. Okay. But imagine you've got to get comfortable somehow with forming those partnerships. What comes up for you? The know-how. I don't know how to go about that efficiently, except from messaging them and hoping for the best. So what if I gave you... Now you can see here the problem and challenge started off with cashflow and oftentimes the problem we start with is not the problem that we end up with. Right. So we've shifted from cashflow is actually okay, provided we can find an audience and sell the socks. The problem here is actually getting out there marketing and selling bucket loads of socks, basically. So let's look at partnerships. There's a simple five-step framework, then, in order to get in front of people with large audiences. And as you know, I've done it myself. I've been on Ali Abdaal's podcast, Deep Dive, which got 3,000 leads. It's had 300,000 downloads on YouTube. It's still bringing business in even three years on. I work with Chris Doe and Daniel Priestley and Simon Squibb and various other influencers, but those didn't happen sort of overnight. It wasn't just a ping Ali an email and hope for the best. There was a process behind that, which means stepping outside of your comfort zone a little bit. So for me, I think you're similar. I used to build websites for 12 years and was very happy sat behind the screen, never speaking to a soul. When I started coaching, all of a sudden you've got to get out there and start putting yourself out there more. But partnerships was an interesting one. And maybe this is partly where you're a bit, maybe feel a little bit stuck here, is imposter syndrome. So for a very long period of time, I would look up to the likes of Dan Priestley or Ali Abdaal or Simon Squibb and go, well, who am I to be in their space? I'm not insignificant. Why would they want to speak to me? Why would they want to promote me? Obviously, we're picking up a little bit of recognition, so Danny Ray is Zoe Ray's husband, who is the sister of Molly May. So that's a huge influencer. He's, well, by association, that's a big, I was going to say scary, but I guess that big scary influencer seems a little bit out of reach. Who do you actually know who you've met who is moderately famous? Besides you. Thank you. I don't know. I haven't met many famous people that I actually know. Not like no-no, but who you've met. I've met Simon Squibb and Chris Do, who's spending time with you. So, and again, how did you feel when you were sort of in their sphere? Well, they're just normal people, aren't they? Very normal people. Yeah, absolutely. So very accessible. And I think that's what a lot of us, we kind of hold these people up on a pedestal and put ourselves down here. Whereas actually when it comes down to the nuts and bolts of it, they're just ordinary people. And I was thinking about, as you were explaining about the, you said the words you used were just a small business. Yeah. Okay. If you think that, how are you going to show up? As a small business, right? So there's a mindset thing, which is going on here as well. And I was imagining like Ben Francis when he was first, you know, using his mum's sewing machine to make his first iteration of the Gymshark products, you know, and kind of, I can see him, you know, like he's there, he's excited, he's making the products, but now he's got to actually put them on and walk into a gym. Imagine how uncomfortable he probably felt doing that, right? So I'm guessing there's probably a bit of that as well, which is like, oh, we've got great idea for products, but actually then putting it, you've got some market validation because people are buying the products and you're getting a lot of money from, you know, 20 plus K a month now, you're doing through the sock fight. So there is some degree of market validation there, but you still have that, oh, we're just a small business. There's not many businesses in 18 months that have gone from zero to 20 K in the way that you have. So you're actually, you're probably bigger than I would say 90% of businesses out there already. Do you think? Yeah. Yeah, I don't know. I see, I spent a lot of time in the, obviously in the e-com space and looking at other, well, listening to other people and seeing what they're up to. And obviously when you spend a lot of time doing that, you generally listen and see people who have like six figure months and in some cases million pound months, things like that. So it just, I suppose that in that context, it is small. Yeah. But you've got to shift that language, even if it's a bit of that, I wish there was a better phrase for it. Cause I don't really like the phrase, but it's a bit of that fake it till you make it mindset, which you've got to apply here. It's like, no, no, we're a bit, we're a big business and we're going somewhere. And even if you don't quite, you have to keep on repeating itself in order to get yourself into that mindset, grow into that sort of mindset. And so to give you the belief, then at least to step into that room with your shoulders kind of high and saying, yeah, we're a business owner. We're a big business. We're going places. What have you noticed about me? So going back to the partnership process then, and there's five steps. What have you noticed about me and my approach to sort of working or getting in front of people like Simon Squibb and Dan Priestley and all of these incredible entrepreneurs? Showing up consistently, I think, and across multiple channels. So I've seen that you would comment on their LinkedIn, you'd comment on anything on their TikTok and across the social medias. And then any given chance that you have to be in the same space as them, you seem to take that quite seriously and try and be there and be seen. That's it. So you've picked off two of the steps there out of the five intuitively, great. What about who I chose? People who you could be friends with in theory. Yeah, yeah. So they're people who I would like to think I could go down the pub and have a beer with. We share similar values. We talk about the same stuff to people. We get excited about the same. We're on a similar sort of purpose and mission. We have similar values, shared values and things like that. But again, think mindset-wise about specifically, then like how I chose those people. What do you think was going on there? You're putting yourself on the same level as them, I suppose? In terms of like self-value or? Even more simple than that. You have the ability to get to them quite easily. What question did I ask you to figure out like which influencer would be on your list? Who's the biggest person in the space? Yeah, so and then it's like, okay, so we've got our top one. So you've got your guy. Write a list of 10 people now who share similar values or in a similar sort of space who you feel, yeah, I can vibe with them and get on with them and I think they would like me. Be intentional, basically, is write down that list of the 10 people, okay? So that's step one. Step number two is then you want to think about, okay, where are they hanging out? So marketing 101 is like very straightforward. So it's four steps. Identify your ideal client and this is the same for partnerships. Figure out where they hang out. So demographics first. So that's that list of 10 people and based on that demographics. Psychographics though is like their behaviors. Where do they actually hang out? What events do they go to? What podcasts do they appear on or subscribe to? Whether they post on social media, what type of content are they putting out? And it could be, I call it kind of like ethical stalking because we're not doing it because we want to do something nefarious. We're doing it because we want to build a solid partnership for both parties to really benefit from. So find out which gym they go and work out at and go and spend some time at the gym, even if it's in ******* Peterborough. Like you get in the car and go and spend a month in Peterborough. Showing up, showing your socks off. Oh, hi. What was his name again? Danny. Hey, Danny. I'm a big fan. Love your channel. Listen, I just happened to be here. I make group socks for High Rocks. I've got five packs. I'd love to give them to you. Don't expect anything from it. I know you're into this sort of thing. Here you go. Now, most people would be like, God, that's ******* cringey, Rob. I couldn't possibly see myself doing that. But that's the little bit of like fear which you've got to get over that imposter syndrome, which says, no, I deserve to be in the same room as these people. What's the worst that's going to happen? He looks at them, chucks them in the bin. Yeah. Looks at them, gives them to a mate. Looks at them, wears them, never posts. But if we didn't give ourselves that opportunity, there will never be the opportunity for him to look at them, go, well, he's pretty decent actually. Try them on. You know, he may even take his shoes off, try them on in the gym there and then. He might strike up a conversation and be like, oh my God, these are really cool. How did you come up with this? And want to know the story behind it and sit and chat to you for a bit. But then he puts them on. He's like, **** me, these are really good. But if you don't go there and, you know, so identify that ideal client. So you've got Danny, figure out where he hangs out. Yeah. And then we have to be consistent, go there regularly and often with the same consistent message. You know, I sent Chris Doe a copy because on every YouTube video, he has his address in there at the bottom of the YouTube video. So I've sent him goodness knows how many signed copies of Take Your Shot, you know, to his address in San Francisco, you know, in LA, wherever it is. And it wasn't until about two years after I'd started doing this that then I happened to be at an event. And then he shouted me out in front of everybody and said, oh, by the way, guys, this is Robin. He's written this really cool book called Take Your Shot. Robin, I haven't finished it yet, but when I have finished it, I'll get you on the podcast, right? And that's because I was like, I could have sent him one book, but I think I sent him about 10. Keep doing it. One is going to get through. Yeah. Or one will end up on Gatekeeper's desk or his assistant's desk, or it'll just get lost in the post, you know? So you might have to show up. And then you see Danny speaking at a conference and you're like, right, I'm going to go to this High Rocks conference. I'm going to take another set of five socks with me. And, oh, hey, Danny, don't you remember me from the gym? We bumped into each other. By the way, I just happened to have another five pairs of socks. Oh, God, I feel cringey getting over that sort of hump. So show up regularly and often and with the same consistent message. And this is the bit, again, which a lot of people, they send one email, they'll go to an event and sit at the back of the auditorium. They'll get to the gym, but then lose their wobbly nerves and just kind of walk away. So coming back to partnerships, be intentional, write the list. Second one is you've got to show up, be in the same room as them physically, and put yourself in the front row, put yourself out there. At that point, things shift. So as you start to build the partnerships, and this is what I've done with all of the people now that I get to work with, you lead with value. So the obvious one is give them socks. But I would also be looking at, well, what else do I have that maybe they need? So you now, through your customer base, how many emails do you have? Just below 10,000. 10,000 people in your email list, right? So if you go to somebody like Danny, hey, Danny, here's my socks. Listen, by the way, with my sock business, we've managed to collect 10,000 email addresses of people who love High Rocks. I wonder if there's something we could do together. I don't expect anything in return, but I love your brand. I'd love to promote you and your brand to my group. Do you have a course I could send them or a book or a download or something like that? So we're going to lead with value and be as helpful as we possibly can do, because you have something of value. Most people look at email lists, their own email lists, and go, what's in it for me? How can I leverage this for me? I need to make more sales. But data has power. So if you can find a way to use that and help other people, go for it. The fourth step is then, Danny's probably a busy guy, I'd imagine. He's probably quite hard to come by. He's probably got some really muscled up dudes when he's at an event or down the gym that would just be like, you get the big hand and they'd be like, don't come near me. Leave Danny alone, he's busy or whatever. And then we go, okay, and then we toddle off, right? But what we might have to do in this instance, and this is step number four, is then find your inside man or woman. Got to be politically correct these days. So you're then going to get to know the team and they're easier, they're more accessible. All eyes are on Danny. So when you start to pay attention to the team, then all of a sudden, they're like, oh, somebody's paying attention to me. So you're kind of stroking their ego a little bit. And a lot of Ali Abdaal's team and Chris Do's team and other members of the team, they kind of know this is happening. Simon Squibb's team, they know that there are people that are like buttering them up all day long to try and get to Simon. And I genuinely, I love working with the teams. So for me, getting access to Simon or Ali or Chris or any of those people actually is a bit of an afterthought. Because I get a lot of intrinsic value for me out of helping the team out, helping the wider communities out in their teams. But other people lack that. They're very much driven by their ego and they go in wanting something. I don't want anything. So you have to go in with that very laissez-faire. I just love what Danny's brand is about. Is there anything I can do for you guys? Basically earn their trust in a very genuine way, authentic way. And then you show up often enough and then eventually they'll be like, oh my God, there's this guy, Danny, you've got to speak to this guy, Tate. He's got these really cool socks. I know you've got that supplier at the moment, that brand you're working with, but this guy's socks are better than theirs. This guy's young, he's enthusiastic, he's got loads about him. He's also got a list of 10,000 people that he's offered to us. Should we think about doing a campaign together? So you're leveraging the team to then introduce you to the main man or woman. And then the final step then is what we call the silver platter. So that's the point where if all else is failing, and not if all else is failing, you can still kind of leverage this under the be helpful, add value bit as well. But it could be, again, you have to do this very genuinely, very just graciously, but offer a silver platter, which could be once you've started to build up partnerships, like me for example now, I've got a nice warm, my WhatsApp is like, I look at the contacts, I've got my WhatsApp, it's ******* cool who I know in there. So I'm able to like at 1 billion followers summit, bring like Chris Doe and Simon Scripps teams together so that they can then do a partnership whilst they're out there. Of course, when they get together, like how did this come about? It's this really cool guy, Rob might introduce this. So that makes sense? Yes. And you see now that it's not a cashflow problem, it's a volume problem. Right. How do we leverage what we've got in order to create a high volume of sales, which is going to drive cashflow faster as well in a campaign driven approach? So where does that leave the business now? With the need to build more partnerships, I suppose. Yeah. And finding the right people to build them with. Yeah. Which takes some legwork, but that's easily doable outside my normal working hours, of course. There you go. So yeah, I heard your boss is an arsehole. So, but again, what we're not doing is we're not going to replace all of our other forms of marketing with partnerships. The three work, there are three kind of time horizons for marketing. So short-term, mid-term, long-term. Partnerships very much fits into that long-term strategy. We're just going to be spending an hour or two every week nurturing those partnerships, following their content, trying to figure out what events they're going to, how we can get our products in front of them, how we can get to know their team, doing all of that research. And sometimes you may do nothing, other times you might have to go and do a big event. So like for me, IdeasFest, that's where I get to do a lot of networking with people in my space and in those partnerships. So that's long-term. Mid-term is around those marketing assets. So you have the socks as a product, which is probably your best marketing asset, but is there something else which you can do around that, which is a good lead magnet to attract people into your brand? This is harder for a typical service business like mine, you'd write a book or you would write a brochure. But you might wanna think about things like, you could do a psychometric personality test, what type of high rocks athlete are you? And it comes off the back of it that, yeah, okay, it's driving interest into the socks, but is there a couple of different marketing assets you could build out? And the goal then becomes, you can set big hairy audacious goals around it. Right, like me, I'm gonna give away 5,000 books a year, how can we get 5,000 people to take our psychometric test? What type, are you a superman or woman, or are you a, so you can give them different personalities. And then you've got the short-term stuff, which is all of that mostly short-form content ads and stuff which if you stop paying a pound into the meter, then your sales stop, okay? So you've gotta be running short-term campaigns alongside medium-term campaigns alongside your partnerships. And invest, you know, partnerships only take an hour or two a week, they don't take long. You know, whereas the videos and all of the other shorter-form stuff, you'd be doing loads of that. It's like a flywheel that you have to spin up. But it's getting that balance right. So then it's like the Hormozy thing as well, which I know you know a lot about. So when he wrote $100 million offers, he talks about having, trying to build up custom lifetime values. So through getting people to come back and repeat purchase, so that's how we generate more cashflow. It's a bit like compound interest. So you get a client, they come back every three months and buy another product, but it's passive at that point, okay? But he also says, how can we increase first order value? And typically that is by having product two, product three, product four. So it's just something we've discussed before. So that's one, if it, you know, your cost per acquisition, if every cost per acquisition is say 20 pounds and your first order value is 40 pounds, well, if we introduce product two, it costs the same to acquire that client. But if product two then means we add another 10 pound product onto that order. So first order value grows to 50 pounds, but the acquisition cost is the same. We've just increased our margin by 50%. Gross margin by 50%, you see? So squeeze as much juice out of that lemon as we can on that first order value. And then, you know, in a month's time we send out a drip campaign to all the people who bought products one and two to buy product three. And again, that will start to spin up that cashflow sort of, you know, by just repeat purchase, but different products. And that's harder. And there are people as well who like the first business which they started didn't end up being the business they've got today. I mean, you look at, you probably look at Huel, you know, they'll have their flagship product which they started out with, but now they've got all sorts of different nutrition products. And I bet there are probably some of those nutrition products that are more profitable than that initial Huel, you know, shake which they created, for example. Yeah, we're seeing that now actually. Yeah. Yeah, we've got, we've brought in compression sleeves and nose strips which are both ready to launch. The nose strips have got an insane margin compared to the socks. And the compression sleeves are also a better margin than the socks themselves. And we're hoping we can pitch them as a performance system basically. Yeah, nice. To do exactly what you said, increase the AOV on the first order. Yeah. And then also obviously get those customers back who've already bought all the socks. There must be, I don't know, 5,000 people bought a pair of socks or something like that. Yeah. So yeah, the plan is to expand, get everyone to buy more. Yeah, and then that should put us in a more profitable position with more cash flow coming back in because we're not having to pay for that acquisition again. Nice, right. You've got a chance now, a quick fire round for me to ask me questions and I'll give you short snappy answers. Right. How much cash should I have in reserve before I think about paying back my directed debt? A good question. I would say probably about three to six months worth of operating expenses, including your salaries when you start paying them, obviously. Would that include like, so that's all expenses? All expenses. Three to six months? Three to six months, ideally. Okay. I can claim that back now that I've just registered for the last six months that I've paid. Yeah. Does every invoice that I've paid need to have that outline on a separate line? Yes. Yes, it will. For me to get it back? Yeah. Okay. I think it's only children's clothes where that isn't applicable, but yeah. Every bill which you pay, you have to make sure that that person has included that on there if they're VAT registered. And it shows. And it shows, yeah. That was the other question. I'm working with the videographer, with the videographer, Will. He's not VAT registered. Yeah. So when I pay him every month... It's just ex-VAT. So if it's a thousand pounds that he's charging you, it's just a thousand pounds. So, okay. And you can't claim anything back on that. He's not charging you VAT, so you can't claim that back. Same as anything which you buy from overseas as well. So your socks which you're importing, you can't claim any VAT back on that. Yeah. Unless they're part of, I think it's like the Schengen Agreement, where sometimes there are VAT does cross borders, but... Yeah, I don't think so, unfortunately. Yeah. Any other questions? While Tate's thinking about another question, don't forget that you can also go and request a free signed copy of Take Your Shot and all the Fearless Business Blueprint. We'll make sure that we include a link to that in the description below this video. And I'm always happy to have a conversation with you about your business as well. Either come and join me on the business bench. If you want to, you can apply for that or you can just reach out to me and we have a short application form for Fearless Business. So you can book in a call and hopefully get some similar useful feedback to what Tate's been receiving. Yep. Very useful. How was your experience on the business bench? 10 out of 10 business bench. Excellent. Great. What's the one thing you'd say you're going to action as a result of this conversation? Do you know what, actually? I think it's the mindset thing. I think it's about putting myself at the level as a business owner with actually having valuable assets like the email list and on top of the products and seeing what value you can actually bring to people who I may previously seen as out of reach. So I guess it's changing the mindset a little bit so that those people are just people and they're people that I have something that I can help them with. Cool. So that's our time on the business bench done.