The Free to Grow CFO Podcast
How Elite DTC Brands Measure Marketing Performance
Episode Summary
In this episode of the Free to Grow CFO Podcast, host Jon Blair, founder of Free to Grow CFO, engages in a comprehensive discussion with Ryan Rouse, advisor for growing consumer brands and co-founder of Factor and former CEO of Highkey. They dive into strategies for scaling direct-to-consumer (DTC) brands with a focus on balancing marketing efficiency, growth, profitability, and cash flow. Ryan shares insights from his entrepreneurial journey, highlighting the importance of understanding unit economics, contribution margins, and the realities of scaling a business sustainably. With an emphasis on profitability and cash flow, they explore the nuances of business finance, marketing measurement, and the challenges and opportunities of going omnichannel. This episode provides a deep dive into creating value in DTC brands through economic viability, offering a blend of high-level strategy and practical, actionable advice.
Meet Ryan Rouse
Ryan Rouse is a growth advisor to consumer businesses with a focus on every line of the P&L. He was previously, Co-Founder at Factor Meals (acquired) and CEO at Highkey.
Episode Transcript
00:00 Welcome and Introducing Ryan Rouse
02:43 The Entrepreneurial Journey: Challenges and Learnings
05:44 The Transition from Operator to Consultant
13:37 The Importance of Understanding Your Business Model
14:13 Deep Dive into Marketing Performance and Profitability
25:21 The Nuances of Customer Acquisition and LTV
28:43 Decoding LTV and CAC: A Deep Dive
30:51 The Importance of Contribution Margin in Business
33:34 Navigating the Buzzword: Understanding Contribution Margin
34:15 The Significance of Defining Financial Terms in Your Business
42:19 The Transition to Omni-Channel: Strategies and Considerations
49:21 Final Thoughts
[00:00:00] Jon Blair: All right. What's happening, everyone. Welcome back to the Free to Grow CFO podcast, where we talk all things, scaling a DTC brand with a profit focus mindset. I'm your host, Jon Blair, founder of Free to Grow CFO. For those of you that don't know, Free to Grow is an e comm focus, outsourced accounting and finance firm.
We help scaling profit focus DTC brands scale alongside healthy profit cashflow. And confident decision making. And I gotta be honest, the conversation we're going to have today, I've been super excited preparing for we're chatting with Ryan Rouse. Some of you guys might know him as co founder of factor, former CEO of High Key, he's now a consultant for growing consumer brands.
I'm super excited for this conversation. Ryan, welcome. And thanks for joining man.
[00:00:48] Rya Rouse: Thanks, man. Excited to be here, Jon. This will be fun.
[00:00:50] Jon Blair: So for today's topic, I mean, here's the thing. I feel like you and I can chat about any number of things when it comes to scaling a consumer brand in the DTC context.
I've kind of got earmarked like for us to chat about this balancing act of marketing efficiency, growth, profitability, but then also cashflow. And the reason why I think you're, um, the reason I consider you an authority on this topic is because. You've got this multi dimensional background of being in the trenches as a co founder of a consumer brand, right?
Um, an operator in that brand, not just a founder, an operator of High Key, and actually you've also held several executive positions. in consumer brands as well, and also had a nice little stint in the investment world, CEO sitting on, um, as an operating partner in a PE firm in the space. And interestingly, a, in my opinion, a super talented marketer, but you can talk shop on the realities of like one, the messiness of scaling a business and two, the, the, the connection back to ultimately what matters the most.
Profitability, cashflow, building a business that actually generates value through generating economic value in the form of cashflow and profitability. And so because of all those reasons, I'm really excited to dive into this topic before we get into the weeds of chatting about some of these things. I just, I really want the audience to understand your background and your entrepreneurial journey and what's brought you to this point.
Uh, cause I think that will really help them understand the diverse perspective that you have on scaling a consumer brand.
[00:02:43] Rya Rouse: Yeah, for sure. So, um, you know, I spent 13 years in finance. I'm four. I just turned 45 actually two days ago. So when I graduated college, entrepreneurship was not fun and sexy and new, right?
Everyone did consulting and finance and all these things. So, um, so I, I, I grew up in finance and, um, 2012, a friend of mine came to me with an idea for a business, healthy, prepared meals delivered to your door. Fairly ubiquitous. Now, it was not at the time and we certainly didn't know anything about it. So I dove into Entrepreneurship startup operating Through that lens and through that experience, you know him and I he had had the idea for this business he had done a lot of legwork in terms of Figuring out what the business was going to be and doing some branding work on the business But we hadn't launched the business yet.
So he called me bring brought me in and It was trial by fire. You know, we, we did raise a little bit of friends and family money, you know, admittedly, like institutions weren't interested in the space at the time. We could go into why I think I'm grateful for that. It made it much more challenging.
Certainly. Right. We used a lot of our own money and we used Uh, friends and family money, but we had sort of this proverbial two year convertible note open that was, you know, we were just sort of piece mailing money into it and then we were covering the rest ourselves. Um, so, so I spent five years in an operating role in a, in an early stage startup where we were underfunded the entire time and that's relevant because we couldn't really hire experienced people.
Right. So I think again, same point I'll make about. You know, the lack of ability to raise outside institutional capital is we were forced to use our own a lot of our own money. We're always short on money, and so I'm grateful for the experience. I can't tell you confidently that had we. Raised 10 million, 5 million out of the gates that I would have had the same mindset about profitability bootstrappers mentality, I guess, is the best way to put it.
I can't confidently say I would love to sit here and say, yeah, you know, had we raised a bunch of money, I still would have been very diligent and used rigor as a, as it relates to spending money. But I can't say that. I don't know that. And so. It made it more challenging for us. Uh, we were certainly, we're low on money the whole time, but on the flip side, I learned every element of the marketing tech stack myself.
I, at one point was running our ads, Facebook and Google learned SEO, learned email, learned content. Um, and that wasn't fun looking back. It sounds like it was, and I'm grateful for it, but, but you're grinding, you know, you're doing all those things yourself and you're doing it without a lot of money, right?
Um, so, uh, I left that business the day to day that business in 2017, it did go on to be acquired at the end of 2020 for almost 300 million. So an amazing outcome, but it was, it was a grind for the entirety of the five years that I was there. Um, And then since leaving the day to day I have, to your point, I've taken, I've done a lot of consulting with a lot of omnichannel consumer businesses across all different categories.
I have taken three leadership roles. One is the head of growth at a healthy baby food company called Serenity Kids. I was the CMO at a company called High Key, which is a low sugar cookie company, Omni China business, mass retail, as well as e comm, uh, spent a year as an operating partner at a private equity company that was investing in digitally native consumer businesses, helping them scale into retail.
And then most recently was the CEO of the aforementioned High Key. Uh, so I spent seven months as the CEO of High Key. So to your point, like I I'm, it's a, it's an interesting background. Right. If, if you were to go talk to a recruiter and say, Hey, what's, what is Ryan the perfect fit for? I think they might be a bit confused about what I'm the perfect fit for, but I'm grateful.
I do think, you know, at this point, as you're thinking about your career, it's sort of, in my opinion, you're trying to get a. Fully rounded perspective. And I don't think you ever get there, right? It's a dynamic game. The game of business isn't, it's not conducive to saying I know all things from all sides that that's a farce, but I feel like I've got a really good perspective and had looked at it from multiple angles, both from the operating side, the bootstrapper side, the entrepreneur side, the investing side, you know, and then different roles inside businesses.
So I've, I've, I'm. Grateful for the different lenses I've been forced to view businesses by because I just think it helps, you know, in the totality of how you view things.
[00:07:21] Jon Blair: I love it, man. Um, we, we, you and I certainly don't have the, obviously the exact same background, but coming from the early state, like working in house at early stage, um, startups and being on the founding team and guardian bikes, a lot of very similar stories.
Almost all those companies being very underfunded the whole time and looking back the range of skills that I learned because I was originally trained as an accountant. Um, most people don't know me as an accountant today. I'm much, most people know me as an entrepreneur today, but why? Cause when you're, when you're part of founding teams, You have to have range.
Like, yeah. What did I own the finances of these companies? Absolutely. But did I get involved everywhere? Yeah, we had to, cause we didn't have enough money to hire everybody else. Right. Um, and I actually would agree with you that was it all fun? No, it was not all fun. Am I grateful for it? A million percent, right?
Like I would not have the perspective as a finance professional that I have today. If I didn't have that entrepreneurial experience, the way I like to explain it to people is that like. I was getting a PhD in what it actually takes to scale a business, right? And that's all kinds of things outside of my primary, like what I was primarily trained to do, which originally was accounting.
And so, um, it's really cool, man, because You know, when I think about the consulting world, which you and I are now both in, in this season of our lives, right? The consulting world, you and I know this from being on the operator side, I've been screwed and overcharged by every consultant you can imagine.
Marketing consultant, strategy consultant, supply chain consultant, spent tens of thousands of dollars or more and felt like I got no value. And one thing that I always tell brands that I'm talking to on sales calls is like, Hey, We're a small boutique firm. There's only about seven of us. Everyone has worked on the brand side before.
So we are not out of touch career consultants. We have been in your shoes and we actually know that there's nothing worse than a consultant giving you this plan that like, it sounds so amazing on paper, but on the other side is the operator. You're like, That's not possible. That's not practical. I can't implement that.
Like you don't, you're so out of touch with like the reality of like my actual problems. Like, can you speak into that a little bit from your perspective? Like literally your background is being an operator. How does that position you to be that much more of a valuable person? Consultant given that you know what it's like to be in the shoes of your clients.
[00:09:59] Rya Rouse: Yeah, I think it's really important. I'll take a step back and say, you know, one of the problems, one of the issues we had when we would hire the wrong person, whether that's a consultant contractor agency, full time employee is not being crystal clear on what we were looking for, what we needed in the business at the time, right?
It's very easy. I think in this world of. Of creators and LinkedIn and Twitter to follow people with large audiences and to place a large amount of credibility on them strictly for the size of their audience rather than their body of work. And so you, you go into a conversation, you're sort of so happy to just be on the phone for as, as funny as that sounds.
It's true. I'm on the phone with this person who I looked up to. They have this large audience and I just want your help. So and so. As opposed to being very, very clear on like our needs at this business, in this business at this time are right, this very clear about what we're looking for and then asking, you know, and then seeking out the solution to that.
So I think that's, it's an important takeaway is to just, I, I always, every time I'm on a call with someone is to just. Is to push back on them to make sure they know what they're looking for. Now, to your point, yeah, I think it's really, really important. It's certainly an early stage, right? What a, you know, what a fortune 100 company right now want more of like the Deloitte consultant that's looking at a full blown implementation of an ERP system or me, probably the former, but if you're talking about a sub 150 million.
Company that really wants scrappy tactics and high level strategy combined at the same time. They want that from someone that's been in the weeds in those businesses, because the challenges that have 150 million and below business faces is going to be wildly different than the Nike's of the world.
Right. So, so yeah, I think, I think it's all about the type of business and what their needs are, but certainly, um, certainly putting the reps in, in this situation. Of the company that you're going to help specific to the needs that they're trying to solve is going to be a much better solution than someone that's just never done it before.
[00:12:20] Jon Blair: Totally. I am 100 percent agree. And you know, for me, the space that we sit in, um, at Free to Grow CFO, you know, we help scaling DTC brands between about five. And about 65 million in revenue. And like that, that stage, that lower to middle market, you really need to be in touch with the actual challenges that that brand is experiencing across the business, because it is this, I mean, every stage of business is hard.
There's not a stage of business that isn't super freaking hard. Right. But like that stage of business is especially hard because you're literally The way that I like to think about it is, you know, the concept that the scientific concept of like, you know, uh, cell multiplication, right? And like that multiplying going from like one cell and splitting apart into two and then splitting apart into four.
And then it's painful. It's so painful, right? And all the while, Your business is not running the business. The operation serving your customers. That's not getting any easier. It's not getting any slower, right? And all the while you're literally building the plane while you're flying it. So anyways, I think that's super awesome.
A lot that we relate to on that level. And I think super valuable for brands in that lower to middle market that we serve. I want to turn our attention now to talking a little bit more about marketing performance. Um, as it relates to profitability, it's, um, a spot, it's, it's a con, it's a topic that I've had several interesting conversations with you on.
Um, and it's also, it's obviously front and center in the world of digitally native brands because of the challenges, the increasing challenges of scaling a digitally native brand through digital advertising and other channels. In a manner that's profitable. What are the big mistakes you're, you're seeing out there that brands are making when they're thinking about attribution and or just marketing performance measurement in general, that's maybe leading them in the wrong direction to make wrong decisions as it relates to profitable marketing.
[00:14:33] Rya Rouse: Yeah. I think the first one. You know, and, and, and this is largely changing, but you know, we're, we're on the back end of a, of a consumer bubble where, you know, for a very long time, institutional dollars, certainly venture capital wasn't coming into consumer brands. Right. And then when venture started coming in, and this is not placing blame on anyone.
This is the, the facts are
[00:14:57] Jon Blair: venture
[00:14:57] Rya Rouse: capital is not interested in consumer. And so consumer businesses had an, a playbook that was very old school. And I mean, old school in the best way, right? Profit first managing margin profile and understanding that self sustaining business is your path to success.
Towards optionality and optionality is your North stars of business. In my opinion, right options. The only way you have options is if you can say no to something that's presented to you and still thrive and still grow and still make it and still succeed. So for a long time, venture capital wasn't interested than they were.
And when they were, they were very, very interested, right? And so you have a lot of money flood flooding into consumer businesses. And again, I mean, it's very easy to place blame on venture capital or investors, or even on, on the bubble itself or on direct to consumer for that matter. None of those are at fault for anything that happened.
Everything is at fault for everything that happened recently, which is we lost our focus on profitability. Easy to say that obviously, but I think there's, there's a difference between, let's use one specific example. So it's not so vague, one big, big problem that arose because of that was this idea of payback period, right?
You would hear, I remember one of the first people I ever. Started learning marketing from was Ryan Dice from digital marketer when I started when we started factor And I didn't know anything about digital marketing. I found digital marketer comm which is a brilliant URL And he's a brilliant teacher and that company did a very good job of just training people who knew nothing about digital about how to think About digital you have to keep in mind that They were largely not looking at e commerce businesses, consumer businesses, direct to consumer businesses.
They were, they were thinking about services type of businesses, right? And so one thing that I remember him saying was he or she who is able and willing to pay the most to acquire a customer will win. And this is, this is, this is a truism, but it's nuanced like everything else, right? So if you take that as fact blindly without peeling back the layers of the onion, you say, Oh, I should be willing to pay as much as possible for a customer because that's how I grab market share.
The nuances there are that cashflow matters and that profitability matters. And so one huge mistake I certainly saw throughout the bubble was. People and brands and companies and operators taking that as without the nuances that matter, meaning, Oh, I should just pay a lot to acquire a customer, right?
Well, first of all, you have to know what your customer's worth in contribution, margin dollars, and when that money comes, right? So a standard LTV curve, your LTV is 800, but it takes two years to get it. Well, you first of all have to strip out all the variable costs from that. And then you have to understand that that 800 is really only 300 over two years.
Okay. You can't pay even 150 to acquire that customer if you don't get paid back for 12 months. Not in a consumer business, right? Because cash flow, as you very well know, and many who are listening to this will know, the challenge, one of the biggest challenges with consumer businesses is the cash flow element.
You have to buy inventory. You have to buy it ahead of time. You get paid. Paid late from certain customers. Right. And so your cash conversion cycles really, really critical. So, so I say all that to say like you have one of the big mistakes that I, that, that I constantly seeing being made is taking these.
Statements about things that are actually true. Like that's a true statement. He or she who's willing to pay the most to acquire a customer will win. That's how you grab market share, but not applying the nuances to their business. And in a consumer business, that's cashflow, that's inventory, that's understanding your customer unit economics.
So overall point being, you have to understand how much your customer's worth when that money's coming in and whether or not you can handle. From a cashflow perspective, paying X, Y, Z, right? X amount to acquire a customer on paper. If my customer in contribution margin dollars is worth 300, I should be able to be, or be willing to pay 150 in a silo.
But if I don't get paid back for 15 months, it's a dramatically different business model. That's not tenable rather than if I get paid back in three months, that is potentially tenable, right? So all, all of it has to be specific to your business is just take this high level sort of guardrail advice that you get, understand that even if it's true, it may not be true for your business or said differently.
You have to apply it to your business and then you really have to get into the nuances because, you know, a tweet that sounds really good and a bunch of people are, are, are commenting on it about how true that is, is only true if it's true for you.
[00:20:08] Jon Blair: Totally. And you know what? So one side note, I don't want to get us on a tangent here cause I want to come back to several things you said there that are really important, but one of the issues with short form content is that there are only so many characters, right?
That someone of influence. can make a statement with. And I've even, you know, you know, you and I both have our own LinkedIn content. Um, and one thing I've actually started to say is make one of these general statements because it's true, but I'll say later on in my post, there's nuances here. And like my goal in this post is not to draw out all the nuances.
It's to make a statement about something true that I want to get people talking about. So, But I will be humble enough to let you know there are nuances to this. And if you want to discuss the nuances, let's take it off LinkedIn, right? Because there's just too much nuance to talk about. But I've started to do that because I don't want to mislead people because I have seen influencers out there.
I don't know if they're doing it on purpose or not. I think some of them are. Some of them are not. But I've seen influencers mislead people by making these generally true statements. And not make the a a the sub statement that like, there's nuance here, so be careful about how you use this. But that's not the goal of this short form post.
Right? That's
[00:21:31] Rya Rouse: right.
[00:21:31] Jon Blair: That's right. But that aside, I wanna dive into contribution margin a little bit more. Um, 'cause you brought up, you brought up a couple things that are, that I see as a fractional CFO for scaling D two C brands. I see time and time again. One is brands not operating with a financial model, right?
And so, uh, when I say financial model, I mean a projected PNL and balance sheet and cashflow statement, what we in the finance world call a three statement financial model, right? And what's important reason I'm bringing that up is because you brought up several times. Hey, yeah, profit profit, but cash flow, right?
Those things don't ever equal profit never equals cash flow It never does especially in a consumer brand that's capital intensive requires inventory investment, right? Um, but additionally You can't optimize only for unit economic or, well, I won't say unit economic. I'll say marketing tactic decisions.
You can't optimize for a single piece of that just for order level profitability. You have to run it through your model and go, can we float this cashflow wise? Like given our capital structure, how much equity cushion do we have? What debt do we have available to us? And how many days of inventory do we have to hold at any point in time?
And so something new. that I almost most of the brands that we end up encountering in our sales pipeline at Free to Grow CFO, like all 99 percent of them don't have a three statement financial model. And that tool is so foundational in being able to see, I think, I think a lot of brands, at least, If they say they have a forecast, it's usually just the P& L, the ones that we encounter.
And that added dimension of cash flow and balance sheet are like, there, you have to see all three of those dimensions. If you don't, you could optimize for something on the P& L that totally screws you up somewhere on the balance sheet or in your cash flow. And then the other thing that you mentioned, which goes along with this, is like, the timing of, Your LTV coming to reality, right?
That like, what is that period? And the reality is the way that I try to explain it to brands in simple terms is like, look, if the LTV gets paid back over a longer period of time, you need to have the cash reserves to basically operate unprofitably on that customer base for that period of time. Right?
And so if I take some of our more profitable brands. That can that, you know, maybe have 20 to 25% EBITDA margins and they're doing 50 million a year in revenue. Well, at that profitability, they have cash reserves that they can afford to not get paid back fully by a, a customer's LTV for maybe 90 to 120 days.
But if I've got a brand doing 5 million and their EBITDA is 5%, they've got very little cash reserves to operate unprofitably for even 30 days. On on a new customer, right? They literally need to generate their minimum contribution margin dollar target on order number one. Um, you know, what, what, what other, uh, what other nuances do you think about if you're sitting down with a brand?
You've kind of run through your diagnostic, right? Um, what are some of the just other areas that you talk with them about or levers that you talk to them about that they need to consider when they're thinking about how profitable they need to be on a first order versus, you know, getting paid back, um, by LTV over time?
[00:25:20] Rya Rouse: Yeah. Yeah. Let's back up to your LTV. Cause I think there's so much important stuff inside of that. And again, we'll, we'll circle back to this. Sort of very short statement that has truth to it, but is missing nuance LTV to cap, right? This, this thing that largely SaaS businesses sort of made popular and then venture came in and said, Hey, this is, we will judge your business model based on your LTV to cat fair.
Right. And what we're looking for, I literally looked this stuff up when we first started factor, right? You're in this, you're in this like information gathering mode. You're like, I literally don't know. Anything. So where am I going to find this information? Like, Oh, cool. Right. And what am I aiming for?
Three to one. Okay, perfect. Three to one. All right. Well, SAS different than this different than consumer, right? SAS going to have a large upfront fixed cost and then low variable cost over time. So an LTV to cat in general for a SAS business relative to a consumer business is going to be, should be. Is wildly different, but let's just say three to one works and you say, okay, I'm, I'm optimizing for three to one and you've seen a ton of decks in your day.
So have I, and they say our LTV to CAC is three to one. Okay. That doesn't mean anything, right? A non time bound lifetime value. Let's just dig into the mistakes of lifetime value. Cause cause to answer your question, a lot of it is around how they're viewing their business model. Right. Are they viewing it in the appropriate way?
And not that there's one way to view it, but there's certainly wrong ways to do it. So if you say our business model is sound, our LTV to CAC is three to one and period. Like that's not enough. How long does your LTV take to materialize? First of all, how are you defining LTV? LTV in a revenue basis. I view LTV from a revenue perspective as a measure of retention, not as a measure of business model sustainability, right?
If you are seeing your LTV on a per customer basis grow over time, you have good retention. There's certainly other retention metrics, but if you just had one metric and you said, hey, how are you going Judge whether or not this company has retention LTV cohorts are the way to do it to me. If you could only pick one, because you're looking at how much was the average customer in a cohort worth on their first order.
And then what were they worth at three months, six months, nine months, 12 months. And is that growing, right? Because in consumer ALV is not going to move wildly. Yes, you can do a lot of things in order to increase your ALV, but generally speaking, certainly on a consumable. But most consumer businesses, ALV is going to stay within a relatively tight band.
Therefore, you can't have a low percentage of customers making your LTV grow over time, right? There's going to have to be a good subset of customers that are adding orders regularly in order for your LTV to grow. So to me, the LTV on revenue and how much it's growing over time is a retention. Litmus test, not a business model litmus test.
So that's one. So we're talking about how do we judge, like, how are we defining LTV? LTV is a, is a gross margin number at, at worst or at best, however you want it to find that it's not revenue, right? If you're looking at the business model, you're saying our LTV at the fully loaded gross margin. So that's product cogs, fulfillment, delivery for a e com business.
How much is, how much is there are customers bring to us after all the costs associated with getting it to them before marketing. Now you put that number relative to CAC. And then that LTV number has got to be time boxed. So you say our 12 month LTV LTV is defined as lifetime value of a customer on average, from a fully loaded gross margin, gross profit perspective.
This is how much they're worth in 12 months. Over how much we pay to get them. That's a much better, right? So I would say six month LTV to CAC from LTV being gross margin fully loaded. And then our CAC, that is a more of a business model question and answer than just a, a, you know, a non time bound LTV.
That's a revenue based number over your CAC, because that doesn't give you any indication of like your margin profile of the business. You know what I mean?
[00:30:06] Jon Blair: First off. Brand founders and operators listening to this, Ryan just gave you like a mini masterclass on how to think at, in my opinion, a very sophisticated level, um, about thinking about marketing, um, measurement. Now, to be clear, I think you would agree with me, Ryan, these concepts aren't super technical.
They're not super hard to understand. It's just that what, what Ryan's breaking down here. I would say the, the upper echelon of, of marketers are thinking in this way and a lot of other people, I would say that the masses are thinking in the way that Ryan's telling you not to, in terms of like thinking about LTV at just a gross revenue basis.
Additionally, one thing that I've recently started saying, Ryan, and this is actually because it's becoming a closely held belief of mine. is that contribution margin is the real top line, right? And for us, we use slightly different terms in Free to Grow. Um, we have gross margin is just landed product cost.
What we call contribution margin before marketing, which you're calling fully loaded gross margin is basically backing out all. Yeah. Non product cost basically the, the, the variable costs to get the order fulfilled, right? And then we back out marketing and that's our contribution margin after marketing but like Contribution mark, uh contribution margin dollars.
That's your real top line because Generally speaking, top line revenue somewhat means nothing from, from a bottom line profitability standpoint. If you're not charging against it, the per order or per unit costs that get deducted from every dollar of revenue that you generate. So really, contribution margin dollars that are left over to cover your fixed overhead and then contribute to bottom line.
That's really your top line. And I think that interestingly enough, I come, like I told you at the beginning of the show, I come from an accounting background and I was the rebel. I went, I didn't go big for accounting. I went straight into being an entrepreneur and working with startups. And I eventually did get a certification.
In the CMA certification certified management accounting and what most people know the CMA certification for is cost accounting. Um, it's actually turns out to be a lot deeper than that, but that's what it's known for. And this concept of contribution margin used to be when I took the CMA exams 15 years ago.
Um, that was a, that was a concept that was left for the cost accountants in the world at that time. Like you didn't have CEOs and founders of brands and lower to middle market talking about contribution margin. It's become a buzzword since. Yeah. And so, so for us, we're not talking about anything new in the finance world.
Contribution margin has always been a staple, right? Um, in the way that we model and we think about, uh, we think about a brand's margin profile and ability to break even or generate certain profitability, but it has absolutely become a huge buzzword, I think, partially because of the Investment dollars in the space drying up and brands needing it by necessity.
It's a necessity to become profitable and internalizing the concept of contribution margin is a necessity to understanding your profit equation as a consumer brand. But what I want to chat about really fast is like this buzzword, right? It is super, super. important to understand contribution margin, but I'm seeing a lot of people take advantage of this buzzword.
And actually I don't believe they understand what it means. And it goes back to your comment about like making a generally true statement, but worse than the fact that there's nuances. The person saying it doesn't even actually get it. Um, they're just claiming to get it. Are you seeing that? And if so, like where, where, like, where, where are you seeing that?
[00:34:08] Rya Rouse: For sure. I mean, absolutely. You hit on a couple of things that are important to hit on, uh, or, or to discuss. One is There's a lot of different terms for the same numbers. That's, that's an accounting and finance generally thing, but like, certainly as you get into just public discourse about business, uh, there are multiple definitions for the same term.
So it's important to just understand how you internally at your business define certain things. To your point, like. You know, gross margin, one gross margin, two contribution margin. I've seen our head of finance at companies I've been at. That's how they described it. Or, you know, uh, gross margin fully loaded, right.
Or gross margin, direct gross margin, indirect. So, so, so removing all that, just understanding that there's, there's multiple ways to do that. If I'm thinking about a business, the earliest business books I ever read, We're generally not talking about consumer businesses and definitely not talking about e commerce channel consumer businesses because it wasn't available.
And so I think one of the most important things I ever read was, let's just use, let's just define quickly for what we'll talk about here, gross margin, right? So. You have your gross revenue, net out your returns, and your, um, discounts. Then remove your cost of goods sold, the product, right? Then for e commerce, you do have to remove shipping and fulfillment.
That's not gap gross margin, but that's just, if you sell an order, right? What will you take home before marketing before overhead, before anything, what is coming to you and what's coming to you is the revenue. You got less, any returns and discounts, less the product costs, less the shipping and less the fulfillment.
So that's what's coming to you. Let's call that, just for this conversation to make it easy, gross margin. It's not according to GAAP and it's not according to the way a lot of people define their P& L. That's fine. Let's just call it that for now. The best business book, books I read originally, I remember saying all this idea of like, Hey, one million dollars per employee, right?
Is as a framework for how many people should I have on my team? It was like, Oh, a million dollars per employee. That was sort of like a widely used metric. I remember reading a business book very early on that said, we're talking 1 million in gross margin dollars per employee. The money that comes to you, that's a very, very, I'm not saying that should be your metric, but I am saying like, that's an, that what's coming to you is very, very different than what you're being paid for it.
So you have to be conscious to net out all of the things that are not going to get into your bank account before you spent money to acquire these customers. You have to understand what that is. So you have to understand how you and your finance team are defining your P and L and not get. Confused by anything that you're reading online or, or anywhere else about how they're defining certain numbers, you know, how you define certain numbers and then don't get caught up trying to redefine your numbers internally.
Just know what you define them and isn't what they mean, but yes, group contributions. So then if that's gross margin for this conversation, then the only thing you net out of that in my world to get to contribution margin is. Advertising dollars and processing fees. Those are the only two other variable costs that will move up and down according to how many orders you get, especially in an online world and e commerce universe.
So if that's contribution margin dollars, I, to answer your question, yes, it's everywhere now. I'm glad that it is, but with the good comes the bad, which is that some people don't know how they are describing it or what they're defining or describing when they give advice. So the best advice for you as an operator is, Get with your team align as a leadership team and a fine in your head of finance.
What are you calling each line of the P and L? Let your finance team worry about the accounting portion of it and what needs to be submitted. That's gap compliant. You should understand that too, but like we're operating the business under these. This is how we define each line of the P and L and know what's included in each one.
And then know what the percentages of each of those are and what the trend of each of those are, right? What are your returns? And what's the trend? What is your discounting off of gross revenue and what's the trend? What's your product cost and what's the trend? What are your shipping costs and what's the trend?
What are your freight costs and what's the trend? And then what are your, your fulfillment I think is the last one. And then certainly marketing underneath that, but you get the point. It's like you define it, how you do internally at your company. And then you need to understand why they're defined the way they are, what constitutes each definition.
And then what's the trend of each of those? What is the percentage of those costs? And what's the trend of the percentage of those costs over time? And are they getting better or worse?
[00:39:21] Jon Blair: I love that, man. Um, and honestly, you, you hit the nail on the head in so many ways. And what you were just talking through right now, one of the big things that we do as fractional CFOs for scaling DTC brands is we just go ahead and give the brands our roadmap for the chart of accounts and what should be included in each of those margins.
And then when, when, when the books are done every month, we hand them dashboards that we've built that trend out All of those costs that you're talking about, and so that way they understand if their contribution margin there's getting better or worse every single month, but they can see why which area of their variable cost structure is getting better or worse.
Right? Um, look, one thing I just want to say, man, I love, it's very clear the empathy that you have for founders and operators of scaling brands. Um, there's a lot of people who will latch on, like, there's a lot of people who will talk on these concepts and say, like, this is the way to do it. You are always in, in your content and conversations I have with you outside of this podcast, in this podcast episode, you're always going like, Hey, listen.
There's freedom to define things in a way that work for your business. Understand the underlying absolute concepts so that you know how to apply them in a nuanced manner to your business. You do have to understand that first. But there's nothing, in my opinion, there's nothing absolute in business.
There's all these rules that you have to understand and all these theories and concepts. They're tools in your tool belt. Right. But it actually is very similar to like, I'm a musician and one thing they talk about with jazz musicians, which are considered like in many, many, um, you know, many people consider jazz musicians to be like the creme de la creme of musicians.
What they'll all tell you is learn all the rules, learn all the scales, learn all the keys, learn all the modes and then throw them out the door. Right. And I look at the way that you approach business and that I approach business is very similar, which is, Learn all the rules cause you need the tools, right?
But then when you get in the trenches, throw them out the door and just grab them and nuance them the way that it works for your business. And I think that's, this is, I just want to call that out cause it's an important message for the DTC brand founders and operators listening to this episode. Like, you don't have to feel so constrained and so confined, right?
Like, yes, there's best practices. Know them. Because you want to know when to pull those out, right? Um, but don't feel like you have to do it like everybody else. And don't feel pressured by the prevailing messages in the marketplace that like, we've got to be doing things this way. Seek to understand these things.
Internalize them so you can break them down. Break the rules and build them back up in a way that works for you and your business and your business model. And I just want to call that out. Cause I, I love that about, about chatting with you and about the way that you approach giving advice to people. Um, so look, we only have so much time, so we're not gonna be able to get into everything, but I do want to chat about one more thing that I just think, I know you have a wealth of knowledge on, and it's something that's very top of mind for all the digitally native brands that we're working with a Free to Grow CFO.
Going omni channel, right? Breaking out into retail. There's a number of reasons why brands are considering it right now. There's a lot of brands that I'm seeing consider it, um, much earlier than I've seen in like, you know, previous years of, of the e com space challenge with scaling, uh, digital advertising profitably.
And so there's this allure of getting into retail to basically, you know, lift your blended marketing efficiency. Right. And, and, um, um, you know, find new channels to acquire new customers, but frankly, find new channels to convert customers who find out about you top of funnel on like meta or, you know, Instagram, Facebook, whatever, what, um, what is, when a brand comes to you and it's like, Hey, Ryan, we're thinking about going Omni channel, right?
We really want to break out into retail. We think it's the right thing. I know there's a ton of advice you could get in there with your background. But give me the high level of like how you would begin to advise a brand of the things they need to think about before they decide to venture into expanding into retail.
[00:43:39] Rya Rouse: Yeah. The, the irony is like, um, consumer was only in retail for the entirety of consumer until whatever, 2010, 11, 12. Right. And so, um, What we talked about when Venture came into D2C, D2C turned into a business model and not just a sales channel, right? I come, I learned this game on a D2C only business.
Prepared Meals does not have Omni Channel. It's not an option. So I was one of those people when I left factor, I sort of had this DTC lens. I was very emotional about it, loved it. This is how you grow businesses. But the reality is, if you look at the data, this is growing, but 20 percent of shopping is done online.
And of that. Half is going to Amazon. So you have to consider that if you are going to choose to stay direct to consumer only or direct to consumer plus Amazon, then you are wildly limiting your potential investor or customer base. That's okay. If you realize it, so I would say, okay, if you're going to stay without going into retail, that's fine.
You just have to understand what your top line revenue probably is going to be like where you're going to top out. I see a lot of beautiful 40 million online only businesses, right? I don't see a lot of hundred million dollar online only businesses. None actually, uh, AG one, sure. Like, but don't be the exception.
Don't you don't, you don't strive to become the exception, right? You don't scale businesses by being, we're going to be the exception. Like, that's just not how you do it. So, so that's what I would say. Like, like understanding sometimes your cap table, the way you've raised capital, isn't going to allow you to be a 50 million business because you have a 75 million valuation or 80 million valuation.
So removing that, which is a deep conversation and topic. If you're going to stay online, only understand there's a top that there's a, there's a ceiling to where you're going to grow your revenue and there's an efficiency that's going to start to decline when you get there. If you want to open yourself up to the other 80 percent of people who would prefer to shop in a store for most things.
Cool. Now you have to understand the differences in cost. And supply chain complexity and your finance function that are going to be required in order for you to get into retail, right? For every new customer you get. So you're going to use retailers, right? These, you can go direct, direct to Walmart. They cut a PO, they buy your stuff.
You send it to a distribution center at Walmart, pretty clean, but then you've also got distributors. Right? Some just work through distributors. So you got a UNFI, they're going to collect orders for multiple retailers, they're going to send them to their distribution centers, and then they're going to send it to the customer.
Now you have a relationship with the distributor. And you have a relationship, in our example, with Walmart Direct. Right? You may need to get a broker to get into some retailers, and the retailer that you got a relationship with through the broker only goes through a distributor. Right. And so I'm not going to get into like, try to confuse everyone, but the overall point is this, I would say internally to simplify all that down one, it can get complex and it can get expensive.
You're going to play slotting fees, just to pay to play, to get into some of these retailers. You're going to pay some of those distributors margin. You're going to pay some of those brokers margin. So you cannot probably. Go from having no retail exposure to every retailer. Let's just presume the buyer want from every retailer wants you in their store.
You're not gonna be able to do it probably because the cost is going to be up front and it's going to be hard. And then those retailers will pay you on terms on the back end. But even internally, if your supply chain team and your finance team are not familiar with the retail channel and all those different things that I just described, they need to get.
Trained up on that. And it's very different than how you're going to distribute into, um, e com, right? And your own 3PL. So, so there's a lot there, but I would say, A, if you're going to go online, only understand that you've got a ceiling. And if your cap table, Sets up such that that's okay for you and your margin profile sets up that like, Hey, a 50 million business for us kicks off 5 million at EBITDA and we can handle being a 50 million top line business because of our cap table and our goals and our desires.
That's awesome. That's okay. You don't have to be a hundred, 200 million business. If you want to get to a hundred or 200. You're probably going to need retail. And if you want retail, you're going to have to have a supply chain team, a finance team, and the cash in order to get into retail.
[00:48:37] Jon Blair: Totally, man. Um, I I've, I've dealt with it before.
I had a, I had a stint before getting into DTC. I actually came from more of the wholesale, um, and manufacturing world. And like, everything is different. The cash conversion cycle is different. Cause you've got receivables. Um, you know, the, your financial model changes. Um, how you, how your operations team has to prepare shipments so that they actually get accepted and not rejected.
Um, there's just, it, it, it's a lot of complexity. I'm not saying don't do it. There's a place for it. And like Ryan said, make sure it ladders up to your overall strategy, right, and your overall goals. Um, so in, I'm going to help us land the plane here. Before we close out with a final personal question, which I always like to ask everyone, tell me a little bit about your consultancy.
What are you doing today, and how are you helping growing consumer brands?
[00:49:35] Rya Rouse: Yeah, it's, you know, a lot of the stuff that we've talked about today, you know, my, it's funny, I've taken leadership roles on the marketing side of the house in, in a number of cases along the way, I've just never considered myself a marketer.
I've always, I got thrown into an operator role. And to your original point, when we first kicked off, I was forced to learn finance. I mean, I had a background in finance, but like business finance is different than finance, finance, finance, supply chain operations, marketing. And so I don't know, you know, like I, I happen to be very good at marketing.
I happen to have a business. And so I'm working with, you know, like I like to think of myself as like. What I would have loved to have had in when I was operating factor before I sort of know what I know now, which is someone that can speak intelligently on your leadership team across functions. I think the best people you add to your leadership team, everyone on your senior leadership team should have the ability to speak intelligently about every function of the business.
They're not an expert in it. They're not running the function, but if they can't weigh in and a at a minimum understand how their function. Is going to affect all the other functions, but more importantly, and more ideally be able to speak intelligently about those other functions where that leader has an issue and you can collaborate with them on a solution to it.
So that's how I think about it, right? You, you have a lot of complexity that the, the thing that I, my. Clients would probably say I do best is just find the simplicity, find the simple answer, try to reduce the complexity. What's the 80 20. I think it's incredibly hard to find the 80 20 of your own business because you can't read the label from inside the jar and you are totally squarely inside the jar at all times.
And so just an outside perspective from someone who's operated multiple businesses in this space, bootstrapped way. Had to look at profitability from day one and therefore have a lens that says, Hey, I can, you know, I can be helpful across a number of functions. Um, not just marketing because for marketing to work, you need all the other functions to work too.
[00:51:41] Jon Blair: I love that spot on their spot on. Um, Okay, so I always like to end with a personal question. You know that I'm a dad of three little kids. Um, in terms of being a dad, I think I did the math and I'm about four and a half years behind you in terms of the age of my youngest. And I've talked to you several times about like, just, I mean, I mean, I'm completely honest with everyone here.
Like, it's just all out insanity. It's the most amazing thing I've ever done. Raising a small family and scaling a business at the same time. But sometimes I question my own sanity. Like why am I doing these two things at the same time? They're both so exhausting. And so I'm asking for a friend here. How did you pull off raising a young family of three while being an entrepreneur?
[00:52:30] Rya Rouse: Yeah. That, you know, the, the really short answer, which is like not helpful is you just figure it
[00:52:38] Jon Blair: out.
[00:52:39] Rya Rouse: You know, it's, it's not unlike anything. I mean, think of all these challenges you take on within your life when, when you can look back and you say, we had no idea what we were doing, but we figured it out.
So there's an element and their strategy to this, right? Of understanding again, what's the 80 20 of like me being a father to me, I determined to ask that question and answer it right to me. I want to be present. I want to be available. I want to be around. Right. Yeah. Okay, cool. So, if, if My kids feel loved by me and I'm around and they see me every day not every day But most days I feel like I'm doing a good job there cool So then I don't have to get so stressed out about stressed out about all the other things as a husband If I'm of it once you have kids very different to be a husband without kids and it is with kids like Totally am I doing 50 percent of the work?
No, I think my wife does more than 50 percent of the work I think most wives do more than 50 percent of the work But, um, am I there when she needs me? Do, am I clear on what she's asking from me on any given week or day? Like, so just asking like, what do you need for me this week or this month or this day?
And if I'm there, most of the, if I can say yes, most of the time I feel like I'm winning, right. As well as spending alone time with her. And then same thing with the business. It's like at some point you 80 twenties overused, but it's overused for a reason. At some point you just have to understand what's important and the rest is just you worrying.
Right. About, about, you know, like, was I not there enough or was I will ask her, right? Like, was I not there for my kids? Ask them once they're old enough, you know, but I think it's just asking yourself and asking the people you care about what they need from you and asking yourself what you need and then trying to show up there as often as you can and let the rest just be what it is.
[00:54:30] Jon Blair: Dude, such sound advice, man. When you posted two days ago about your birthday, I actually read that whole post and it was like, I want to be Ryan Rouse when I'm 45. He's a few years ahead of me. Um, but man, I just, I really look up to your wisdom, man, on the business side. I'm, I truly, truly am someone who, um, holds you in high regard on the balance between, uh, you know, personal and business.
And so, I just, I can't thank you enough for coming on the podcast and sharing some of your wisdom. I might have to have you on again at some point because there's just so much that we didn't get into. Before we break here, um, where can the audience find more about you and your consultancy?
[00:55:13] Rya Rouse: Yeah, LinkedIn and Twitter, easy enough.
You know, after, after we just spent so much time ragging on those platforms, I'm a believer that there's a lot of good on those platforms. So, so hit me up on one of those if you're interested.
[00:55:26] Jon Blair: Definitely follow Ryan's content. Um, you know, I, I, um, shamelessly follow it all the time and I'm always like, man, where does he come up with all this wisdom?
Um, but thanks everyone for joining. Um, again, masterclass in so many important concepts, uh, today. So you might need to listen to this one twice. Um, and you know, if you're looking for help on the accounting and finance front, as you're scaling your e com brand, don't forget Free to Grow CFO. We're here to help you scale your brand alongside healthy profits, cashflow and confident decision making find us on a, you can find me on LinkedIn, Jon Blair, or our website, Free to Grow CFO. com until next time scale on.
Leveraging Data Privacy Laws to Increase Profitability: Ian Madigan with Dataships
Episode Summary
This episode of the Free to Grow CFO podcast features host Jon Blair engaging in an insightful conversation with Ian Madigan, Head of Partnerships at Dataships. The discussion highlights the crucial aspect of improving profitability for DTC brands by leveraging data privacy laws to optimize post-purchase email opt-in rates. Ian shares his journey from being a professional rugby player to joining Dataships and sheds light on how the company helps brands navigate the complexities of data privacy laws to increase their marketable audience through compliant email and SMS marketing practices. The conversation also delves into the importance of compliance and how Dataships helps brands navigate the complex landscape of data privacy, thus aiding in scaling with a profit-first mindset.
Meet Ian Madigan
Ian Madigan, Head of Partnerships at Dataships. Ian was previously a professional rugby player, playing 31 times for Ireland. He was an early investor in Dataships and moved into a full-time role in 2023. Having owned and run an eCommerce store, his passion now lies in ensuring that data privacy laws do not hold businesses back, the Dataships mantra of 'Growth Through Compliance' fits in well with his goals.
Episode Transcript
00:00 Introduction and Welcome
00:32 Understanding the Role of Dataships
01:49 The Importance of Maximizing Post-Purchase Email Opt-In Rates
02:15 Ian Madigan's Journey and Background
03:28 The Evolution and Impact of Data Privacy Laws
05:27 The Power of Leveraging Data Privacy Laws for Marketing
06:07 The Knowledge Gap in Brands and the Power of Data Privacy Laws
07:33 The Misconception about Data Collection on Shopify
08:37 The Impact of Data Privacy Laws on Marketing Consent Rate
09:07 The Role of DataShips in Maximizing Marketing Consent Rate
13:44 The Value of DataShips for Different Brands
32:09 The Double Impact of DataShips on Profitability
40:06 Final Thoughts
[00:00:00] Jon Blair: Hey, everyone. Welcome to the Free to Grow CFO podcast, where we talk all things, scaling a DTC brand with a profit first mindset. I'm your host, Jon Blair, founder of Free to Grow CFO for all of those, for all of those, for those of you that don't know Free to Grow as a boutique outsourced accounting and fractional CFO firm.
And what we do is we help scaling profit first DTC brands grow alongside healthy profit cashflow and confident decision making. Today on the show, I'm super excited to be chatting with Ian Madigan, head of partnerships at Dataships. Ian, welcome.
[00:00:33] Ian Madigan: Jon, great to see you again. Uh, thanks a million for having me on.
Uh, delighted to be on the podcast.
[00:00:39] Jon Blair: Absolutely. You know, today I'm really excited to talk about today's topic because when I met you in Ireland at that e comm event several weeks ago and learned about what you guys are doing over there at your company, Dataships. A light bulb went off that I think the problem you guys solve is something that a lot of DTC brands in, uh, the States are not zeroing in on.
And so it's, in my opinion, the reason why I wanted to have you come on the show was I think it's kind of a, it's a, it's a goldmine that some of these brands are sitting on. It's going to be more valuable to some brands than others, depending on the product that they sell. You know, uh, do they have subscriptions or not, but like.
Again, this was a problem that I was aware of, but didn't realize the opportunity. Um, for how, um, for how your product could actually, uh, increase profitability of a scaling brand. And so I'm super excited to chat today for everyone, um, in the audience to understand what the heck are we talking about today?
We're talking about increasing profitability by maximizing post purchase email opt in rates. And, um, I think you're going to find today's discussion super, super helpful and hopefully actionable. For you to actually implement some of the things that we talk about today into your DTC brands, marketing mix so that you can improve your profitability as you continue to scale.
So before we dive into the. Um, you know, opt in rate topic in a little more detail, Ian, I'd love for you to just share with the audience a little bit about your background and how you ended up at DataShips.
[00:02:19] Ian Madigan: Yeah. So before I, uh, took my, took the role of, of head of partnerships in DataShips last May, um, I was previously a professional rugby player.
Uh, so I played for. The top teams in, in, in Europe, in, uh, in Ireland, in, in Ster and Ulster. And then I also played in the top league in, in France, uh, with a team called Bordeaux Bag and in England with, uh, Bristol Bears. So I'd, uh, played over 300, pre 300 professional games, 31 times for Ireland. Um. But during that time, Michael, who's the CEO of Dataships alongside our co CEO, Ryan, he approached me back in 2013 with an idea for fantasy rugby, similar to some of the fantasy products that there are in the States.
We tried to replicate that in Europe with rugby, with a more kind of detailed stats based game. And we had good success with it. We built the game out. Um, at its height, you know, with 200,000 people playing it in, in Europe, which, um, for less populous countries, uh, isn't bad going. Yeah. Um, and then we, we, we subsequently sold it, sold a game, and it was really then in, in, in 2017 and 2018, that we pivoted into the data privacy space.
So in Europe, um. The GDPR was, was coming in, um, and we looked at building a one stop shop solution for SMEs, um, to ensure that they were going to be fully compliant with the GDPR. So at the time it was all, you know, privacy policies, cookies, tools, the big change we thought would happen with the GDPR in Europe was around, um, data access requests.
So customers making a request for their data. The merchant having to send it out in machine readable format, um, and we, we built a solution for that, but as, as, as it transpired, not many customers actually make these data access requests. And that wasn't really the change that the GDPR had, um, what we found that the GDPR, what a change was how data is collected.
And that's where we pivoted, uh, two years ago into really more growth space. And, and as you touched on at the start of the podcast profitability, so, you know, our slogan is growth through compliance. So, um, you know, as we all know that the cost of acquisition is going up with the, with meta ads being more expensive, Google ads being more expensive.
Um, you know, cokie tracking being nothing as effective, especially in Europe, and we can see that coming into the, into the States and Canada now, too. So, what we want to ensure is that, um, our, our, our clients can, uh, email and SMS market to as many of their customers as possible, and that's what we call the marketing consent rate.
So, the marketing consent rate is the percentage of your customers or the people. Um, traveling through your website that you're able to email an SMS market to. Um, and in effect, what we're doing is we're presenting the most optimal data privacy laws, um, to the benefit of our clients to ensure as many of their customers are opting in for marketing.
[00:05:35] Jon Blair: Awesome. I love that. So there's a ton to dive in there. I think you gave a really solid overview of like. What the problem is out in the marketplace from a data compliance standpoint or data privacy standpoint and how that provides a roadblock potentially to maximizing, I'm going to say it in simple terms, effectively, how many people you can email, right?
Or send SMS, uh, marketing text messages to and. Yeah, before we can touch on pretty much every aspect of that overview that you just gave us, but I want to dive in first to chatting a little bit about what you have seen as you guys have been growing data ships, um, what you have seen as the, um, kind of biggest knowledge gap out there.
Within the brands that you guys talk to and to be more specific when, when, when I sat down with you and really understood, um, what data ships does a light bulb went out off. Like I said earlier that like, man, I don't think a lot of my clients are even thinking about what data privacy laws are doing. To actually, um, keep them from growing their email lists and SMS lists to as large as possible.
And so I think that a lot of brands are thinking, they're thinking about buying paid ads. They're thinking about just emailing their existing email list, but they're not sitting there thinking about how do we get more people to subscribe through something as seemingly simple as. You know, uh, leveraging the data privacy laws, but the issue is there's a lot to know there, right?
And it's different from country to country. And so when you talk to brands that could potentially use data shift, what do you see is the biggest gap in knowledge of, of what these brand founders and operators just don't understand about, about the data privacy laws?
[00:07:26] Ian Madigan: Yeah, great question. And the biggest knowledge gap for me is the misconception, um, around data privacy and how data is collected on Shopify itself.
So everyone thinks that for, you know, a big platform like Shopify, that they'll present all the different options that data privacy laws around the world will allow. Um, and it was really only when we were asked, you know, probably for, I'd say the 50th, 50th or 60th. Uh, time by our, our current, uh, clients, you know, how can we gather more data on our customers compliantly that we dove deeper into the different platforms and Shopify specifically, and we wanted to see, you know, from our own knowledge of the data privacy laws.
Is Shopify presenting the most optimal options? And what we found is that Shopify gives you two options. You can either have a pre ticked box, which is, is fully compliant in, in, in the States and Canada, or you can have an unticked box, which is fully compliant in across Europe. Um, now the two differences with those two options is an unticked box where the customer would have to take the box to opt in for marketing converts at between 20 and 25 percent and that's compliant across the world.
Um, and then the pre ticked option, which is compliant in the States and Canada converts at between 40 and 50%. The odd time is high as a 60%, but you're still missing out on. On, you know, potentially another 40 percent in the States and Canada with a pre tick box. So, what we, what we do is we present the most optimal data privacy law.
Um, and where, where we see the knowledge gap is that in the States and Canada, for example, you can rely on implied consent, especially in Canada, where. And once the customer is purchasing a product, they're effectively opting in for email marketing in the States. The legal requirement is no consent required, which is effectively the same as Canada in the sense that once a customer purchases.
You're able to email market to them so we can get an uplift in the States and Canada from 650 or 60 percent all the way up to generally 98 99%. Um, and then in Europe, you know, you've got countries like, um, the United Kingdom, France. Ireland, Netherlands, um, where you can rely on soft opt in or legitimate interest, where the difference there would be, as opposed to a customer having to tick the box to opt in, they would have to tick the box to opt out.
Um, and that's where across our portfolio of, of, of, um, 450 clients, we, we increase the marketing consent rate. Up to 88% on average, but for our American and Canadian customers, it would be above 95%.
[00:10:25] Jon Blair: Wow. So this is fascinating. So let, let's break this down a little bit, uh, a little bit here and kind of summarize it for our listeners.
So we're talking about an, uh, post-purchase, um, or, or as part of the, the, the checkout process. an unticked box, right? Um, uh, in terms of like opting in to email marketing, that's converting at 20 to 40%. You said?
[00:10:51] Ian Madigan: Yeah. Yeah. And I don't take box in Europe. We'll convert a generally between 20 and 30%. 20 and
[00:10:56] Jon Blair: 30%.
Okay. And then at pre ticked box, Did you say 40 to 60%?
[00:11:02] Ian Madigan: Yeah.
[00:11:02] Jon Blair: Yeah. 60 to 60%. Yeah, exactly. But then, but then, um, leveraging implied consent, which means in the U S and Canada, it is compliant that if the, uh, customer executed a purchase, they're implying their consent to opt into email marketing that's upwards of 90 percent conversion in terms of, of, is it, am I correct there?
[00:11:27] Ian Madigan: Exactly that. It'd be even upwards of, of 97, 98 percent where, where you wouldn't have that, that total 100%, 100 percent would be if an American or Canadian customer, which was purchasing from Europe, but it was being shipped to the States, it would default to the safest data privacy law. So that customer might be asked to opt in or double opt in if they happen to be in Germany at the time.
And, but it will be close to a hundred percent, exactly that.
[00:11:52] Jon Blair: Okay. Okay. So we're talking Shopify only offers the unticked box or the pre ticked box. So let's say you go with your Shopify site, you know, to the, you know, maybe a little bit more, um, aggressive pre ticked, pre ticked box, right? Forty to sixty percent.
opt in rate versus 97, 98 with using data ships. We're basically talking close to double the opt in rate, right? Um, so if you think about, um, if you think about increasing the profitability of your marketing efforts, you know, like Ian mentioned earlier. In the post iOS 14 world and you know, seeing CPMs get more and more expensive on Facebook and you know, Google advertising costs are going up more and more brands that I'm working with as a fractional CFO, they're turning to their retention, right?
And they're saying like, look, we still need to use, we still need to use pay per click advertising or top of funnel. Advertising channels like Facebook to drive awareness and acquire new customers. But we're going to really make our profit or at least the bulk of our profit. We're going to make on repeat purchases and we're leveraging our email lists and our SMS, um, lists in order to do that.
So thinking within that kind of like view of the world that we live in, in, in trying to, to scale a profit first DTC brand, if you're converting on your Shopify site, Double or close to double. The number of people that are opting in post purchase to email marketing. That is, that can be for the right brand, that can be massive for driving your, um, driving your marketing efficiency and ultimately your contribution margin through the roof.
So walk me through a little bit of what are the types of brands or maybe the types of products or, um, I don't know if it's subscription versus non subscription, like what are some of the core key characteristics that you see? In a brand that really, really benefits financially from using a product like Dataships.
[00:14:01] Ian Madigan: Yeah, like, so for us, it is wide ranging, um, you know, the, the cosmetic space in particular would be one that would work well, you know, repeat purchase products, um, not necessarily high AOV, but we would have some, some clients that are high AOV. Um, and then, you know, a wide, wide range of products. But you know, across our, our portfolio we would see the most in, in supplements, cosmetics, footwear, um, clothing, um, pet supplements is a, is a really popular one.
And when you were talking about subscription there, where, where we would be popular would be in trying to, uh, in, in ensuring that for one off purchasers. That they can be marketed to, and then with the goal of turning them into subscribers, as opposed to, you know, maybe one in five or two and five of those one off purchasers, um, being marketable and maybe only 50 percent of them turning into subscribers, we'd be increasing that to four or five out of five and ensuring them that they're, they're moving on to subscription.
Um, but yeah, for, for really high average order value products, um. It's not as good a fit because generally that the repeat purchases aren't going to be there, um, or it could take, you know, maybe 3 to 6 months or 12 months for those repeat purchases to happen. Um, but, yeah, in those other sectors, it's, it's really powerful and, you know, ultimately, Jon, if you've 1000 customers coming through your checkout, and, you know, even with a pre tick box, if you can market to 500 of those.
And you're converting what we generally see with email marketing. It's kind of between 5 and 15 percent will be kind of the market average we'd see. But if you can, if you can maintain that 5 or 15 percent would increase the number of people you're marketing to, to close to a thousand. Then you're looking at a significant return.
[00:15:52] Jon Blair: Yeah. So I think there's a couple of interesting points that we can dive into on that. One is, and you know, we talked about this when, when I met you in person in Ireland, walk me through what you tend, what you were seeing with these brands. They, they get on, they start using data ships. Um, let's say they've doubled their email opt in rate, um, from 45 to 90%.
Right. They were using the pre tick box before. What do you guys tend to see in terms of two, two key components? Cause I'm sure every brand founder operator listening to this podcast is going to have these questions. Okay. Well, what, what is that, what are you seeing is happening to the conversion rate on email, right?
Cause the, the, a big risk is conversion rate dropping so much that it offsets the additional subscribers and two, what do you see in terms of unsubscribes over time, or is that 90 percent that's retained post purchase? Or opted in for post purchase, are they sticking? What are you guys seeing with the clients that you're serving?
[00:16:55] Ian Madigan: Yeah, I think, you know, brands are very wary of the unsubscribes. And I think when you, you know, you, you promote through a competition or a giveaway, you're going to get people who will sign up for the competition giveaway. But then once the competition passes and they don't win, they will then unsubscribe.
And they're not necessarily valuable, um, data to have. But what's different with, with our list is because they're actual paying customers, they've gone through the checkout, they're more vested in the brand itself. Um, that when they do get marketed to it generally sticks and they're happy to see marketing content to, uh, from the brand.
Obviously it's, it's over to the, the, the brand itself to ensure that, you know, they're segmenting while the timing of their offers is good. Um, if you're sending out, you know, poor quality emails. Not necessarily good offers are relevant to the person. You will still see a drop off, but what we see is the actual unsubscribed percentage will stay the same as it was pre data ships.
Um, but because you're having more of your customers actually subscribing to emails. The actual number will go up, but the percentage will stay the same. So if it's 5 percent of 500, you're looking at, you know, 25, um, unsubscribes 5 percent of a thousand, you're looking at 50 unsubscribes, but, um, yeah, we'd keep a very close eye on that.
Um, and ultimately what we've seen is that, that, um, customers are still happy to receive marketing information from, from the brands that they've actually purchased from.
[00:18:29] Jon Blair: Yeah, that that's huge. And I, I think you, you're bringing up a couple, like just. Regardless of whether or not you're using a tool like data ships, there are just some core tenants of good email marketing, right?
That like you're going to want to adhere to, like you said, segmenting so that you have some sort of personalization in the email journey. Right? Um, which is hopefully driving relevant information going to each of each of your email segments, the right offers at the right time. If you're just, if you've got poor email, um, marketing strategy or, um, you know, tactics, that's going to drive unsubscribes, whether you use data ships or not.
Right? And so, um, I do really love how this is tied into. Post purchase because like you're talking about they've already voted with their dollars that customer right for a product From this brand and so this is not about some sort of a gimmicky way To drive email subscribes like you brought up the giveaway or you know something something of free value This is about deepening a relationship with a customer that has already transacted with the brand, right?
And so it's like, uh, it's in my opinion from an email marketing standpoint. It's like a high leverage moment, right? Or, or like you can either kind of lose that customer, um, in terms of like lose their attention, right? And the ability to talk directly to them post purchase. Or you can capture that customer by getting them to, to opt in.
You already have a relationship with them. And so you actually have something already preexisting to leverage. You're not trying to leverage something from zero to something. Right. And so, um, I love that. I want to talk a little bit more. About data ships itself, just so that, um, the, the audience can kind of wrap their mind around like, okay, I think we've been pretty clear about Shopify currently offers these, these two options for, um, you know, marketing opt in post purchase it's pre tick box on tick box, right?
One's got a 20 to 30 percent conversion rate, the other 40 to 60, um, data ships has proven to. You'd be able to increase it to, you know, 90, as high as 97, 98%, but like from a practical standpoint, what, how, how exactly does this look to the brand when they want to go get data ships turned on, how easy or how, how hard is it to do?
[00:21:02] Ian Madigan: Yeah, great question. So I think first off, what we've, what we've kind of explained is, is for brands that are only selling into one region where data ship still works, you know, particularly well, if you're. Selling solely into the UK or Ireland or, or, or America or Canada, but also for brands that are selling internationally.
So they could could be selling into multiple different regions and each of those regions can have different data privacy laws. So, for example, Germany is particularly strict. So. Because our, our, our widget is, is geo located from the IP address, uh, backed up by the shipping address and billing address. Um, and off the back of that, then we're then presenting the most optimal data privacy laws.
So for example, in Germany, it's really strict. You have to do use double opt in. So the customer, if they're purchasing from Berlin and Germany would have to tick the box to opt in, and then they would have to double opt in via the first email that they'd be sent. Uh, in Klaviyo, so we would have a separate list in Klaviyo for, for, for, um, for any German customers.
Um, they're purchasing from the UK or Ireland or France, then they're being presented with a box where they would have to tick the box to opt out. Um, if they're purchasing from Canada or, or the States, then they're being presented with the marketing preferences. And a link to the privacy policy, which is still really important for, for, for the, uh, data privacy regulations, but they will be going straight into a marketable list within within Klaviyo.
Um, so, yeah, the actual, uh, dev side of what we do, we're in the Shopify app store, the installation. Um, only takes three minutes. Um, it's as simple as giving some access in, in Klaviyo and copying some script into the, um, the checkout page on, on Shopify where we're obviously altering what we're doing around the, the subscribe box.
Um, and then for SMS, it's, it's slightly different because the laws vary from, from state to state. In, in the States itself. Um, so yeah, the implementation on the SMS is maybe about 10 or 15 minutes, but the, um, the initial implementation of email is, is only three minutes to get up and running.
[00:23:14] Jon Blair: You know, what's interesting about this.
And I think we chatted about this a little bit when I was, um, Hanging out with you guys in Ireland. Um, you know, in, in one respect, what you guys are doing is not all that different, um, conceptually from the way that we view in the e commerce world, uh, these sit outsource sales tax, um, offerings. And here's why, because so like back in the day, in the heyday of, of like early days of e com, when I ran, um, accounting and finance departments.
You know, we have these sales tax liabilities all over the country and it's just this huge pain in the ass. So as you, as you scale, you get, you hit nexus and more and more states in the U S and you've got to go set up a corporate tax account and a sales tax account and, and you, and every, every government agency has a different website or some of them, you still have to mail in the application.
It's crazy. Right. And, and there's 52 states in the U S and so like. Part of you, you know, you're, you're pulling your hair out trying to manage this admin nightmare and this compliance nightmare and like, eventually you're like, man, is there some way to just like apply for all 52 states and just like get set up so that this can be done?
But then what's the problem? Once you get set up, you have to file the returns all the time, but then even worse, you have to keep up with all the different sales tax law changes in all of those 52 states, which is basically impossible to do if you're a, you know, small to mid size, scrappy, profit first, scaling DTC brand.
I look at data ships and like, yes, the tool that you guys have built from a software standpoint is Is slick in terms of how, like you can just get it set up in the Shopify app store super easily. Right. And it will automatically detect based on the IP address where the purchaser is located. And it will default to what you guys have deemed to be the, um, the email opt in rate that's compliant, but would most maximize, um, you know, consent.
But then here's the, the flip side of that coin. The laws are changing. Right. The law and as a brand, so like the point that I'm making is like, as a brand, you could go set this up on your store if you wanted to, to start in the US, but then are you going to have a team that's going to go keep up with how these laws and compliance requirements are changing?
Absolutely not. You're super crazy busy trying to scale a brand and then in comes data shifts. And we talked about this a little bit, um, you know, before the show, like you guys have this team who's keeping up to date on the data privacy laws and the different countries that you, that the tool works within.
Um, and that's where I liken it back to those sales tax agencies. We now, instead of managing sales tax ourselves, we're using XAMPP or numeral or Abilara, and you're just plugging into them usually oftentimes through some sort of a software plugin. Sometimes it is a Shopify app and they're handling all the sales tax backend for you, right?
Um, talk me through a little bit what you guys do at data ships. To unbeknownst to your clients, they don't have to deal with it. They don't just get this nifty little app that's maximizing opt ins, but you've got this team that's keeping up on the compliance requirements and if needed, tweaking your app to make sure that it, it stays compliant.
Walk me through what you guys are doing in the background there. Cause that's a huge, huge lift that you're taking off of these brands.
[00:26:47] Ian Madigan: Yeah. So like, first off, like on that point, like my, my passion doesn't necessarily lie in data privacy, you know, but where my passion lies is very much in ensuring that it doesn't hold businesses back and that's where like our slogan of growth through compliance, ensuring that the, you know, if, if there's a more optimal data privacy law that can be relied on.
Let's make sure that, that, you know, e commerce merchants are, are, are using it because they've, they've, they've so many different things to, to, to worry about. We don't want compliance to be holding them back and we've had so many merchants over the years come to us and they're just so afraid of these data privacy laws that they'll default.
To the strictest, but they might only convert a 10 or 15 percent or even on the high side, you know, maybe 50%, but they're still leaving 40, 50 percent on the table. And, you know, in my view, that's unfair because the e commerce merchants are doing an incredible job and getting, you know, potential customers to their website.
Then their website themselves itself is doing a brilliant job in converting these potential customers into paying customers. We want to ensure that those paying customers that as many of those are being marketed to, because there's been so much money spent and driving them to your website in converting them on the website.
It's, it's only fair that you can market to as many of those as legally possible. Um, so yeah, from, from a compliance standpoint, we have our own in house compliance team and we've, we've built out a rules engine for, um, 88 countries. So we have, um, the rules built. If we have a client come on and we don't have the rules built for that country, we will ensure that, um, we'll be up to date on the, on the data privacy laws.
It usually takes about two weeks for a new country to be added. And then we're staying on top of all the new data privacy laws that are that are coming out. So, for example, in the States at the moment, from state to state, we're seeing different regulations around SMS. So we're ensuring that we're, we're staying on top of those, ensuring compliance, whether it's.
Texting at a certain time in the day may be allowed in one state, but could be prohibited in another. We didn't share that. That isn't happening. And then similar with with the data privacy laws within Europe and the states, we're seeing that changing, you know, month to month and we're ensuring that. That, um, that our solution is, is keeping our merchants, um, up to date and ensuring that, that they're being compliant.
[00:29:19] Jon Blair: Yeah. So, you know, what's interesting about that, the fact that you guys have a compliance team that's staying on top of changes, right. To, um, whether you're talking about state level changes in the U S or you're talking about, you know, national, um, changes in the U S or, or, or in other countries. When we tie this back to how a tool like Dataships can help optimize your profitability as you're scaling, there's the obvious subject that we've been talking about, which is, hey, you're doubling your marketing opt in rates post purchase.
You know, and you keep your conversion rates and unsubscribe rates about the same, but you've got double the subscribers. Obviously, that can, that can really make a dent in marketing efficiency and profitability for your brand. But, additionally, you don't have to pay the overhead of the internal compliance team that you would need to do this on your own, right?
Dataships has that handled, right? They've got the compliance experts internally, so you're improving your marketing efficiency through that. The, the, uh, marketing opt in rate. Maximization, but you're also just removing, you're outsourcing the compliance efforts. To a company who is an expert at it, right.
And like, that's one theme that I see super common, uh, that really elite scaling seven, eight, and even nine figure DTC brands do really, really well is they figure out what their brand and their team is really good at, what their core competency is. And they just stay laser focused on that. And what I tend to see is that the brands, you know, elite brands, core competencies, product development, right.
Um, marketing. Customer experience or customer service. Maybe they're very operationally excellent, but, but you don't find a DTC brand who's crushing it because their compliance. Experts, right? Whether you're talking about tax compliance or data privacy compliance or other compliance, that stuff's usually outsourced as it should be because they're absolutely super important things that you have to adhere to as you're scaling, but they are not the core things.
That really set your brand apart in the marketplace, right? Like market, marketing and product development and customer experience. And so the point that I'm making here is that when it comes to scaling a profit first D2C brand, knowing what overhead activities and costs you should outsource. To experts in the field.
In this case, we're talking about data privacy, which is super important for a DTC brand. Absolutely. Make sure that your brand is good at that if you want to optimize profitability over time. So it's kind of like a, I wasn't even really thinking about this as we're preparing for the show, but you guys kind of have a double whammy in terms of how you can improve profitability, marketing efficiency should go up.
But then at the same time, you're removing this overhead burden of, of staying compliant. And I think that that's, that's really, really cool. Um, so I want to actually, um, I want to actually, before, before we move on to a slightly different topic, is there anything that we haven't covered in terms of like GDPR compliance in the U.
S. that you just think might be a knowledge gap for the listeners of, of this podcast? Anything else that you just, you know, I think that a DTC brand founder operator in the U S should know that they probably don't know about data privacy laws in the U S.
[00:32:53] Ian Madigan: Yeah, I think that the biggest one is that, you know, that a lot of the merchants in the States and Canada, they don't realize how preferential the laws are there.
If they're selling on a platform like Shopify, it doesn't allow them to utilize those different laws. Um, and that's where that's ultimately where, where we come in. Um, and yeah, one, one, one area that I didn't touch on is, is that the actual emails that we unlock, we, we actually track those emails and we see who, who has repurchased, um, and to the value of those repurchases.
So that's. That's a key way for us to ensure that we're showing the value of, of, of our, our application. Whereas if, if, if, if the, those emails weren't deemed valuable and weren't making the repurchases, then our, you know, our solution, you know, falls on its face. So, um, and, and, and tied in with that as well, Jon, is we ensure that we, we do, um, a, a two week free trial, um, to, to.
Show a dashboard within that dashboard, we'll be able to do a 12 month look back and show what our merch, what the merchants previous or pre data ships marketing consent rate was and then what we've grown it to in that 2 week period. And then we can also show the emails that we've unlocked and the value of those, um, repeat purchases and then depending on what, what sector they're in.
We can dive into them and show, and show, for example, if they're in cosmetics, we can show them cosmetic examples of the results that you can expect after a month, after three months, after six months. Um, so yeah, it's, it's, it's a kind of risk free way of, of, of trialing the app and ensuring that they see the value in it.
[00:34:35] Jon Blair: I love that the risk free trial is super important. And you showed me the dashboard when we sat down together in Ireland and, um, it's super helpful for understanding what the impact. Of turning the app on is and, um, that way, you know, when I think about, you know, some of the brands that we work with potentially considering using data ships, like, um, it's really easy for me to bring it up to them because it's not a huge lift first off to get it implemented and it's not a huge risk.
To test it out and, and get some analytics from, from your dashboard on, on really what is the app doing to improve the opt in rate and then ultimately the, the value of those additional opt ins, um, over time. So before we close up here. I like to end every episode getting a little bit personal with the guests that are on, on, and, and, you know, you mentioned earlier that you're a rugby player, which, um, I was actually on the plane coming home from Ireland and a guy sitting next to me on his way to Dallas, I'm in Austin, Texas, he had an Irish accent, and we were on the connecting flight from Dallas to Austin, and I said, Hey, man, are you, are you traveling to Austin from Ireland?
He goes, And he's like, I'm, I'm, I'm traveling to Austin for my first time for, uh, uh, uh, a show like with, uh, for work, uh, a trade show. It's like, that's funny. I'm coming back from Ireland, kind of from a trade show, my first time to Ireland. And so anyways, we started talking. And he was asking what some of the brands were, or some of the companies were that I met with.
And I was telling him, I said, Oh, and I met with this one guy. He was a rugby player, Ian Madigan. He's like, Oh, I know Ian Madigan. Um, and so anyway, so we actually talked about you on the flight home, but all that being said, you know, post, you know, your, your pro rugby career. Um, what does your personal life look like these days?
[00:36:31] Ian Madigan: Yeah, so I've, I've been finished really playing since, since May and, uh, full-time with, with data shift. So that, that, that certainly keeps me busy. And then I do, um, national television for the, the rugby when there's, um, either Irish matches on or the, the club games, um, which is the U or C or the, the European championship.
Um, and then I'm actually a promoter as well for, uh, American college football. So, oh, really?
[00:36:59] Jon Blair: I love it.
[00:37:00] Ian Madigan: Yeah. So I was over in, in, in Florida state, uh, back in October for, for, uh, again, there against the Gators and then I was back down in Dublin this weekend with the Georgia tech, uh, teams. So Georgia tech are hosting Florida state in Dublin in August.
And, uh, I'm happy. Promote that game to ensure that, um, I think there's 30, 000 Americans coming over and it's my job to ensure that there's plenty of Irish people there watching as well. Um, so yeah, there's, there's a good, good American connection there. Um, and yeah, then we've, uh, have two, two Labradors, Black Lab, Benji and, uh, Fox Red Labrador, Freddy.
So they're one and three and they keep me busy. So in my spare time, love going on hikes with them. Um, We've just bought a hay, so I can't afford to do anything else other than just walking up the mountain.
[00:37:54] Jon Blair: I love it. I love it. That's cool. I didn't realize your connection to American football. I'm a huge, um, American football fan, college specifically, my huge USC Trojan fam, uh, family.
And so we're huge. I've been going to USC Trojan games my whole life. Um, what's something that you're, uh, reading or listening to that's really impacted you, um, recently?
[00:38:18] Ian Madigan: Um, I, being honest with you, I don't, don't read a whole lot and I, I used to listen to more podcasts than, um, than I have done recently.
Part of it is just being busier and when I find now and I'm in the car, I like to just chill out and listen to some music. Um, but I got to see Bob Marley's movie there, um, last week, One Love. Um, you know, obviously it was very sad that he passed away at like 35, 36, I'm 34 now. And I think the movie itself just gave me a really good appreciation for life and, you know, how lucky I am to be fit and healthy and, you know, appreciate the smaller things in life.
And, uh, yeah, I've been listening to his album Exodus flat out since and certainly helped him chill me out and, and enjoy the moment more.
[00:39:06] Jon Blair: I love that. I love that. Um, yeah, I mean, look at, at Free to Grow CFO, I say this a lot in our content, but you know, business is much bigger than, um, than just making money for our business, actually our, our purpose.
The reason we exist is to build a profitable business that cares for people. And the reason that's our purpose is because. To me, business, yeah, yeah. We need to be profitable. Profitable is in there in service of caring for people, making a difference, right? Like a business should make a difference in the world one way or another.
Um, and so that I, I love the. It all comes back to this heart that like, Hey, we've got one life to live. It's short and we're here to enjoy it and make an impact. And so I really, really love that. Um, so before we close here, where can people find some more info on you and data ships?
[00:39:59] Ian Madigan: Uh, so I'm on, uh, Ian, IAN at Dataships, D A T A S H I P S dot IO, or our website, Dataships.
io will have, um, plenty of information from, you know, implementation, the app store itself, pricing, um, and, you know, more information really around what we do. Um, and yeah, if you want to, if you want to reach out and have a chat, I'd love to show you the product in more detail. And, um, if not, Jon, obviously has my, uh, my details too.
And it's been an absolute pleasure coming on, Jon. I've really enjoyed meeting you in person in, in Ireland and, um, big fan of what you're doing and Free to Grow. And you've already made some, some brilliant introductions, um, to me, which is much appreciated.
[00:40:45] Jon Blair: Of course. No, it's, uh, It's an honor to have you on as well.
I mean, we're here talking because what you guys are doing is very interesting. And I think it's kind of a little known fact that really can move the needle for, for a brand that's trying to scale and, and also shepherd, shepherd their profitability. So I really appreciate you coming on. This is super helpful.
Chalk full of nuggets that, um, the brand founders we're talking to can use to improve their profitability. So, you know, for, um, all that being said, You know, that's the Free to Grow CFO podcast for today, where we talk about all things, scaling a DTC brand with a profit first mindset. And don't forget, you know, if you need help, uh, with scaling your brand while also maintaining healthy profitability, cashflow, and confident decision making.
Reach, reach out to me regarding Free to Grow CFO. We're a boutique accounting. Um, sorry. We're a boutique outsource accounting and fractional CFO firm. And we work specifically with scaling DTC brands day in and day out. It's all we do. That's all for today, everyone. Let me stop here.
Leading a DTC Brand to $50M in 3 Years: Dean Brennan from Heart & Soil
Episode Summary
In this episode of the Free to Grow CFO podcast, host Jon Blair chats with guest Dean Brennan, CEO of Heart Soil, about the challenges of scaling a direct-to-consumer (DTC) brand.
Touching on everything from leadership to strategic decision-making, Dean shares his insights on the unique challenges and opportunities faced when scaling a brand. He emphasizes the significance of being consistent and proactive and maintaining a strong alignment with the brand's purpose. He also highlights his leadership philosophy which includes principles like trust, relationships, humility, prioritization, and high-value activities. Dean's journey, from his entrepreneurial influences as a child to his rise as a CEO, provides valuable lessons for growing a successful DTC brand.
Meet Dean Brennan
Dean Brennan, CEO of Heart & Soil Supplements, leads a pioneering brand in nutrition and health, with a focus on premium organ supplements. Under his helm, Heart & Soil has served over 200k+ customers and scaled to 50M in revenue in just three years, a testament to his vision and steadfast dedication to servant leadership with purpose. This commitment drives the company's mission to provide unmatched nutrition and lead a movement toward profound health and vitality.
Episode Links
Books or courses mentioned in the episode:
Traction: Get a Grip on Your Business by Gino Wickman
The Culture Code by Daniel Coyle
Coach Wooden's Pyramid of Success by John Wooden and Jay Carty
Decision by Design - FS Course by Shane Parrish
Episode Transcript
[00:00:00] Jon Blair: Okay. Welcome to the Free to Grow CFO podcast, where we talk about all things growing and scaling a DTC brand with a profit first mindset, I'm your host, Jon Blair. And today I'm super excited to be chatting with one of our Free to Grow CFO clients. It's Dean Brennan, CEO of Heart & Soil. Dean, welcome. And thanks for coming on.
[00:00:19] Dean Brennan: Happy to be here, Jon. Thanks for having me.
[00:00:22] Jon Blair: So, as you know, at Free to Grow CFO, we're fractional CFOs and accountants for growing profit first DTC brands. And given where we sit in the space, you know, we're uniquely positioned to spot common challenges and opportunities across dozens of brands that we work with.
And the challenge that I want to zero in today and for the next couple of weeks on, on the pod is. The common constraints to scaling. And here, here's why, because every DTC brand that we talk to, like, they all say that they want to scale, but it's what I've found. Is that only the elite brands have like a solid, well thought out scaling strategy.
And I think a lot of brands think that, hey, spend a bunch of money on advertising, that's how you scale. They don't think about the fact that there are specific constraints to scaling along the way, right? And, and your constraints that going from say zero to five million are not the same as going from five to ten, aren't the same as going 10 to 20, 20 to 50.
And beyond, and so what, what I want to talk about is I'm a big fan. I'm a big reader. I'm a fan of several different books related to scaling one traction about EOS and the other one scaling up by Vern Harnish. And, and Vern lays it out really nicely in scaling up in terms of the constraints to scaling.
And he puts them in this order saying that you have to tackle these constraints in this order. Cause if you don't tackle them. In priority order, the ones that come afterwards just don't matter. And, and the constraints in order of priority are marketing because marketing is the engine that drives the plane.
And if, if you don't have solid marketing, you're not going to scale, but once marketing is working, you better have solid leadership because your organization is going to be growing and you need to, you need to build a machine that's led well to keep up with the marketing. And then third is cash and profitability.
And so you have a huge passion for sharing your leadership journey. I love following your content on LinkedIn. And so I thought who better to talk to about the leadership side of scaling constraint than, than you. So to get things kicked off so that the audience knows a little bit about you and, and why, in my opinion, you're, you're an authority.
On this subject. Tell me just a bit about your personal journey and how you ended up as the CEO at Heart and Soil.
[00:02:43] Dean Brennan: Yeah. Happy to what's funny about the leadership constraint is I kind of realized throughout my journey that that's what was holding me back. And we can get into that more, but you know, I had a pretty normal childhood, grew up in Michigan, small town, lived outside of the city, which was kind of nice.
There were a number of, I think, formative Experiences and people in my life that helped me get to where I'm at today when I look back at it, and I didn't know it at the time, but had a really amazing grandfather for one who was very close with, you know, for example, playing sports growing up. I'd look into the stands every single game from being a child all the way through high school.
He was always there. And, and that when I look back at it now, is kind of centered in my why and, and why I do what I do at heart and Soil because I want, I want people to have healthy and happy grandparents. You know, you, you want people in your life to, to be that way because it, it only, it only helps.
One interesting thing I, I think growing up there is my father at a young age faced a pretty tough decision when I, when I was young. Mm-Hmm. . He was laid off from his job and he had another job offer in pocket that, you know, it was a better, a better offer than where he had, he had previously worked and like his dad did.
And like his brothers did, he decided, you know, I'm going to start my own business. So, you know, most of my childhood into. My teen years were kind of working alongside my my dad, you know, not every day, but he started out of our garage He had a trade. He was an appliance technician and he literally started from nothing from scratch and When I look back at that now, I'm like, okay I think I formed some kind of self identity around this because you know my dad was one of the heroes of my life and You know, I saw, I saw how he navigated the business.
I saw how he treated people. I went on service calls with him and I would learn the technical aspects of like how to fix things and, how to mark up products, essentially parts. I would look up parts, answer the phone call, phone calls from customers. So I was doing like sales, administrative work, all kinds of stuff growing up, even mowing the grass.
So, so I think that that, you know, it was really cool. opportunity growing up, like being surrounded by that. And it kind of instilled in me this desire to want to understand business and to want to do it and be like my dad. The other thing that I'll mention is that I was always an athlete and there's a lot I learned through through sports.
You kind of learn to be a teammate. You learn the importance of being a teammate. And, you know, not selfishly trying to get all the accolades yourself. There's one moment when I was young, I didn't understand why we kept having to do these drills. I was a running back and, and they're like, you know, here's a ball, run through this thing with all these little paddles that are gonna like try to knock the ball out of your hand.
And then we're gonna come over here and the coach is gonna try to punch it out of your hand. And I never understood. I always just wanted to play, like, just let me play. And sure enough. He was like, I don't know, our third or fourth game in the season. We're on the end zone or close to the end zone. Time's running out and I get, I get the call and I made it to the end zone.
However, I fumbled the ball before and I lost a game for the team. And that, that feeling of. Knowing that it was on you and that you let everybody down, that's kind of when it sunk in for me that, and this is at a pretty young age too, but I kind of realized, okay, I gotta, I have to practice these fundamentals and, and try to get better and better.
So one, so that doesn't happen again. That's not a good feeling when, when you let everyone down. But the other side of that is. There's always the next game. And so you, you can't let that get in your head for too long and you have to move on and you have to learn from it. So anyways, long story short, you know, those were some good moments in my life.
And then I think those kind of helped me out in my college career, my first job, which was up in Michigan. And I reached a point of being comfortable. And I kind of knew, you know, when I get comfortable, I don't like it. I'm like, that's usually when growth stalls and when it stops. So I moved across the country down to Austin, Texas for a job, didn't know anybody and just thought, Hey, I need this kind of pressure to help me grow and take it to the next step so we can get into my career now, but that's, that's kind of where I'm from and where some of my mindset was formed, I think from, from an early age.
[00:07:41] Jon Blair: Man, I love that. There's. So much that we could dive into there, but don't have all the time in the world to do so, but a couple of things that I hear just going on my own personal leadership journey for the last 15 years and kind of pulling out some things that are noticeable about your upbringing, like one, the focus on important people.
Right in your life and like the focus on people first from my perspective Is just it's it's non negotiable in being a leader like there's no such thing there is no such thing as being a selfish leader and there's no such thing as leading purely for your own benefit, it, it, that just doesn't exist that, that can, that can produce results for a certain season and a certain period of time.
But eventually all the, you know, no one's really going to be following you right at the end of the day. And and then the other thing is the entrepreneurial spirit in your family. And like, you know, funny enough, my, my dad is, he's a dentist, but owned his own business my whole life. Right. And, and my mom was the hygienist in the, And so like a small business is what is what our family lived off of my whole life.
And like, it's very formative watching your parents deal with the ups and the downs of running a small business and even more so a service business, right. Where like at the end of the day, you're not selling a widget. Or some product that some manufacturer makes for you and, and you're, you're just really good at the marketing and delivering it like your business is your service, right?
And so it's like very personal in terms of like taking care of your clients and then scaling a service business. I talk about leadership, leadership challenge. Like you have to scale on the back of people, right? And so you have to have people who are really willing to follow you and put their heart. And so into delivering the service as well as you, the founder have.
So like, I love all of that. What I want to talk about next, take this last question to kind of the, the, the next stage of your life, which is you have scaled or been a part of leading scaling heart and soil from zero to 50 million in three years. Walk me through that journey, some of the highlights and maybe even some of the low points in the learnings.
[00:10:06] Dean Brennan: Absolutely. Trying to figure out where to start on this one because a lot of like when the company started, I was kind of in a unique position to add some value in certain places. And that was from a couple stops before where, you know, I started my career in higher education and. I had a really great time, but it was also a very tough time in my career journey.
I heard I learned a lot of lessons the hard way and just the system of government. And bureaucracy, I was paying attention and I learned a lot of like what not to do. And my next stop after that was in a mission oriented FinTech company where it was like just complete opposite of the bureaucratic system.
So I got a pretty good education there. So what originally brought me to heart and soil, the other aspect here, that's very important when it comes down to. Our ethos as a company and our brand is that I in my twenties had ulcerative colitis, and I was able to essentially get off the medications that doctors told me I was going to be on for the rest of my life.
And I did that through eating essentially real food and cutting back almost completely on, on processed food. And when I went through that experience, I started thinking like, why, you know, why didn't my doctor ask me about my diet? Why, you know, we put so much into our bodies every single day, three times a day for a lot of people, six times a day.
Why wouldn't we consider that as maybe a first place to look when we're dealing with, with issues. So, you know, I wanted to scream this from the rooftops and. So I started a health coaching practice and started doing that. And then I eventually met Paul Saladino, our founder in Asana with two other guys, Dylan and Doug, our chief operating officer and Dylan, our chief research officer, and I could tell just pretty much from the first meeting that, they wanted to start a business, but it wasn't just the precipice for like why they wanted to start the business wasn't just to create a business. It was because they saw a problem in the world that they wanted to contribute to that they wanted to fix. And in my opinion, that's where some of the best.
Businesses come from. They come from solving an actual problem and not necessarily just wanting to make a business very important there. So when we started, you know, the passion was was high and that that's only going to get you so far, right? We had the opposite issue that some businesses have in that.
Well, I'm not even going to call it an issue. It was a challenge and I'm very fortunate for it. But our founder had. You know, very large audience with high trust before the business started. So, you know, when you open the doors, we've got, you know, hundreds, if not thousands of people emailing us about the product and.
There's three of us, well, there's more than three, but three of us kind of like working on, on the business with zero e commerce experience. So if you can imagine, not knowing what you're doing at all, thousands of messages coming in, supply chain issues. I mean, you name it issues with the platform, with the website, everything.
So we had to, we had to very quickly learn how to navigate that. And so we started. With a lot of those issues, a lot of process issues. So we started with customer experience, which is a little bit different, too, I think, than some businesses we because we had so many people emailing us. We're like, let's make sure we take care of these people that we answer their questions that we guide them in the right way.
So we came up with a framework for that and use some of our technology to to help us Recall information quickly, those types of things, SOPs, you name it. And we had a lot of issues on the supply chain to iron out. And that's where Doug comes into play. And Doug is a godsend. He was able to really take the chaos of chaos of our supply system.
And, You know, and again, it starts with people, you know, he spent a lot of time calling, talking with building relationships with folks, and kind of leading them towards a solution, you know, we sometimes I talked to people and they're having issues with vendors and they're like, Oh, you know, the first thing they say is like, I'm going to switch vendors.
And it's like, well, what are you doing? proactively to try to work on that relationship to try to proactively raise the issues and work together on a solution. I think some businesses move too quick to move on and the opportunity cost there is pretty great. So we had those issues at first, ironed them out for sure.
It doesn't help podcast, which also It was bad timing because we were out of stock of almost everything.
I mean, pretty much, I think the story of story for us in the beginning was we did, we tried to do everything and that, you know, isn't a good move. So you want to really scale back and figure out like, what is it first and foremost that we can do that's going to add the most value. And then let's build a great foundation of system process.
Marketing, understand your brand story, everything else. And then as time goes, you can build onto that. So we tried, we tried everything at first. I mean, we were shipping to every country. We were on Amazon. We were on Shopify. We were in a little bit over our heads. We had to tame all that chaos.
[00:16:04] Jon Blair: So there's a, there's a few interesting notes that I took here that I think are, are interesting things to, to dive into a little bit further, at least call out one is going back to kind of my intro talking about how, you know, Vern Harnish scaling up.
He says, marketing is the first constraint then leadership, right? Marketing was working. Cause you're. you know, your founder, who's getting all of this huge exposure for the business that's driving demand that's working, but then there's things internally that are, you know, breaking or not, you know, fully polished.
But then you mentioned something, Doug, your COO, a godsend, right? So again, going back to this framework of scaling constraints. First, marketing as a constraint needs to be removed when that's opened up, then you need really solid leadership in the business, right? And you mentioned, not just you, but other functional leaders, and specifically you called out Doug, your COO, right?
That are able to really proactively get their mind wrapped around Challenges in the business and then themselves go execute or put together the plan to remove those constraints. So talk to me a little bit about like, when you, when we're talking about leadership as a constraint, as you guys were dealing with all this demand, what were some of the other key leaders?
that you had to get put in place other than just Doug, the COO?
[00:17:33] Dean Brennan: Yeah, it's a good question. So it was really the three, it was myself Doug and, and Dylan who does all of our product development, he's our chief research officer. And our founder, Paul was in the same room with us at that time as well. I think what it really boils down to in those early days is.
And even important later as you get more, more, more people is that you have to, you have to show up and lead by example. So. We were proactively trying to support each other and the problems that each of us was trying to deal with. We also had to be very clear about whose responsibility was what, because, you know, you only have so many people and you have probably each person like 80 to 100 hours of work to do per week with, with more.
So prioritization is also key. So I think that was the biggest thing for us is that we all knew that each other. We're there to support each other and to make the business successful. And we were willing to do just about anything to make that happen. So at the end of the day, that's like the number one key there in the beginning when there's only a few of you is like, you can't be in a position where you're starting a business.
And, and you're just going to bark orders at people. So like you have to actively be involved, you have to be willing to admit when you don't know anything. And you have to be proactive and you have to move quickly. And sometimes you have to be okay with making the wrong decision, but being able to pivot from that fast.
So I'd say that there was a level of trust through. Going up for each other. And that really helped us in those very tiring and trying moments because they were, I mean, I think we worked like a year and a half, maybe two years without like a day off working weekends, working nights, working mornings, and, it was a grind.
It's a grind to start a business. And it's another reason why I think. For me anyway, my passion in health and wanting to spread this message. If it wasn't for that, I don't know if I could have put in those hours. I don't know if I could have done that work. And I know the same is true also for Dylan and Doug and the rest of the team that was there in the beginning.
[00:19:56] Jon Blair: I love that. So there's a couple other notes I took. Here you, you keep coming back to these, I, I would say very critical tenets of leadership, which like one purpose, purpose is fueling everything. Right. You, you, you mentioned this in a couple of different words, like one, why, what's your, why, right?
The other one, you know, when you and and Doug and Dylan were kind of like, talking about starting this business, that the passion that was behind it. So there's kind of passion and purpose. Then there's prioritization, another P word, right? Where first you guys are trying to do everything, but then you had to say.
It took the leaders to step in and say, what's the focus, right. Because, it, it, that has to start at the top, the focus and the prioritization of, of the, of the organization always has to start at the top and like the number of times that I've heard about a scaling business, whether it's a DTC brand or not, basically, you know, buckle under its own weight because they're trying to do everything right.
I mean, it's just, it's just so. Common. And so really quick on the purpose front, it's funny that you mentioned this. Cause like when we, when I started Free to Grow CFO, I, before I ever even, I didn't even know that this was going to be a fractional CFO business. I sat down, I'm an, I was an EOS coach. And so I'm, I'm a big fan of the EOS VTO, Vision Traction Organizer.
I printed one out and I sat down and I was like, what do I really care about solving? Right. And I wrote down DTC brand founders are so stressed out. It's overwhelming. They're overworked. Right. And, and everyone's always asking for a handout. No one's ever asking to help, right. Maybe being a little bit overly generalized, but that was my experience being on the brand side at guardian bikes.
So it was like, I want to help bring some more confidence and reduce some of the stress of being a brand founder. Cause I've been in their shoes and it, it's just this overwhelming feeling. And then what's our purpose. We're going to be a business that's profitable, but that exists to care for people.
Right. And the reason why I'm saying that is because. Growing Free to Grow CFO is like really hard. At times we're, we're still only two years into this. So we're still at that, like, we're, we're starting to, we're starting to scale beyond the founders, me and Jeff. Right. And those are like the hardest years in my opinion, because it's like, you used to do everything.
You can't keep doing everything at scale, but that, like the growing pain of like building a team and delegating and building the systems is really, really hard. And it's, it's almost like you have to have two jobs for a period of time, right? Before you can go to having the one job, which is the elevated executive of your company.
And, and what gets me through that every Monday, I read our businesses, VTO. It's where I read our core values, our reason for existing. And our mission and I'm like, okay, everything's going to be okay now because this is why I'm doing this. It's not because of all the emails that are in my inbox or all the slack messages I haven't gotten back to or all the things I need to get back to clients about.
It's about that we are here to fight back against the stress and overwhelm. Of scaling an econ brand and we exist to care for people. And so, how do you as the CEO of heart and soil champion to yourself and across the business, the purpose and the mission that you guys are on to keep everybody going through the hard times.
[00:23:35] Dean Brennan: Good question. And one working with you guys, I would, I wouldn't know that you're overwhelmed to have a lot of work as you guys show up all the time for us and shout out to Jeff because he's amazing. Amazing. So appreciate it guys. Yeah, you know, I started feeling that probably, you know, we've scaled to 50 million and it was probably around the 10.
10 to 25 million mark where so in the beginning, I was very in the weeds in on the marketing realm because my background is in storytelling and creative. So I naturally, you know, kind of fit in that realm. Anyways, when I started pulling out, you're right. I was doing like two, two jobs trying to facilitate that transition.
And working very closely with the folks on the team who are kind of taking over those responsibilities in certain areas of, of marketing. But to answer your question about keeping like the purpose front and center is. I think structurally in your business, you can, you can put some certain things in place and design it around it.
For example, the hiring process, the way we do it at heart and soil is that, I just, I will not hire someone. In a full time capacity that's coming into our HQ every single day, who is not intrinsically motivated to want to pour into this mission. And so what that means is I recruit from our community, I recruit from friends of friends of people that work here that live an animal based lifestyle that already take our products and, you know, there's challenges to that, on one side.
But. At the end of the day, what we're doing is like extremely important and I don't want to deal with the mess that will be if you bring in somebody who doesn't really fully, you know, believe in this and want to contribute to it. So we have a number of things that we do there on the hiring side from like the conversations that we have with candidates.
We have them out to HQ or we have even deeper conversations and experiences with them. And so. I really want to know that the people that we're hiring are very much into this and, and that there's no question there. So that, that is a, that's a non negotiable in our hiring process. And that is, you know, essentially lined up and guided towards our purpose and our mission.
So we did the traction thing too. And our purpose is to live the animal based lifestyle and spread it to others. So it's another important point in leadership when you, when you do have values. When you do have passions, if you say you are one thing, you better not do the other thing. You better do the thing that you're saying.
And this goes down to brand and storytelling, right? If you tell your customers, Hey, we're this, and then you're not that in their experience, whether it's through their email conversation with a support rep or whether it's through the product, then you have what's called a brand gap. And in a brand gap is where you diminish trust.
And the same thing goes for if you're a leader at a company, or if you're an employee at a company, right? If you say one thing and do the other, you're going to have problems. So, the key there, if you are a leader, is audit what you're saying, figure out what you want, figure out who you want to be, write it down, think on it, and do that.
And. And it sounds easy. It sounds easy, but it's, it's, it's very difficult to do, especially if you're, if you're in this environment, let's say you're working somewhere, you're leading a team and it feels kind of chaotic and you're not quite moving and flow. You'd be good not to point your finger at other people and to ask yourself, what can I do about that?
How did I contribute and figure out who you are, who you want to be, and then be non relenting in your decision making towards that. And don't feel bad for it. Don't right. Have a little courage, make the hard decisions and move towards that. Cause at the end of the day, if all that's in alignment and your team's working in flow, your bottom line is going to be affected in a very positive way.
[00:27:52] Jon Blair: I love all of that. I love all that. There's, there's so much there. I I'm, you know, it's funny. One of the questions that we talked about discussing, I'm not even going to ask, cause we've just. We've just kind of, we've, we've hit it multiple times, but you know, the core tenets of your philosophy on leadership, I'm pulling out trust and relationships, purpose fueled, being humble and consistent, being, you know, driving prioritization and, and high value activities within the business.
One thing that you mentioned. That really hits home with me on the consistency front. One of the reasons that I decided to start Free to Grow CFO besides like the purpose in the marketplace or like the problem we're trying to solve in the marketplace and the passion behind that is because I've worked at other places where leadership was inconsistent.
Say one thing, do another. And when you're an employee or even for me, even harder, like I was on a, on a founding, on the founding teams or on the executive team, right? And when you have the organization saying one thing and you're trying to adhere to that, but other people on the executive team are not.
It's really frustrating because you have your group of people who are loyal to you and you're trying to do right by the company's purpose, but then the rest of the org or maybe other functions are going in a different direction. And so one thing that I set out, I, I mapped out all of our guiding principles before the business started and wrote them down and read them once a week, sometimes more than once a week.
Because I don't want to be a hypocrite. Now, I, I've, I've, we screw up and when we, when I screw up, I know the best thing to do is just say, guys, I messed this up. I own this, you know, I'm one of the top leaders in the business. We made the wrong choice. I led us down the wrong path. We shouldn't have acted in this way.
Right. And so I, I always tell my team, like we're humans. And I always tell our, I always tell my clients too, like, Hey, we know what we're doing, we know what we're doing, but we're humans. And, and, and one other thing too, that I want to point out, and I think this is really awesome that you're doing this.
I first started posting on LinkedIn to just be helpful, right? My, my goal was to just be helpful, put out helpful tips cause I'm a huge content consumer and it's helped my leadership and my ability to scale a business. And I always want to try to give back what I've learned right in, in my content, but I've noticed a new thing that comes back to a very powerful.
Force of sharing your ideologies in social media and it's accountability to myself that I'm sharing with everyone on LinkedIn that this is what Free to Grow stands for. This is what Jon Blair stands for. And I actually will go post things sometimes. This might sound crazy. But I've been in this season recently like leaving and it's something that I want this company to adhere to but it's scary to say it and I'm gonna force myself to say it on LinkedIn because It's out in the open and, and, and if I don't adhere to it, everyone's going to call me out.
And so that might sound a little extreme, but that's something I've been doing recently because I feel like it's so necessary. And I, I think I even see, whether that's your heart behind it or not, I definitely see you out there sharing your philosophy. And I'm sure people on your team see some of your content.
And so it doesn't get more vulnerable than that. You know,
[00:31:18] Dean Brennan: yeah, no, it's a really good accountability tool. I think the other thing that I think is really useful for is, you know, we just talked a little bit ago about why it's important to know who you are and what you stand for as a business. And as a leader, I realized at some point where, you know, we kind of have this, like this information problem.
You can read a million leadership books. They're all slightly the same. They all have like. Some different twists to them and everything. Well, in this journey of scale, I realized that I couldn't fully articulate my leadership philosophy and what I wanted for the company and figured that that was probably, it's a bit of a knowledge gap, right?
Cause there's like. When you are a master of your domain, you can easily articulate something. And so the LinkedIn content and the Twitter for me, partly, I hope it's useful for people, but it was me sitting down every morning for 30, 40 minutes and challenging my thoughts. And writing about it, putting it to paper, because when you write something, it, it makes different connections other than thinking about it.
And you see things that you don't see when you're talking about it. So, I'm still going through that exercise, still trying to figure all of that out. But I'd encourage anyone who's In a leadership position to do that, to sit down and write out what is your philosophy on leadership? Why do you think that?
Why could that be wrong? And and kind of go through those segments of thinking. And trust me, when you're when you're done with it, you're gonna have a much tighter grasp on what that actually means and how to apply it at your workplace.
[00:33:04] Jon Blair: I love that. I love that. So what? You know, we've got we've got a few minutes left here, and I want to give you an opportunity.
Was there anything else That you want to make sure the audience hears in terms of like, we've talked about a lot of different core tenants of, of leadership. We've talked about how some of the ways that that helped you guys scale heart and soil, but is there anything that we haven't touched on that you're just like, this is a key part of my leadership philosophy and I want other DTC brand founders to hear this.
[00:33:33] Dean Brennan: That's a good question. I did think of one thing. Another application to keep the purpose and the why top of mind. Our company takes an hour out every single week on Wednesday and we have what's called a win meeting. And it's a very informal meeting where we all get together as a whole team. And there's like 30 of us now.
And. We share, we share our wins and every so often we'll, we'll talk about our whys and we like, that's an ongoing conversation. So it's not like you come on one day and you have your onboarding and you know, you talk about your why, well, it's revisited often and then we read customer stories and we share them and we, and we talk about them as a group.
So we keep. That connection to who we're serving and why we're doing it. It's been a really great thing because you'll hear conversations going on, like outside of that meeting about these things. And I just love seeing it. Have you ever come across a good definition of, of culture? I'm curious.
[00:34:40] Jon Blair: So have you ever read the book culture code?
I believe his name is Daniel Coyle.
[00:34:47] Dean Brennan: I've, I've heard of it, but no, I haven't read it.
[00:34:49] Jon Blair: I can't remember the definition of, of culture that he used, but it's a, reading that book is very formative for me and for him. Culture was more about safety than anything else, meaning that like you as the leader build an environment of safety where no one feels like they have to hold anything back, right?
They can be their true self and that when you have this culture that feels safe, right? And then you layer on top of it, like whatever your mission and purposes, it's this incredibly powerful thing.
[00:35:26] Dean Brennan: I like that. Yeah, I think that's important to like, allowing people to make mistakes and you know, you have to be very intentional to your reaction to just about anything.
If you're in a authority figure, you know, at a company like for us, I admittedly open my mistakes, you know, to the whole team often because I screw up. All the time. Sometimes it's a lack of preparation, which can cause so many issues down the road. So I always try to be prepared, but there's times in the phase of scale where sometimes things get really overwhelming and you're looking intended for different directions.
You need to take a step back and really, try to figure out what is it that you need to be prepared for. And sometimes you don't get it right. Yeah. So preparations. I think key, but admitting mistakes in front of your team and then not, you know, a lot of people I've been in environments where people get berated, you know, for a mistake and then nobody wants to.
Actually speak up when there's an actual issue and that's a problem because you miss things you miss opportunity That's never a good thing.
[00:36:34] Jon Blair: So with our last little bit of time here I want to switch to just talking about your personal life because As you mentioned before and as I've seen in your content, it's incredibly Important to your overall holistic health and being just what is Dean Brennan's personal life look like these days?
[00:36:54] Dean Brennan: Yeah, good question. It's, it's changed a lot over the last couple of years. I just had my first child in April. So I'm still kind of getting used to that transition of, of being a father. It's the greatest, I think, life gift that I've ever been given. But from a scheduling standpoint, it's been tough to kind of figure out how to prioritize everything, you know, you go from, you know, we're like getting work done on the weekends to not doing that anymore to working into the evening to not doing that anymore.
And I don't want to sound like a workaholic. It's just like, I love, I love my job. And I think that's important is finding like a work life. Integration rather than balance. So finding something that you are so motivated about intrinsically that it doesn't feel like work to you. And that's how, that's how hard soil feels to me.
So I get excited. You know, in the morning when I get to go to work and solve problems and, be with my team and yeah, with the child, it's like, okay, the clock stops at five now. Cause I, you know, I try to schedule my family priorities first on my calendar and then. My, my work obligations. And then if I have any time after that, it's like, okay, I might play basketball.
I might play guitar. You know, I try to find little spots, you know, for hobbies, but yeah, adjusting, adjusting to the, to the schedule. That's been, that's been a big, big, tough one for me.
[00:38:28] Jon Blair: Good for you for prioritizing your family, man. As you know, I have three little kids we were talking about before we hit record hardest thing I've ever done in my life is.
Be a CEO of a family and the CEO leader and founder of a business at the same time. And it's a, whew, it's, it's a great joy, but it is, it is hard. Last thing before we, before we run here, what's something you're reading or listening to that you recommend to the audience?
[00:38:53] Dean Brennan: I love this question. You'll always find me reading or listening to something.
But I do have a New Year's resolution to create more than I consume because again, it's that problem of information. If you're not creating, then you get too distracted with everything that you're learning. But I'm taking a decision course right now by Shane Paris. Parish. It's the Fs blog. I don't know if you've heard of it.
He does an excellent job. He talks about thinking and mental models, and he has a really great course on decision making. So I'm going through that right now with our COO. One key takeaway there, I think for the audiences. Separate your problems from your solutions and define your problem first. So don't have a meeting where you're doing both have a meeting and get on the same page with your team about what the root problem is and then work on the solutions.
That that's one good takeaway from the first couple chapters of that. And then a book wise, I'm revisiting John Wooden's pyramid of success. I don't know if you've read it. But, yeah, all time. Great leader. What I, what I like about his philosophy is that he wouldn't even call himself a basketball coach.
You know, he was a teacher. And I think that is a lot of what leadership is. It's, it's guiding and teaching. And he focused on the, on, on the fundamentals, similar to my football story about, learning how to hang onto the ball and doing that over and over again. I think greatness comes through sometimes boring repetition.
So yeah, I'm revisiting John Wooden's pyramid of success and loving every bit of it.
[00:40:33] Jon Blair: Awesome. Awesome. Well, thanks for sharing that with us, Dean. Thanks for chatting. You know, DTC brand founders out there. Dean just gave us a laundry list of really solid leadership philosophies to consider as you're scaling your brand.
Don't forget once you get marketing figured out, leadership will become a constraint. So you need to be proactive on thinking through what leadership your brand needs as you start to scale. And you know, until next time thank you all for joining. Again, Free to Grow CFO podcast, talking all things growing and scaling a DTC brand.
We'll see you next week. Thanks,Jon