The following is a transcript of Episode 7 of Return on Podcast, the show where we help e-commerce sellers improve their ROI in business and in life. For more episodes, subscribe to our YouTube channel or listen on Podbean, Apple Podcasts, and Spotify.
Tyler Jefcoat (00:06):
Welcome to Return on Podcast, where we talk about the experiences, obsessions, and habits of the most successful e-commerce entrepreneurs. I’m your host, Tyler Jefcoat, and I wanna welcome you to this episode of ROP. You’ve heard of return on investment. What you haven’t heard of is Return on Podcast. We’re gonna give you nuggets, habits, practices that will guarantee you an ROI on the time you spend with us. Thank you for being here today. In today’s episode, we’re gonna talk about using Amazon data to drive better decision making, drive better profitability with your advertising. We’re gonna talk about the art and science of being a parallel entrepreneur. And of course, we’re gonna talk about Star Wars, since today is May the fourth. My guest today, good friend, Brandon Checketts. Brandon, you call yourself a parallel entrepreneur. You’ve started over 40 businesses in your career. You currently have 10 operating. By the way, Brandon was my core investor and is now not just my co-founder, but a partner in Seller Accountant. You spend most of your time, homie, trying to herd cats and keep things going at Seller Labs, which is one of the real dominant players when it comes to software in the Amazon space. And you’re a data geek, you know, intersection of data geek and helping e-commerce sellers make data-driven decisions. Welcome to the show, buddy. How are you doing?
Brandon Checketts (01:30):
That was a long introduction. Thank you, Tyler. It’s good to be here. I always love talking with you, and I feel like we never, we don’t get a chance to talk as often as we should. So this is nice.
I know it’s – yeah, it’s funny. It’s funny, Brandon. Brandon has, you know – Brandon is actually my business partner, right? We actually spend lots of time thinking about business together, but we don’t actually get in the same room even remotely that often. So good to have you, pal. So listen, and Caleb, I just agree, may the fourth be with you. I’ve got my Star Wars shirt. Got my Vader mug. I’m ready. We’re ripping and roaring, making the difference. By the way, if you are joining us live here, feel free to add any questions as we go along here. All right, Brandon, as we start our discussion today, help me with something here. Define what you mean when you say that you refer to yourself as a parallel entrepreneur.
I think most people have heard the term “serial entrepreneur” before, which means you kinda like start a business, finish it, move on to the next one. I kind of do that but multiple things at the same time. So right now I’ve got, I don’t know, however you wanna count it, maybe six or seven businesses going at one point or the other. I count Seller Accountant among one of those that I’m a partner with, but I’ve got great people that, you know, you, that are running that one. So there’s – I’ve got that happening in multiple things. I happen to be running Seller Labs right now is one of the bigger ones that we have going on, but there’s several other businesses that I have going on any given point in time. So that’s what I call parallel entrepreneur, I guess.
So what are you learning? Cause I feel like it’s something you and I talk about a lot, but what are you learning about really being successful, trying to operate multiple investment interests? You know, how do you strike that balance between kind of being remote and removed so that your time isn’t kind of tied up versus needing to be dialed in so that things actually perform well?
Well, I think you know, there’s, there’s a couple things that make that possible. Number one is hiring and having great people with you. So you gotta have people that you respect and trust and can have honest conversations with to lead those. And I think another one of the key one is having good financial metrics. Good business metrics in general, but financial metrics specifically, to know how things are going. And not just having good metrics but having a very high degree of confidence in those two.
So let’s talk about – I’m gonna use a little bit of your story, Brandon, to kind of help people connect the dots, ’cause we are gonna, we are gonna spend some time talking about, you know, data and Amazon execution here, but how did you – would you tell us a little bit of your story about how you got into the Amazon game and then obviously how that kind of pivots into the software business that you’re in now?
Sure. So I my background, I was basically a computer, one of the guys that played with computers and stuff when I was in high school and whatever, played video games, built computers, started a computer store with the help of my parents when I was 16. Really had a background in computers, started doing more up with like programming and stuff, thanks to a mentor while I was just graduated out of college. Had the opportunity to work sort of freelance for a while and then got into the book industry because of a price comparison site I wrote once called bookscouter.com. So sort of went from computer geek to, you know, internet e-commerce stuff, specifically in the textbook industry. And then like most people that were in books at some point, they end up selling on Amazon, so we go from books to Amazon.
And then what we really found was the book business was kind of cutthroat business and any kind of inventory-based businesses, kind of, your growth is limited by the amount of capital that you have, but the software businesses are much more put a bunch of capital in upfront and get rewards over the long term and see growth over long term. That doesn’t require as much capital, at least at the time, we didn’t think so. It didn’t require as much capital to scale. So putting all that work in upfront on the, getting a product out has been what most of my things have done, been doing for the last 10 years or so.
And then when you were selling on Amazon – gosh, I have so many things I’d love to share with the audience here, ’cause your story’s amazing Brandon. You’re a, you’re the perfect blend, by the way, of like hacker/developer, but also kind of a scrappy seller by nature. Like you are, for those of you guys who don’t know Brandon, like literally we close an office, and Brandon’s the guy in there like meticulously wrapping every single cable, cord, and like chair for potential resell. Like you’re just scrappy. Like I think you fit the ethos of the like, standard Amazon seller of just how do you intersect technology and like trying to find ways to make money. And like, if I’m remembering correctly, that happened pretty early for you, right? I mean, you were like this guy that even in like middle school, high school was like trying to find ways to buy and sell things, like this kind of like, seller ethic is kind of been with you for a while, right?
Yeah. You know, people have asked me like, why are, did I have something growing up, develop that? I don’t know what it was. It’s always just been kind of part of my nature to be interested in business and selling things and finding, not just selling things, but finding ways to create value. Even, you know, every job I’ve had, I think I would try to – even if you’re not selling something on, in e-commerce world, you’re trying to develop as an employee somewhere, you should figure out how to like create value in your job and your position to make your job more valuable for your employer. So there’s always some element of like value creation there, figuring out like what it is, why it is you’re there and what benefit you provide and increasing and focusing on optimizing that value proposition.
Yeah. When I think of like – I was just thinking about you, Brandon – the three traits that I think about when I think about you that make you innately a great entrepreneur, and one of the reasons I really respect you, are one: you’re willing to take risks and try new things. You’re kinda not afraid to fail and pivot. Number two is you actually have some value-generating DNA that makes it hard, I think, for you to work for people who want to put you in a box, like, right? Like you need to have your own path, which is something I identify with you on also. And then kind of back to that idea of pivoting, ’cause I’ve seen so many elements of your career, even like a – ’cause Brandon, I knew you as a CEO of another company when we were in, a mastermind together and just seeing how you were able to pivot. I mean, do you mind sharing like, the like, Book Scouter pivot story? Is that something you can like share like, this guy, like – you repurposed some code and basically like built a monster business ’cause you were just like, yeah, oops, I can’t do this the way I used to. I mean, do you mind sharing that with us?
Yeah. I mean, I don’t know how far about you are referring to or want me to go, but one of the things – so before I created Book Scouter, I actually was selling virtual currency on eBay when Star Wars Galaxies and World of Warcraft were the big multi massively player games at the time. So I’m trying to think, probably 2004, 2005 time frame and stuff. So I had a website where I was buying virtual currency from people in a video game and selling it on eBay for real dollars. And that’s kind of just crashed. One of the days – the game was run by Sony, and Sony said that’s not all allowed, and they canceled my account. So I had, I don’t know, probably $5,000 to $10,000 worth of virtual currency that just disappeared ’cause I couldn’t log into my account anymore.
So I kind of pivoted from that towards – I had a bunch of technology, and so I pivoted from actually selling virtual currency to doing a price comparison site for virtual currency, for other vendors that were still live and doing it. And then when the time for Book Scouter came out, I sort of pivoted that code from price comparison for virtual currency and made it so it was a price comparison website for textbooks. So I just kind of, I don’t know – is that, I think that’s what you’re referring to is like the piece of code, you reuse several different times. So, and adapt it each time.
Yeah. I love that. ‘Cause I, what you did is you basically found a way to solve a problem. Sony says you don’t get to solve that problem anymore because you’re disrupting the virtual economy of our game. And so you take that code – that’s objectively on one front, like an entrepreneurial failure, and yet it also becomes a pivot opportunity for you to take that code, take that scalable problem solver, and apply it to textbooks. And then your ability to position yourself against, with, alongside even huge companies, like there used to be a textbooks.com that you know, pre-deceased many businesses for lots of reasons. And so, okay, so obviously you’re selling books, you’re pivoting some of your expertise into Amazon. Talk to me about your, the like, genesis of Feedback Genius and how really that product got launched.
Sure. Let me switch back to the right mic, something here. So at one point we were – so we were selling books, obviously. We were buying a bunch of products from the United States Postal Service. They have a, basically the USPS ships millions and millions and millions of things, and they lose a very small percentage of those, but still a small percentage of millions and millions of things is still a lot of stuff that gets lost in the mail. And so my co-founder of Seller Labs and I, Paul Johnson, we bought stuff at the USPS Mail Recovery Center, which is where those lost items go. They auction ’em off every, it used to be every month. And so we were buying books for a while, but one of the things in particular we were buying was they called it “loose mixed media” and it was basically just CDs and DVDs that were lost in the mail. And they just had the disc, the plastic disc, but no artwork, no covers, no cases, no anything.
So we were buying 40 pound totes of these discs, it’s thousands of discs, and found that we could, you know, with a few minutes’ work, list them, figure out what the media was, list it on Amazon. We would buy them, we would buy a, what was it, a 40-pound tote was probably $200 or something, and, you know, probably had 4,000 discs in it. So our cost on each disc was pretty small, but we could sell ’em on Amazon for even a penny at the time. You could sell ’em for a penny and make money on the shipping, so. As we did that, though, we found that we listed them on Amazon, and we would say in our description that they were, you know used, didn’t have the original art or the cases, but we still would have a good number of people complain about it when they were, after they received them saying, I thought I was getting a disc with a case or something, so.
What we, what I ended up writing over a weekend one time was, we don’t – we were already ingesting all the Amazon orders and stuff into our own system to ship them, and so I just added a component on that, where if the product was one of these particular types of products, I could tell because of the SKU we had on it. If it was one of those kind of products, we would send an email as soon as possible after the item was purchased, and we would email the customer and say, “We know you purchased this product, and we wanted to make sure that you realized that it didn’t have any artwork, and it was just shipped in the generic case. If that’s, if you were, if you cared about the artwork, then please cancel the order before we ship it and save us all the trouble,” right? And then we found that that was actually effective at reducing our negative feedback that we got. And that’s sort of evolved into the original version of Feedback Genius that launched Seller Labs
Love it. And so Seller Labs has evolved a few iterations since then. You know, you’re now back at the helm running Seller Labs. Give us, kind of give us a quick update, what’s hot right now with Seller Labs and what you’re seeing in terms of driving performance for Amazon brands.
Yeah. Well, the thing we’re really excited right about right now, which is actually funny, it’s actually the very, one of the very first things we had when we launched Feedback Genius was basically a, well, nowadays it’s called Data Warehouse. Back in the day, it was just a database we connect to. But we’re actually opening up our, the database and as a data warehouse so that people can connect to and use their data without having import it all and everything. So we’re already ingesting all those reports, the transaction reports and order reports and return reports and advertising reports. And we have that all in a database, and we’re opening that up so customers can actually just connect to the database directly and you know, use use other, any kind of third party reporting tools to get at that data. And I’m really excited, we actually just launched a Google Sheets extension, too, so you can actually connect to your data directly in Google Sheets so that you can just see it right there without having to download and upload and import stuff. So that’s what we’re, that’s what I’m pretty excited about. We just launched that in the last couple weeks.
And is that different than the FBA Analyzer? Is that a different tool?
Yeah, so I think I talked about this other product that we used to get another – so I started another Amazon business back in 2010 or something with my brother, Jordan. And that’s another one of those where we had some access just as an example of like how to provide, how data provides opportunities. We wrote a tool, or I wrote a tool way back then that was based on a different API, Amazon’s product advertising API, and it would pull in your every, it would pull in the item that was for sale and the number of units that were available for sale on Amazon. And we watched that every hour or something, and we could essentially tell how many units sold, that if we could say that there was 32 in stock last hour, and there’s 30 in stock this hour, we would assume that two sold in the last hour. I mean, by watching something over time, we were able to like pretty concretely say the sales velocity of things. This was before other, a lot of other third party tools were doing this. This was 2007, 2008, 2010, somewhere in that timeframe. So yeah, so we had a pretty awesome tool that helped us estimate sales velocity. And we used that sales velocity to go to manufacturers and make fairly large orders that we thought at the time, tens of thousands of dollars of orders for somebody that was brand new to e-commerce with a high degree of confidence that we were, that we’d be able to sell those, so.
Yeah, it’s kind of using the data to get almost an unfair, competitive advantage, right? So that you can launch. So speaking of competitive advantage, I mean, the advertising landscape has evolved so much since Seller Labs, and then, you know, the Ignite product and the Seller Labs Pro that’s really key now. Help us, walk us through what you’re seeing right now, kind of some examples of reducing advertising, or what is it taking for Amazon brands to really increase their profits right now? What’s working, what’s not working, what’s on your mind, man?
Well, I guess, I mean, what we’ve kind of seen from our customer base, and we have a services team that manages advertising and stuff for a lot of customers as well, so what we’ve kind of seen, and I think we see this story in the larger Amazon market, as we talk about aggregators and how they’re, how they’ve affected the marketplace over the last several years is growth has been a primary driver. Like everybody’s just been grow, grow, grow mode, and it’s been fairly, I don’t wanna say easy to do that, but there’s been a pretty predictable way to that by advertising. If you out-advertise other people, you get more placement, and you make more sales. But I think what we’ve seen, and Amazon’s advertising has gone from, you know, they used to be like the fourth biggest advertiser on the planet to like, I don’t know where they are now, number two or something. Maybe number one, I don’t know, but their advertising business has gone from nothing to gargantuan over the course of the last five years. So what we’re kind of seeing is a bigger focus on profit now. So instead of just advertising and growing for the sake of growth, to pull back a little bit and say like, just let’s advertise on the things that are actually profitable for us. Instead of advertising on all the keywords, let’s figure out the keywords that we can actually, that are super important for us to win on and then be more targeted or surgical in, say, figuring out which ones we’re going to expand on and try to grow at and taking a more, just a more granular approach to that a little bit. So by reducing your overall advertising, you actually can increase your profits pretty significantly.
Yeah, it’s funny. We’ve seen this in the CFO practice recently, Brandon, there’s this, we call it the kind of insanity flywheel, right? Where, because supply chains, lead times, and freight costs are so high, and because actually here in Q1, demand has been flat and in some categories down a little bit, literally session numbers are down in a couple of categories, the wrong response to that is called the insanity flywheel, where you just spend twice as much as your competitors to buy the traffic for the limited buyers that are available only to run out of inventory and pay three times the normal cost for a container to rush ship more inventory. And that’s a bad way to run a business in a bit of a bearish market. The right way, and I think we’re seeing a lot of this across the board, Brandon, is to reprioritize margin, reprioritize return on investment, and don’t get trapped in the, more is not always better, better is better, right?
Yeah. Yeah. Well, I think it’s easy to look at the top line sales numbers and see that, that’s easy – if your top line sales numbers are going up, it’s always easy to justify more of what you’ve been doing. More sales, more everything, but if your expenses have gone up, and you’re talking about advertising expenses, you’re talking about logistic, transportation expenses, if those things go up, then you’re actually losing money on every unit you sell. Like it’s actually, it doesn’t make sense to keep on advertising.
Yeah, I agree.
So I think that’s kind of the trend that we’ve seen over the last year to six months that we’re adjusting things for.
Anything else you can think about that your clients or your brother’s company or anything else, anything else you’re thinking about right now, tactically, that’s been either a focus, an emphasis, or something that sellers can do that’s actually helping them improve profitability right now?
Yeah, I mean, I think it just comes down to getting really, really understanding on a, we call it unit economics, looking at it on a per SKU basis and understanding like how those unit economics play out. Because again, for somebody that’s got a big catalog, or maybe even, maybe not even a big catalog, maybe a catalog of even 10 or 20 items, what we see a lot of times is, you know, two or three of those are their main driver of revenue. And they may have, you know, it’s usually kinda like the 80/20 rule, 20% of the products bring in 80% of the revenue. And I think at – when I’ve had previous conversations with you, we’ve called it return on working capital. If we think about, okay, we might have a hundred thousand, maybe this product provides a hundred thousand dollars a year in net profit for us. But if you have to have a million dollars in capital to get that hundred thousand dollars, that’s not as good of a product for you as a product that requires a hundred thousand dollars in capital to get, to get a hundred thousand dollars return.
So it’s being a little bit more selective about your catalog and how you treat your, the available SKUs you have as well. So we see, I think some people pull down if you’ve got a unit with like size and color variations, like trimming the number of color variations you have, because that’s just a lot of times inventory that’s sitting in and not as profitable as your main colors are. So that’s one of the other ways we’re talking about, not just to, not just cutting your expenses, but also reducing your capital that you have, working capital that you have in the business to get it, to have a better return on working capital.
Yeah. And that kind of relates to what you said earlier. I asked you the question, what is a parallel entrepreneur? How do you kind of manage these multiple interests? And one of the answers to that that you gave is you gotta have clarity on the financial performance of your assets. And I think the most successful e-commerce CEOs right now are the guys and gals who actually treat their product lines like investments, right? They actually do what you just described, Brandon, which is the numerator’s not enough. Yes, I’m gonna make some profit on this brand over the course of a year, but understanding the context of that profit against the denominator, which is the amount invested. I don’t – to reiterate what you just said, Brandon, I don’t know whether a hundred thousand dollars of profit in a year is a smiley face or a frowny face event unless I know how much money I have invested in the product and understanding on average, how much inventory I’m having to carry, how much deposits, how much is sitting in the LA Harbor, right, waiting to get into the port.
Yeah, that can be a really hard number to monitor and to measure on a regular basis because you do have – you know, a lot of times like your inventory numbers are a little bit hard to obtain, ’cause you’ve got inventory in FBA warehouses, you’ve got lost inventory, you’ve got inventory on the water, you’ve got inventory, you’ve prepaid for. Just trying to come up with how much you have invested is not always an easy question to answer.
That’s right. And it’s one of those that’s probably worth the effort to try to triangulate. And I think part of this also, Brandon, that you mentioned earlier is it’s never been more important to have a great handle on your Amazon data, just – guys, a PSA that everyone that would listen to this knows, but Amazon does delete your campaign-level advertising data – what is it, Brandon, after 60 days, 90 days, something like that?
Yeah. I think they allow you to see some of it, like a very, very high level account-wide stuff in Seller Central for a long time, but the detailed stuff at the campaign level and certainly down to the keyword level has gone after 60 days or so. So that’s another –
This is super important, like as we help clients get through due diligence or we’ve even helped some investors diligence assets in the last year, you – here’s a case study, Brandon. We had a client that wanted to sell one brand and not the whole port portfolio out of their Seller Central account. They had okay accounting, right? But it was really difficult for them to sell their story to the investor to say, “Hey, these five ASINs that I actually wanna sell you, I promise I didn’t spend nearly as much on the advertising for those five as I did on the rest of them.” Well guess what, they really didn’t have an easy way to validate that because the campaign-level data within Seller Central wasn’t there. And so for them having a tool like what Seller Labs provides or having some kind of a database tool where you’re actively managing, storing, warehousing your campaign-level data – and not just warehousing it in case you might need it for due diligence, but actually using that data, maybe that’s another question I would have for you quickly, Brandon: if somebody is starting to gather that data, maybe they already have Seller Labs or another tool where they’re gathering it. Like any advice on like tactically, how you should be using that data to make better choices and actually drive profitability in the brand?
I mean, it really comes down to understanding what data’s available. So sometimes like sales data’s pretty easy to get at. So if you wanted to go download order reports from three years ago, I think you probably still can. Right? But looking at – so a lot of it’s about just having ready access to the data because it’s not that the data is not available. It’s just a pain to try – and if you want to get a holistic picture of your business, you have to download order reports, you have to download advertising reports and keep those. You have return reports and financial reports and advertising, like promotional reports. Like there’s all these sorts of different things you’d have to do to get a good sense of your business. And so what, you know, this is the reason we created our data warehouses, but we’re all, we’re automatically ingesting all those kinds of reports and storing them in there for three years or something.
So that you always have the ability to go year over year and back for quite a long ways that you’d have all your relevant data. So unless you’re doing that, in the case of advertising reports, like you talked about, like, there would be no way to recreate those unless you could like find the Excel file that you downloaded nine months ago. Like that would be very hard. And so what our data warehouse does is just kinda like takes all that thought and effort and it just does it in the background and it’s always up to date, and it’s always the amount of history you need.
No, that’s so good. I mean, even, and again, you mentioned this earlier, Brandon, but I think the days of really, really simple hacks giving you an advantage, you know, knowing what your competitors are selling and that kind of thing, those days are a little bit more challenging now because of how many competitors we have in each category, how much software is available. But it’s actually never been more important to find creative ways to use really deep data, to make objective choices about where to spend your money on advertising. You know, even the “how” question we were talking about, “prioritize profitability,” well, how do you do that? The way you do that is you actually use data to know which of your products are generating the unit economics that you want and prioritize spending money where you can afford to spend money and don’t just buy real estate where you’re losing dollars per unit sold. Yeah. Any final thoughts on that, Brandon, in terms of just driving profitability and Amazon business in general right now?
Well, I think one of the other things to promote advertising a little bit, like the advertising tools that are out there and the advertising opportunities you have are more varied and granular than they ever have been, right? So if you have – it used to be, you had to have $10,000 a month of ad spend or something to launch a display ad on Amazon’s display network. But you can do that now much more incrementally, and you can just spend a hundred dollars a month to do that right now, if you have the right tools and the right, you know, permissions and everything with brand registry and all the other things that go with that. So you can be a little more – you can actually do some of the things that the big guys can do as far as like retargeting people across the web and some things like that that you wouldn’t have been able to do a couple years ago. So there’s actually more opportunity to do there. But every one of those things requires like specialized knowledge and skill and experience to be able to do it well. So it’s a pretty big learning curve or, you know, a lot of people we find are hiring an agency or something to help manage that.
It is one of those things that if you’re not an expert, you probably need to become one or hire one, or it’s gonna be tough to keep up. Brandon, most important question I’m gonna ask you today is when did you first become a Disney fanatic?
It’s so funny, man, if you can work a summer job parking cars for a corporation and as a result become a lifelong spirited fan of that brand, that definitely says something for the quality of that brand. Doesn’t it?
Yeah, it does. So, I mean, it was obviously a super fun place to visit, you know, just like that, those things are just tied with fun, emotional things and fond memories and stuff like that. So that’s where a lot of it goes that you wanna share that with your kids and family. So my whole family, my brothers and sisters and mom and dad are all pretty big Disney fans now. So I think it was a little bit of a thing when we were growing up, but now everybody’s loves doing it.
This is what I hear, Brandon, if you wanna see Brandon Checketts, who, in case you guys can’t pick this up, is a fairly like, you know, fairly like left brain, like subdued kind of person in life. But if you wanna see him act like a fourth grader, you know, get him in the like, you know, one of the Disney parks and get around. So the Disney dining part of this. So like, obviously I know you own another company called MouseDining where you do that stuff, but like, how did you, like, that’s such a fascinating – that’s a great example, by the way, the MouseDining story of like how you took your kind of hobby/passion and your like skillset and kind of tried to form into a business. I mean, give us a little bit of an anecdote about that. How did that –
Yeah, I mean, so one of the things we tried to do is going down to Disney World into like, dining reservations were, are kind of a rare commodity there. It’s been kind of hard to get dining reservations. If you wanted to go eat at Cinderella’s castle or you wanted to go eat with Anna and Elsa, like those dining reservations fill up really quickly. So one of the things they did on one of the trips was we would go to Disney’s site and then just check the website every five minutes, and it would send me a text message if availability showed up for our desired, for our date and time that we wanted. So I ended up creating that into an application called MouseDining, and that was created, I don’t know, seven or eight years ago, it’s been a while. But that business has done, has been doing great and amazing lately as, you know, dining reservations get harder to find.The value, the supply and demand there, there’s more are more demand than there is supply. So that’s been a fun business as we actually get pretty well-connected to Disney fans and their desires and trends and stuff like that. It’s been fun to see that go well and grow.
Love it. Final personal question, and then we’ll talk about some hacks. So favorite Star Wars movie and why?
Oh boy. I would say my first one is Episode IV: A New Hope, just ’cause it’s kind of the classic, the one that started it all.
Still got a great story. It’s still just, still just works over, you know, what is it? 40 years later?
It’s funny you go back and watch that movie right now – and by the way it is May the fourth, so you guys have gotta watch, you’re mandated, as a Return on Podcast listener, to watch at least one Star Wars movie in the next week. My commitment to you guys is this weekend, we’re gonna watch one with our kids. I don’t know which one it’ll be right now, ’cause they love Rey, so it might be one of the newer ones, but. Yeah, that first movie, think about how like, absolutely disruptive Lucas’s technology and the like really campy door opening and closing scenes were, but it like worked, and the trash compactor scene and the princess and everything was just such a absolutely novel idea and obviously has become one of the greatest franchises in entertainment history, so.
Yeah. It’s super fun. That’s another one I love to be in. And then Disney bought Star Wars. So then it was kinda like two things for me in one. So Disney and Star Wars.
Yeah, well I think, and this is one of the reasons that we started Seller Accountant, right, is that we, I found years ago when people were running e-commerce businesses, they didn’t know how well that they were doing. And e-commerce businesses are particularly complicated because they’ve got a large amount of dollars tied up in inventory and capital. So the one thing that I would say is the most foundational to running a successful business is having honest numbers, honest financial numbers that you have a high degree of confidence in. And there’s always a tendency, even when you’re talking about yourself, to like think about the best case scenario for those numbers, but you really just gotta be honest, brutally honest with them, understand how things are going. And don’t – when things aren’t going well, you don’t just kinda like explain it away as like, “oh, but.”
You really gotta be honest and brutally honest with yourself and understanding those and digging into those and having a great amount, excuse me, great amount of confidence in those numbers because they drive – especially as I’m doing like multiple businesses at once. Like I don’t have the opportunity to be in the middle of, in the weeds of every one of those. So I gotta have confidence in those numbers to know how things are going. And I, my favorite financial report to look at is a month over month profit and loss on an accrual basis. So if you’ve got your accrual, if you’re accruing stuff correctly and you read a month over month P&L for the last 12 months or 15 months or something, you get a pretty clear story of what that business has been going through over the last year.
Yep. It’s so funny by the way, the fact that you have a pet financial statement is actually a good sign, right? I mean, you know, it’s funny it’s – but you’re right, Brandon. It’s, if your financial statements are not correcting you occasionally, in other words, if they’re not telling you bad news that changes the way you run your business occasionally, maybe not all the time, but occasionally, then you are living in a entrepreneurial vacuum where you’re always believing your own BS and there’s a real danger that you’re in trouble. And so I think, you know, you and I are optimistic guys, Brandon. We’ve started multiple businesses, both of us, and most entrepreneurs that are like us want to believe that the glass is half full. We wanna be optimistic. We wanna believe that our story will push through. And because our teams are depending on us to not fail, we tend to be the ones that are kind of “rah-rah, don’t give up guys, we’re gonna do it. We can be fine.”
The danger is when we couple that mentality with a lack of real clarity, what we end up with is a situation where we’re driving a car with mud on the windshield. And you know, if you’re in the middle of Nevada in the desert, you might be able to drive straight in a desert with mud on your windshield for some amount of time, but eventually you’re gonna crash. And you’re sure as heck not gonna get wherever you’re trying to go. And Brandon, just to affirm what you said. Obviously I’m bookkeeping CFO boy here, but like having really clear financials that occasionally tell you really bad news that make you change what you’re doing are crucial, crucial to running a business.
The other thing I’ll say that compliments that too, is like momentum is a real thing, right? Like a lot of, I see a lot of businesses, and I’ve been in the middle of many businesses, that were innovative or did something amazing years ago and they’re still, they’ve got momentum from that. And that momentum is carrying them forward and the numbers looked good, but what you’re doing today is not helping you to build that momentum or keep it up. And so that’s one of the challenges that I see often in business owners and especially in e-commerce businesses is you did something great years ago and that momentum is carrying you forward and even telling some of your numbers – some of your numbers will look like you’re doing fine. The ones, some of the ones that are important are actually telling you that you’re going to have a down year next year or something. So paying attention to what those are is – and that’s where we get into some of those more nuanced and complicated numbers is return on working capital and some of those things that are more complicated. It’s really easy to look at some numbers and see if things are going great, but it’s harder to look at your numbers and say, “I see some downsides of this and we need to really pay attention to those.”
Well, and another practical anecdote to that point, Brandon, is my team is going through the Four Disciplines of Execution right now. If you haven’t read the book, it’s really good. But that’s another reason – we don’t think about this as often. That’s another reason why focusing on lead measures is so important because if we just focus on the lag measures, that’s kind of the results, it can give us a false negative or a false positive. Like first of all, a lag measure has already happened by the time you see the report, and so you can’t take a lot of action on it, but also the lag measure may give you a rosier picture than is true.
And I’ll give you an example of this from Seller Accountant last year. We had some unusual income come in that that allowed me as a leader to ignore some challenges that we had in our organization for a few months. Right? I mean, hey, we’re making money! But we’re happy. We’re making money. And it’s amazing how what you said, Brandon, can be true, even for an e-commerce brand. We’re like, wow, that that one lightning deal, maybe I’m still getting kind of a halo effect from it. Or maybe my one hero product – what I don’t realize is that my competitor has one on a boat in the ocean about to compete with me, but I’m making money right now, so I’m not gonna need to feel the urgency to make changes, but that’s really not the right way to run your business. You’ve gotta be focusing on the things that will impact the future numbers and, you know, again, make sure, A, that you can see the performance and B, that you have the courage to take a look under the rocks that you don’t wanna look under and make changes before it becomes a problem.
Yeah. I mean, to make that a little bit more real is what I often see as the hero product becomes less and less profitable, but other lines of business are, they’re starting other products that make revenue go up a lot of times. But they don’t – a lot of times, it’s hard to see that that hero product is not doing as well because of the advertising and stuff. So that’s the common mistake. I think that’s, you know, if any of your e-commerce sellers listening to this are – I would challenge you to take a look at it. Like that hero product, maybe that’s the one where I’m saying like you did something great years ago and you’re still reaping benefits from it. But what you’re doing today, as far as like innovating new products or innovating on that product, or whatever, is maybe not going as well as it should, but you’re still, your numbers are still up and to the right, so things look good, but you need to look a little bit underneath the covers, underneath the hood to see what’s going on.
So I remember when I took a driver’s ed in high school, they’re talking about like, you may be way off from a red light or a green light, red light, but if it’s been green forever, you call it like a stale green light where you should be prepared to maybe stop your car because it could turn red before you get there. The point is, is that if you’ve had a hero product that’s succeeding for more than three or four years, more than two or three years, you would almost wanna consider that a stale green light. There is probably gonna be a change on the horizon, whether it’s from your competitors or from the algorithm or from the USDA or whoever it is that might put pressure on your margins. And if you’re not continuing to hustle to make your next success story, you’re not gonna be able to ride the coattails of that first story forever. Don’t be surprised by that. That’s gonna happen. Every company – like Seller Accountant is not gonna exist forever. Amazon, one of the Bezos’s recent shareholder letter, you know, he forecast that Amazon won’t last for more than 30 years, right? I mean, the reality is, is that everything is being disrupted. We are arrogant if we think that our hero product isn’t also ripe for disruption, and we gotta continually iterate and get better, or somebody will. Right?
All right, well, we’ll leave you with that. Brandon, I’m really grateful for your time today. Thanks for joining. Hey, if anyone wants to learn more about Seller Labs, the new data tool you have, even the managed services, what’s the best way for them to dig in more and find ways to partner with your companies?
Well, sure. So like obviously you can go to our website, SellerLabs.com. We’ve got links there for our managed services team, if you’re having challenges with advertising or just want to expert to handle that. We’re actually offering a new tier of service that’s more focused on your profitability to make sure we understand all your costs in there and make sure you’re actually running things profitable. And then our data warehouse tool, we’re just in the process of launching that, so I would just say subscribe to our newsletters and stuff, or you can go to Seller Labs.com/data-warehouse to have some stuff on that, but we’ll, expect more marketing and more materials to come out as we’re getting more material out about how to use that.
Brandon you’re the man, buddy. Thank you for joining me today. And for those of you guys listening to this show, thank you for joining Return on Podcast with me, Tyler Jefcoat. Guys, if this content has served you or brings you any clarity in your business, or if you just wanna help me out and rep this podcast, please consider sharing it, liking it, sending it to your friends. And with that, Brandon, we’re gonna close the episode. Everyone have a great week and kill it. We’ll talk to you next Wednesday.