How to Transform Profit into Growth on Amazon With Tyler Jefcoat

Join us in this episode of the Amazon Strategy Show with host Ben and special guest Tyler Jefcoat, founder and CEO of Seller Accountant. 

We delve into the critical aspects of return on investment for Amazon sellers and explore effective strategies for managing cash flow and maximizing profitability. 

Discover the key steps needed to grow your business from a six to an eight-figure venture and learn how to prepare for a successful exit from your Amazon business. 

Tyler also offers his perspective on navigating the challenges of a recession, emphasizing the importance of forecasting and inventory management.

Don't miss out on Tyler's personal journey and success stories in the Amazon space!

Connect with Ben Smith:
Instagram: https://bit.ly/3F4hrt8
LinkedIn: https://www.linkedin.com/in/skipwithben/

Business Social Media Links
Website: https://www.sellercandy.com
Facebook Page: https://www.facebook.com/SellerCandyPro
Instagram: https://www.instagram.com/sellercandyamz
LinkedIn: https://www.linkedin.com/company/sellercandy

Connect  with Tyler Jefcoat:
Website: https://www.selleraccountant.com
Facebook: https://www.facebook.com/SellerAccountant/
Linkedin: https://www.linkedin.com/in/tylerjefcoat/
Youtube - https://www.youtube.com/channel/UCfIH3Puf4jXhT1F1EcTIVBg
Podcast - https://www.selleraccountant.com/podcast/

Shareable episode link  - https://bit.ly/3RCE1Ai
For content collaborations, please email us at: grei@sellercandy.com

Never Talk to Seller Support Again.

Seller Candy is the expert operations arm of your Amazon business. We provide outcome-driven support for time-consuming and challenging Seller Central issues so you Never Have to Talk to Seller Support Again! With Agency-Level security practices and an experienced team who’s been through the thick of it, we give sellers bandwidth on demand without the hassle of hiring, training, or managing.

#amazonsellercentral #amazonsupport #ecommerce #amazonpodcast

https://bit.ly/3RCE1Ai

Never Talk to Seller Support Again.

Seller Candy is the expert operations arm of your Amazon business. We provide outcome-driven support for time-consuming and challenging Seller Central issues so you Never Have to Talk to Seller Support Again! With Agency-Level security practices and an experienced team who’s been through the thick of it, we give sellers bandwidth on demand without the hassle of hiring, training, or managing.

#amazonsellercentral #amazonsupport #ecommerce #amazonbusiness

Transcript

Tyler Jefcoat: 0:00

I think return on investment is more important than profit. There are a lot of people that even if you talk about profit even other CFOs, by the way, in the space they're like, hey, if we can just optimize around profitability per skew, we're going to win. I disagree. I think you have to optimize around return on inventory investment and return on capital.

Ben Smith: 0:22

All right. Hello, I'm your host, ben, and welcome back to another episode of season two of the Amazon strategy show. The show that's all strategy, with no hacks, no silver bullets and no magic pills just real, practical strategy for serious Amazon sellers. All right, I just wrapped up an awesome episode with Tyler Jeffcoat, founder and CEO of seller account, and we talked about all sorts of different things, from how to actually manage your cash flow, improve your margins, what should your margins actually be, and then we talked about the fun stuff. So what are the eight figure sellers doing differently from the six figure and below sellers, and how to know when it's time to sell your Amazon business. So really excited for this one. Enjoy it. Let us know if you have any questions and, of course, links to everything will be in the show notes or the YouTube description below this episode.

Ben Smith: 1:07

Not further ado, let's dive in with Tyler Jeffcoat. So today we have the pleasure of being joined by the incredible Tyler Jeffcoat, who's the founder and CEO of seller account, where he helps Amazon sellers maximize profitability well like that and cash flow through next level bookkeeping and CFO services. In addition to this, tyler runs a small mastermind for large e-commerce sellers called the seller round table and towers the host of return on podcast where he talks about the intersection of investing and executing as an e-commerce entrepreneur. So, tyler, welcome to the show. Thanks so much for being here today. Thanks, ben, glad to be here. Buddy, love it. So you've got quite a few things going on in your life. I guess my first question I'm just going to ask selfishly is how do you balance all that stuff? And I know right before the show you also mentioned getting the kids off to school. So how are you managing all these different things?

Tyler Jefcoat: 1:53

Yeah, I mean, for me I think they all integrate pretty nicely. I mean, the first thing is that I'm sitting here at my house, so that makes it easy, right. So the ability that we can now run these companies largely remotely helps. And from the tactical side of seller accountant, thankfully and you and I were kind of talking about this before we hit record just having a great team makes all the difference where I can focus more and more of my energy on the things that I like to love doing, like having interviews, whether I'm the interviewer or the interviewee, and coaching entrepreneurs and groups. I mean that's the kind of stuff that gives me energy, that makes me feel alive and helps me be more plugged into what's happening in the financial world for Amazon, so that when I have a CFO client ask a question, I have something to talk about that's worth digging into.

Ben Smith: 2:39

Yeah, I love that and I'm just going to get this out of the way up front because I've said this a couple other times in some of our previous episodes this season.

Ben Smith: 2:49

But we talk a lot about how to run your Amazon business more efficiently and I always say that you look for the things that obviously you can kind of outsource or give out to people who that are going to obviously give you the best return or really move the needle for growing your Amazon business. And I always put the caveat that you should also really look at the things that you absolutely hate doing, and the example I always give is anything related to the finance or bookkeeping. For me, that's the thing that I hate and I want to get rid of immediately. So I just wanted to get that out of the way up front. But that's the thing that I want to pass off, and I know we're going to dig into that a little bit more today. But before we do that, can you actually kind of take us back and walk us through how you got to where you are now?

Tyler Jefcoat: 3:30

Yeah, sure, happy to. So, by the way, and I agree, like there are things in my business, that I do my own energy audit. I'm a big fan of Dan Martel's book Buy Back your Time right, and occasionally for me it's probably quarterly I've got to do an audit of where my energy is going and some things are going to give me life, ben, and some things are going to suck the life straight out of me, and the things that suck the life straight out of me. I've got to find ways to outsource and partner with people who can do that. And so, thankfully, I'll be honest with you bookkeeping is so crucial because of the due diligence side of it and getting things right and knowing how to drive profitability. I am so thankful for real bookkeepers that are great at that. That's not really my strength and yet, candidly, it's probably some of the things that seller candy does as well the services that are kind of a pain to manage but generate lots of value. Okay, great, outsource it to us, we'll take it off your plate and we'll do it for you. And so, in terms of my journey, though I'm an accountant, listen, I mean I have to. You know account and care Like I hate bookkeeping. I have to own Ben. I'm an accountant, you know recovering and never not an accountant that kind of thing. And I worked at a bank and did a grad program and I don't even do my own taxes. I hate taxes. Like, thank God for accountants that love that stuff.

Tyler Jefcoat: 4:37

I'm an entrepreneur by heart, so I founded a healthcare company in 2012 while I was still in grad school. We had a pretty good run zero to about 120 employees in four and a half years, and I sold that company in 2017. And man, I couldn't be more thankful to not be managing like healthcare stuff during the pandemic. That was like that was a blessing to get to. You know, repack that part of my life. And I'm not a very good like stay, lie around at the house.

Tyler Jefcoat: 5:04

So it was time to start something else and my we live in a great college town here, athens, georgia, about an hour east of Atlanta, and my wife was like don't move me to Atlanta. Like you want to stay married, let's not move to Atlanta. I'm like, I get it, we're not going to Atlanta. And so we were looking to start a company and I have a good friend that was in the Amazon SaaS space a company called Seller Labs is actually also founded here in Athens. And we just got to talking. He's like, dude, you got to take a closer look at Amazon. It's growing. And I was like, well, I used to be an eBay seller back in the day, you know, back when I was in college. Let's check this out. So that's kind of how seller accountant came to be.

Tyler Jefcoat: 5:38

Actually, I'll give you one more caveat of the story.

Tyler Jefcoat: 5:41

During my lame duck session, I was the outgoing CEO of my former company. Because I was a accountant boy. I kind of got relegated to bookkeeper during that transitional period and I realized as I was looking at the books, I'm like, damn, this would have been really handy to have been plugged into these numbers when I was actually running this business. And I kind of had an aha moment there, ben, where I was like, wow, I'm an accountant that worked at a bank for five years, that has a finance MBA, and I almost crashed this business every other month for three years and what I realized is I haven't an education in accounting or in finance. It's not the same as being an operator that can manage money. And so you know, just realized, all right, if we can help our entrepreneurs like become a little bit stronger financially. Like Amazon's going to make money, bezos is going to make money, the Shopify guys are going to make money. I want to make sure that our guys make money, and so that was kind of the genesis of a founding seller accountant.

Ben Smith: 6:33

Yeah, that's cool. It's always fun to hear people's back stories too. I was curious. So, were you a prosper this at this past year prospered, yeah, so I know that the the thing that they were. The whole theme of it was, you know, bringing they, your Amazon business back and really Focusing on profitability, which is so I feel like that's kind of been in the back of my head this entire year versus and I think that's coming off the back end of you know.

Ben Smith: 6:59

We saw in previous years with you know, some of the stuff going on with the aggregators right and these Overvaluations and whatnot, and now all of a sudden people are really like, hey, cash is not around as much anymore. We really need to one rain things in. But that also is gonna narrow the focus obviously on when, where are these? Where am I losing money that I can, you know, plug in? And you you can't get to those numbers or figure that out unless you have your book style. Then you've got someone on your team who's handling that or some company that you know you can go to to actually handle that. So, yeah, I I don't know what was your take kind of leaving prosper. I'm curious because you obviously are kind of the money man. So I Mean.

Tyler Jefcoat: 7:38

The mood has definitely been more like somber here in 2023 and as we get ready to launch into 2024, here been you know we had a lot of inventory. So this was me right CFO boy of nine figures three years ago. We're like, hey guys, the Amazon market's growing so quickly, evaluations are up. We need to make sure that cash is cheap. We can get money really easily. Let's buy a ton of inventory. Let's make sure we don't stock out. We're having issues with with, with Ningbo or one of the other ports, right, and so let's make sure that we've got enough stuff.

Tyler Jefcoat: 8:05

And then all of a sudden, you fast forward to kind of mid 2022 and interest rates have Now tripled and so having inventory sucks because we got to pay interest on that inventory. And then there's a little bit of like slight depression in the market in terms of the amount of sessions. This isn't just like is my product good or bad. It's like, literally sessions on some of the categories in Amazon. We're going down and, and so what we end up in a situation is it's almost like if you're like trying to pilot a ship like a big boat, if you're in the middle of the ocean like you don't really have to worry about whether you're turning exactly the right direction. You're not gonna hit anything.

Tyler Jefcoat: 8:38

But if you're in a really tight, narrow canal or harbor, you're gonna have to have much better like sensors and like depth finders and stuff like that. And so when you talk about accounting, it's kind of like when things were gravy and you're getting outrageous multiples to sell a Amazon business that have two asins and one Supplier and like no sophistication at all, great. But now, when the market's a little bit tighter, we're gonna have to keep a closer eye on things like what is our true tacos plus our cost of goods sold? Or what does it really look like to Control our Amazon FBA fees by engineering or packaging? Or what does it look like to actually make sure we know exactly what our overhead percentages are relative to our revenue? And we could kind of ignore that two years ago, but we can't ignore now.

Ben Smith: 9:22

Yeah, it reminds me of that quote and I I want to say this is like a Charlie Munger quote or something like that, the one that's you know when that, when the tide goes out, you, you see who's swimming naked, right, it's like I feel like that's that's totally applicable here.

Ben Smith: 9:34

It's like once the economy starts like when the economy is going up, like almost everyone's doing great and things are genius, but when things start turning the other way, like that's when you really have to you see who's actually been running, you know tight ship, and even the tight ships are tightening up too. So so I guess kind of just kind of dive into some more questions here. And in the same vein is kind of this profitability question. Do you have like a way of kind of talking to clients about, hey, here's how profitable or how much of a margin you should have in your business, and and of course that's gonna obviously change depending on where they are if they're in just getting started or just launching their first couple products, versus, hey, they've got a mature brand? Of course, those are all considerations, but you have like some kind of general framework that we can, you know, get to the audience.

Tyler Jefcoat: 10:22

That definitely do and you're right, though I mean, you might be launching a new, a new brand or a new product and you're gonna have to eat some losses during that launch phase. So that's not what Ben and I are talking about here. But when it comes to a brand that I'm gonna, if I'm going to place the kind of investment into a product to get it through that launch phase, I need to be convinced that I can capture at least 20 points, at least 20% profit. After all the direct expenses so the product costs to get sold, amazon fees, there's like logistics charges and advertising, so this is including advertising. I've got to capture 20 points or I probably don't have a product that can scale very well.

Tyler Jefcoat: 11:01

And you know, to be honest with you, ben, there's been some pressure. If you would ask me this question 18 months ago, I would have probably said 24 25%, because that's really what the standard was in the industry. We are feeling some downward pressure on those margins and I'm still seeing brands do really really well if they can capture 2022%. After ads, after Amazon fees, you know if it gets down closer to 15%. And now you have a higher cost of capital where I might be paying 12 or 13% per year for that money I'm borrowing. Then the return on that investment is really low and that feels kind of painful if I'm trying to scale. And on the other extreme, here I have brands that we're helping manage from the CFO standpoint that are generating 34, 35%, still after ads.

Tyler Jefcoat: 11:43

So it is possible if you have a highly differentiated product that Really solves a cool problem for your customers. But just know that 20%. Okay, my goal is to get every Ascent, every product, every skew in my portfolio above 20. If it's below 20, I may want to put it into a nurture sequence. Let's see if we can. You know, tame the Tamed, the advertising beast or something like that, try to repackage it, try to get better terms of my supplier. And If it's above 25 or above 30%, if I'm having outrageous returns and I never want to stock out of those guys, those like top 10% of my asins I want to make sure that's where my capital goes is towards those guys.

Ben Smith: 12:20

Sure, yeah, no, that's great. Do you have like any? Just from you know, working with so many clients that you guys have and seeing so Many different Amazon accounts over the years, do you have a sense of like what the biggest categories are where people Maybe our Overspending and can cut costs? Or you know, is it is it in the logistics piece? Is it in either danger overcharged on Amazon fees?

Tyler Jefcoat: 12:42

Yeah, again, I know this is a generalization, but yeah, I mean I think the two categories that are the most controllable, because, at the end of the day, maybe we can re-engineer the packaging to get from oversized to standard and save some of the FBA pick and pack fee, but at the end of the day, amazon's gonna charge us whatever the standard 15% or whatever the commission is based on my product category and and whatever the product cost for us to ship. We don't like it, we, we, we, we bitch about it been, but at the end of the day, amazon still gonna be cheaper to pick, pack and ship our product than Almost any other alternative, and I don't want to go buy a warehouse, and so I'm gonna kind of just take it whatever they charge me for FBA unless I have an obvious re-engineering. The two other categories, though, that are that make all the difference in the market are what am I paying to secure my product that landed product cost to good sold and then what am I paying to advertise that product my true Tacos total advertising cost of sales, and and the way I would view this is I view those two metrics in tandem the the higher this kind of makes sense right the higher my cogs, the less budget I have for ads, the lower my cogs, meaning the higher margins I have, the more juice I have left that I can outgrip my competitors for real estate and try to gain some market share. And I really encourage. Because the other most common question I probably get been is well, how much can I really afford to spend on ads?

Tyler Jefcoat: 13:56

And the answer to that question Glad you asked it is this you can only afford to spend as much as your Cost of good sold allows you to spend and still capture that 20 to 25% in profit. And so that's why that's when people say it depends and it's really annoying it that actually gives you a lot of money it that actually depends very specifically on what it cost you to secure the product. And so tightening down the keywords that we're bidding on, making sure that we're designing products that are differentiated enough that we can charge a little bit more of a premium over what we have to pay to secure it you know, killing bad products that aren't performing Like those are the kinds of things that we're having to kind of think through this year, as things have been a little bit more challenging.

Ben Smith: 14:41

Yeah, and I think just a follow-up question to that too, and this goes back to my first private label product launch, which I'll just say what it was. But it was a webcam cover, which now you know they're either built into laptops or you can they're everywhere. But when I launched it it was like there are only two or three other sellers and it was flooded by the time my product landed. So I sold through my inventory and that was that. But that was a six dollar and 99 cent product and I was like the premium version at the time and anyway. So my point with this, where the story here, is do you still think that, or see examples of sellers that are coming in and are able to actually make it with you know something less than 10 or 15 dollars? Or are you seeing pretty much everyone that you guys work with starts to push to that upper end of the market in terms of selling price, type of product?

Tyler Jefcoat: 15:30

Most of the people are pushing towards bigger Like I'd love to see a 35, $45 product, just because it's a lot easier to make money in those. If it's small, you know you think about those those lens covers. They're going to be really cheap to ship and your cost of goods sold might have been really, really small. It might have been like 40 cents a unit on those. If you manufacture them correctly, then you might be OK, right. So think about that.

Tyler Jefcoat: 15:54

If you're selling a product for $5 on Amazon, I almost have to have an outrageously low cost. I got to have my cost of goods sold be like 10% or like 50 cents on that $5. To make the math work where I can actually afford to do it, some products like I think of some guys that I've worked with that sell like hot sauce or something like that. You can get away with selling multi packs where I can now make it a $13 product right, instead of it having to be a 699 kind of product, and so there can be a little bit of economies of scale. But to your point, your point is exactly, is spot on.

Tyler Jefcoat: 16:23

I think if I had, you know, 50 K that I was looking to invest right now in a new brand, I would probably lean heavily into trying to find a product that was more than $30 retail and, frankly, some of the most successful launches I've seen here recently either are one of two things. One, they're highly subscribeable, like I've had a couple of consumables that have come through our portfolio in the last year where, yeah, it's about a $20 product but it gets repurchased every month Like that's a beautiful thing. And then the second product that's really been successful is one that's more on the $500. I mean, it's a big product. It costs 500 for him to sell it right, it's a little bit of a and so then he just has the opportunity to out compete some of the more kind of hack job sellers create more beautiful listings, create a better quality product, buy it for 200, sell it for, you know, 450 or something like that. And so I really like the idea of going upstream as the market tightens down.

Ben Smith: 17:20

Yeah, love that. Okay, so this is a question. I know I've heard from you know, just some client calls and partner calls over the last you know, I guess what month are we in now? We're recording this in November, so over the last almost 11 months. But what happens in the event that we run into a recession, or we're already in a recession? How does that change? How you want to, I guess, interact with everything related to the Amazon business, so forecasting how much of a mentor you need to buy all this kind of stuff I guess that's the main question is like how do I, as a business owner, change my strategy, my tactics for Amazon if we're either in a recession or going against one?

Tyler Jefcoat: 17:55

Yeah, the most annoying thing. Then I was reading a Fed article last week because I'm a nerd, I'm an accountant and you guys need me to be reading these terrible articles but basically it said that we have a 61% chance of a recession in 2024, which is the most annoying number ever because it's more likely than not, while still not being in another debility, right. And so here's how this plays out for our customers here at Seller Accountant we are going to have to get better at forecasting and, if we can, on an ASIN level, I really want to encourage you guys to spend more energy this year doing the forecasting, and you got to keep a couple of things in mind. One is, in the event that we do have an additional slowdown, there's additional recessionary pressures. I just want to be a little bit more conservative with those estimates. Right, if I thought I was going to grow year over year 10%, let's look at a model that's more like 8%. You know something that's just a little bit more sober. The second thing is, I think sometimes we launch ASIN after ASIN after ASIN and we forget that there's actually this phenomenon called it's kind of a decay rate. Right, if I launch a product and I'm doing well on it, eventually competitors are going to come in and they're going to compete on those same key words, and so, even though I might be able to grow sales, I'm going to have pressure on my margins at some point. This is just, like you know, the economics 101 class that we took at like whatever beginning of college, where it's like, if there's profit available, someone's going to jump in and try to take that profit.

Tyler Jefcoat: 19:22

And so when I'm forecasting, make sure that my forecasting isn't complete BS, and what I mean by that is and I've done this, by the way, again, I'm a count and boy here. I can't tell you how many times I've built a spreadsheet bin and like, every month in the past is like it's not that great, but all of a sudden something magically happens in the future and you know like I couldn't possibly screw it up and I'm going to be a millionaire and it's like, and everything's like it just roses and rainbows and unicorns, right. And so make sure that you pass your own sniff test when you do your forecasting and take into account that some of your existing products are going to decay a little bit as the market matures. And so you know, don't forecast that you're going to double sales If you're not adding new products to your, to your launch list. And then the final thing I would say is yeah, you're going to be a little bit more conservative in your forecast, you're going to make sure that you take into account that some of those products might be decaying a tad and then just be more focused in your launch. This would be.

Tyler Jefcoat: 20:20

My third piece of advice is, if I thought I might launch 20 products in 2024, let's launch the best 12. Let's make sure that we are getting data that's supporting that we can afford, because here's what the real constraint is. The constraint hasn't changed, it's just that interest rates are high. The constraint is capital. How much cash do I have available to me? And I want to make sure that I'm placing bets in products that are winners and that I have good analytics. Really, I really this is, you know, this is self-serving, but really this is a good year to have great bookkeeping, because I need the data to tell me for sure, as quickly as possible, whether I'm winning with this product launch or losing, so that I can make adjustments. That's awesome. How many, how many, how many?

Ben Smith: 20:59

how many? How many? How many sellers come to you and this is a two-part question, I guess. How many come to you and their books are just a disaster zone versus the number you know that come to you and they're like actually pretty solid. You know, I don't know, Books are never perfect, but like, do you see a lot of sellers coming, it's a disaster. Are they coming to you like hey, we've been trying our best, it's decent, and you guys just help them to kind of take it to the next level, tighten it up and give them kind of the insights they need.

Tyler Jefcoat: 21:27

Yeah Well, when everyone was exiting really easily a couple of years ago, ben, they might have had like okay books and they just wanted to make sure they were like ready to go through due diligence. But candidly, I would say, more often than not somebody's either not really doing much bookkeeping Like. I'll give you an example. This is this is a pre-pandemic One of the biggest exits we were involved with like 30, 40 million dollar deal. These guys really did well on the exit and they came to us already doing more than a million a month in revenue and we're using like a spreadsheet and a clipboard Like that was their entire, their entire accounting for this. You know 2000 different products.

Tyler Jefcoat: 22:07

This gigantic company was just non-existent and so you know those are fun because you're like oh, we can generate value for you. Let's go ahead and get this straight now. But you know like and again I have to confess this, we're talking about how people don't always love bookkeeping. I've started two companies. I didn't do my own darn bookkeeping for the first six months of either of those companies, because as a CEO and even a CEO running a bookkeeping firm I have one job and it's to find a path to profit. And if I can't find a path to profit. What am I doing here? Right? And so I think that's a pretty common case study is somebody you know launches a couple of products and wakes up and hey, I've got 80 K a month in revenue now. This is amazing. I need to go back and clean up the mess and make sure that I am kind of minding my business in a way that allows me to be a sustainably profitable. Well, that's normally when seller account gets involved.

Ben Smith: 22:53

I love that, yeah, and I guess my follow up question is and this is just from personal experience as well but you know, if you're working with brands or you are a brand owner, is it pretty common that brands come to you and they think that they actually know what the margin is on, let's say, one of their SKUs or all of their SKUs, like they're, they're really confident in their numbers, and you guys come in and they're like actually your margin is significantly different than that. So I feel and the reason I ask this is I know that Amazon can be really convoluted with the numbers. That can change, you know, very quickly in some cases, because maybe Amazon's made a tweak and now your fee structure is different, so your margin is showing completely different than it should. So how much of an issue is that with just from your experience working with clients?

Tyler Jefcoat: 23:41

I think it's really important to take the time at least periodically to look at your portfolio on an ace and by ace and level, and I do think it is kind of hard unless you're looking at the details been it can be really hard to know oh my gosh, I didn't realize that I had a repricer that that maybe made that product be I'm not charging enough for it, or I didn't realize that I had a really high refund rate on that particular product. And that's crushing me, because even though you can resell a product guys, this is kind of a PSA here you always I don't care who you are, you always lose money if you have to sell a product a second time because of the FBA fee load and the fact that Amazon keeps a portion of the 15% commission right, that kind of thing. And so I think it's really important. You know, the bigger you get, the more often you need to do this.

Tyler Jefcoat: 24:26

My eight figure sellers look at skew level stuff almost daily in some way. They have a team, they have dashboards, but even for the average, you know, maybe a million dollar seller, I want to make sure that I'm dialed in to my product level performance, because there's almost always one bad guy in the mix that's killing you. You're like, wow, why is my overall taco so high for the month of November? Oh, it's because I had a couple of keywords on an automation that got out of whack with this one product and I spent twice as much to advertise that product than I even made in sales. Oops, let's stop that and it's going to fix the whole thing.

Tyler Jefcoat: 25:01

And so I do think that sometimes, especially if you have a larger catalog, like more than 50 products, one or two or three bad guys can kind of hide in the mix of everything else. So we just got to take the time. We got to make sure that I have a good friend that says this a lot, ben and it's like Lots of the areas of running a successful Amazon business are not really a matter of, like, superior intellect. It's more a matter of superior attention. Can I pay enough attention to the little things with my inventory and my advertising and my profitability to allow me to adapt quickly to the data?

Ben Smith: 25:32

Yeah, it's just tough since attention's in very short supply these days. But yeah, that's a really good point. So I guess kind of next question how do you actually measure the ROI as an Amazon seller, brand owner? Again, I know this will vary depending on category, type of product, what stage you're at in your business, but yeah, how do you kind of help your clients make sense of that?

Tyler Jefcoat: 25:55

Yeah. So return on investment, ROI is. I just want to say that, in principle, this is actually perhaps more important than just profitability. If Ben and I go and buy a piece of corn of real estate in a city of your choice and we tell you that we make a million dollars in profit next year, you won't know whether we're happy with that million dollars until you know how much we invested. If we invested a hundred million dollars to make that million dollars in profit, we're not going to be nearly as happy as if we invested a hundred thousand dollars.

Tyler Jefcoat: 26:27

And so I think, with an Amazon seller where, as the market's evolving, we're having to get better, ben, at measuring actual what are we getting for what we put into it? And what we put into it is normally money and inventory. That's the thing that gets tied up. Is our borrowed money or our family's finances into the inventory we're purchasing? And so return on inventory investment is. By the way, if you like, pull up one of these tools, pick your favorite one Helium, tinti, cometrix, whatever it is, or whatever tool you use profit divided by the cost of goods sold gives you a return on that inventory investment. And I don't feel like baseball at all, ben, but it's like a batting average. It tells me how successful I am every time I turn my inventory, and so I just encourage sellers out there that are growing pay a little bit more attention to your batting average.

Tyler Jefcoat: 27:17

What is your profit divided by the cost of goods sold?

Tyler Jefcoat: 27:20

If it's high is it maybe 100% or 150% Then you probably have a really healthy, profitable product.

Tyler Jefcoat: 27:27

If it's really low, like 30% or 45%, then I may be in a position where man I'm an Atlanta Braves fan, so we had hitters back in the day, like in the 90s when we were really good that you just know like that was back when the National League had the pitchers had to hit Ben Greg Maddox, hall of Fame pitcher, but he wasn't going to get a hit. He gets up to the plate. His batting average was like 120. It was awful, and so I would have to get Greg Maddox 25 at bats a game if I wanted to make sure he got a base hit, because that's how bad his batting average was. It's the same thing with our products. If we have a crazy low return on inventory investment, I've got to turn that money 12 times a year to make a dime. But if I have a really high batting average. I may only have to turn my inventory twice a year and I can have a lot of impact, that kind of thing.

Ben Smith: 28:16

Yeah, now, is that something that, when you guys are working with clients, are those the type of insights that you guys are actually digging up for them? Or oftentimes, do sellers already recognize those kind of things themselves and maybe that's going to depend on if they're a six-figure seller versus an eight-figure seller and maybe you guys are coming to the plate and saying, hey, we're going to present all of these awesome insights for you, or is it pretty common that sellers already know that by the time they get to you?

Tyler Jefcoat: 28:44

Well I mean, that's part of the service that we offer is kind of twofold.

Tyler Jefcoat: 28:48

Can we make sure that our bookkeeping is ironclad where we have to pay attention to it as entrepreneurs, ben, you know this as you launch your products that it's really easy for us to be so optimistic that we ignore bad news until it's, like, so obvious that it slaps us in the face, and so our job is to make sure that, if there's ever any news that makes you change, that, it's so obvious that it slaps you in the face. You know that kind of thing. And then I think, when it comes to the more analytics, our CFO service here at Seller Accounting is really oriented on. What is that return on investment for individual products or for Amazon versus Shopify versus eBay? Because at the end of the day, we're going to do some forecasting and say, okay, all I've got is this pile of money. I've got $100,000 in capital available to me, interest rates are high, so I might not be able to get another loan. It's the best investment of this precious capital that I have, and I think that's kind of our role as CFOs.

Ben Smith: 29:40

Yeah, I love that. You're making me think as well. I still sell on Amazon, but I sell on KDP, which is Kindle Direct Publishing. So I've got a bunch of ghost-written books somewhere in the vicinity of, I think, like 12. And you're making me think, like, as we're going through this and thinking about, I've known for months that there's two books and I'm like we need to stop spending money on advertisements, but I've got that emotional tug of no, we need to keep going. I want to try to figure this out. I see that a lot of times in other sellers when I'm talking to them on calls as well. They know that they've got something that's a losing product, but either once was an amazing one and they just keep hanging on to that, or something else, and so I know that it's tough to look beyond the emotional side, and sometimes, when emotion gets in the way, you want to cover things up, which is why we have people like you guys to put us in check as Amazon sellers. That product doesn't make sense by the books.

Tyler Jefcoat: 30:34

Well, it's hard though it's. Nobody wants to fire their own baby. Nobody likes it. It doesn't matter what your business is If it's something that you've poured your sweat and tears into building, even if it's the best thing objectively to just hey, ben, I can give you a raise if you just stop selling those two books. How would that be Like? On the surface you're like, yeah, tyler, that'd be great, thanks so much. But then you think about, yeah, but like, this book has a message and it's meaningful to my customer, that's meaningful to me. And hey, next year it's going to be better than this year. And I think because I just want to acknowledge that even for me that's hard. It's hard.

Tyler Jefcoat: 31:09

It's hard if you make a hire that doesn't work out, like somebody that's on your team. It's hard in any relationship and in a relationship with the products, the same. And so I feel empathy and, by the way, it's a lot easier for me, right? I launch or sell a product I'm going to be, it's going to be my baby, just like it's yours, and so the reason you bring in an outside voice is somebody who isn't that emotionally attached. They can say well, ben, I don't see a path to this book being something that's going to ever give you a smile on your face. I don't know if it ever is. And then the second layer is I wonder if we can really give you some data over the next 30 days that would make you feel more certain that it's a loser and we can go ahead and stop spending money on it. And I think we have to kind of do that with our products as well.

Ben Smith: 31:47

Yeah, absolutely I like that. The other side of that too is, you know, just in this lead into the next question I have, cutting, you know, obviously, the products that are not serving your needs, allows you to be free of cash which you can deploy in other ways to grow your business. So that's my way of kind of leading into, I guess, like, do you have other tips or recommendations in terms of how sellers can kind of better manage their cash flow, whether that's using the resources they already have? And I guess I'm also kind of curious if you advise a lot of sellers on, you know, looking to maybe utilizing some of these financial institutions or instruments that we have, you know, kind of the Amazon space. We see them at all the events and everything like that.

Tyler Jefcoat: 32:28

Yeah, well, I mean, I think it would go back to kind of our illustration at the beginning of the conversation here, ben, that when things are harder, we have to tighten up and we have to be better at managing cash. And it is, objectively, going to be a little bit more challenging now than it was two years ago. Here's the flip side of that the greatest wealth transfer in history happened during the recession of 2008-2009, meaning the right entrepreneurs that make good choices and manage their assets well come through a tricky market, the winners. And so there are going to be substantial winners in, and so that's that. I just want to make sure you guys hear that this is not a podcast about what was me. This is a podcast about manage your business in a way that makes sure that you're the winner when you come through it. And so, when it comes to managing cash, one thing is I just can't ignore. I can't ignore the numbers that tell me that I'm so. That's the first thing is, I need to do that skew level analysis and I need to say to myself okay, I'm going to be honest.

Tyler Jefcoat: 33:22

Product A, the red one, is not working. I'm going to liquidate the rest of it. Let's just turn down the ads, maybe turn down the lower the price a little bit. Yes, I'll lose 50 cents a unit, but let's just get that sucker off the balance sheet and move that money into another product. That's kind of tactic one. Tactic two is I need to actually, maybe once or twice a year, take a hard look at my overhead expenses. Listen, I can't tell you that you guys know this, that I'm preaching to you, anyone who's listening to this, but you know this. You look at your P and L and you are for sure paying for seven different SaaS tools that do the same thing within the Amazon ecosystem. Pick the two that bring you the most joy and actually have operational effectiveness and stop paying for the other ones. So that's one way to kind of just save cash.

Tyler Jefcoat: 34:09

And then the final thing I want to say that's probably the biggest, most important thing, then is Remember I can improve my financial performance in one of two ways. I can either increase my margins or I can increase the speed with which my cash flows. So if I just don't have to borrow more money because I can turn my inventory more quickly and I can reuse the same dollar, I don't need to borrow another dollar, ben, I can just go buy inventory with the same dollar again. That is equally happy. And so my point is saying that is you need to invest energy not just in your tacos, not just in keyword research, not just in the marketing and the listings. You also need to invest in your supplier relationships.

Tyler Jefcoat: 34:51

If you're the CEO of an Amazon business especially six figures, getting closer to seven figures and you have not spoken directly with your supplier, what are we doing here? What are we doing here? Because there's no other way that you can get relief on your terms, there's no other way that you can get better pricing on the products, that you can get lower MOQs, and I just need to push those categories into your brain. If I can just pay for my product one month later, if I can just get 30 days of relief on my cash flow, I might transform the entire financial performance of my business, even if I don't have better profit margins. And so I just encourage our clients to spend a little bit of time. This might be an hour a month. Let's have a phone call Once a year. You need to dust off the passport. I need to fly to China. I need to drink sake. Kiss babies, I need to do the thing that is nurturing these relationships, because I'll give you a quick story One of my clients finally did this.

Tyler Jefcoat: 35:45

He's a veteran, so he's a retired Army guy, which means while he was still running his business and was active he actually wasn't allowed to go to China because of security clearance stuff. But he finally retired as he's full-time managing his Amazon business, finally gets to dust off the passport, fly and spend about two weeks with his suppliers and he, like on day one, found $100,000 worth of his inventory that they had just like left in the corner of the warehouse. No way I've been waiting for you guys to call and pick this up. And he's like I didn't know that my guys had even ordered that two years ago. So literally day one found $100,000. And then over the course of the next two weeks got better payment terms, lower MOQs, better pricing on his units it was like a $200,000 of ROI that he got on his little whatever cost him 10K to fly over there and spend two weeks. You know that kind of thing.

Ben Smith: 36:35

Yeah, that's amazing. I love that story. It's always fun. I feel like we have some client wins like that too, obviously in different areas, but it's, I guess, kind of.

Ben Smith: 36:44

The thing that I've noticed is every once in a while you get one of those things that's like either the person didn't even know was an option like negotiating better terms of their supplier whatever you, you know some of the examples you were just mentioning or they just haven't tried it, and it's remarkable, like sometimes, how little time it seriously could be. Like you make a 15 minute phone call that ends up resulting in saving you thousands or tens of thousands of dollars, and it's a. Of course you know that doesn't happen every time, but yeah, I mean, I always live by the same thing of like anytime I'm in a store or talking to someone, I'll always ask for a coupon code or a discount. 99% of the time you don't get it, but still, every once in a while you do get it right. So I feel like there are a lot of those little happy wins out there. Once you just start kind of trying to look for a more, you're just actually vigilant and monitoring for that stuff in your business.

Ben Smith: 37:28

So I love that too. In the spirit of kind of uplifting the mood as well and not talking about recession or anything else anymore, I want to talk about kind of what I think is almost every seller's goal right, which is to get to the light at the end of the tunnel and neither exit or just have a wildly profitable Amazon business they keep. But when do you kind of advise clients that they should start to think about, you know, maybe exiting their business? Ideally that's going to be before they ever get to a point where they have a distressed business. So I'm curious what are kind of the guidelines that you advise clients on?

Tyler Jefcoat: 38:01

Yeah, I mean this is really. It's important, ben, to think about your end close to the beginning, right? And so two things are true. One is I need to be thinking about my exit strategy. The likelihood, the percentage chance that you are going to pass your Amazon business to your children is like close to zero. It's just not going to happen. The market's evolving too quickly. This is not a marriage. You're not going to be in this business forever. Okay, let's grieve that emotionally.

Tyler Jefcoat: 38:27

Now it's time to figure out when we want to exit, and so two things are really important here. One is I got to know my number, because I've had some clients, even during the heat of the like aggregator feeding frenzy, who one story the guy had a number. Love this guy, he's one of my best buddies had a number but got a little greedy during the process, got offered more than that number and said no, I'm going to hold on. Of course, the market corrects right, and now he didn't get the number he wanted. And so know what your objective for this investment is. This is an investment. This isn't my life, my identity is not just the business that I've started on Amazon. I've got a family. I love being married. I have kids, I have other things I like doing and my identity is more than just my business. But this business is a crucial investment that has an objective at the end of it. If I know that objective, I can have a lot more confidence pulling the trigger when the time comes.

Tyler Jefcoat: 39:18

The second thing is once I know that number, be honest, right, and say to yourself what would I want this business to look like Objectively if I were the buyer? What would it need to look like for me to want to pay that number to acquire it? And then you'll find yourself just doing the right things. Well, I want it to be more profitable. Well, I don't want it to not have as much debt on it. Well, I want to make sure that the processes I heard an interview with Norm that your partner did last year. I was listening to a little bit of one of the interviews from last year and talks about the importance of SOPs and processes right and building the business in a way that can be transferable from you to somebody else. The opposite of that is I was talking to one of my customers yesterday and his wife is the social media queen. Right, nothing moves unless she goes and posts stuff. Okay, that's okay. It's just going to be a much more challenging business to sell.

Ben Smith: 40:09

Yeah, absolutely. Now, those are great pointers too, I think, just like a kind of follow up. This is very general question, but you actually mentioned something and I don't know why I haven't been asking or other guests this. But are there any other kind of commonalities that you pick out that eight figure sellers are doing differently than a six figure underseller, and if you don't have any additional ones, that's all good. But I'm just curious if there's anything that you can kind of see from those people that make it to that finish line versus the guys and gals just getting started.

Tyler Jefcoat: 40:39

That's like an awesome question. I think and I'm just processing it a little bit here there are a couple of breaking points. Every business has this where I think for Amazon it's crazy we can actually get a little bit bigger before we need to bring in people and bring in help. It's possible that we can have a million dollar a year brand in terms of sales and maybe be like me plus one VA. That can often happen, which is kind of awesome. Yeah, it's crazy. No other business, there's no construction company in the world that you could have a million dollars in revenue and have, like me, plus a part time person helping me.

Tyler Jefcoat: 41:13

Amazon kind of makes the math a little bit different. But at some point between one and three million dollars in revenue, I think with almost every model that we've looked at, we're having to understand that I'm not going to be able to keep doing the things I was doing. I'm going to have to bring in partners, like seller candy, maybe, like seller accountant. I'm going to have to actually hire people, and so that's a completely different skill set. A lot of our solo man show kind of entrepreneurs. We actually don't always love hiring and training and managing people, but if I want to be a five million dollar business, I've got to get through that adolescence, and that adolescence includes being able to hire and retain good talent, and so then, once you reach about five million a revenue and I'm kind of riffing here, ben so step in if you want to. But, like, my thought here is that then we have to implement a business scaling system.

Tyler Jefcoat: 41:58

My favorite is there's a book called traction EOS by Gino Wickman, which is kind of this how do we bring some order into a visionary's world? Like I'm a visionary and if you left me on my own I would make it up every single day and I would cowboy it until I failed. Thank God for my COO and she is much more ordered and she has helped us implement this thing called EOS, the entrepreneurs operating system, where now we have team meetings and we have agendas and we have accountability and we have scorecards and the companies that make it from five to 10 million dollars. The owner has figured out how to manage by the number, the other things that, by the way, the eight figure businesses have in common is they just tend to have more products.

Tyler Jefcoat: 42:41

It is very rare that you're going to have 10 ASINs do 10 million dollars. It's not impossible, you've seen it, but most of the time you're going to have 100 products to get eight figures in revenue, and so I think those are some of the things that come to mind. Obviously, you have access to capital. You're obviously really good at managing money, but the skill set changes. I'm now managing people, I'm now managing processes, and I have to have good data around me to do that.

Ben Smith: 43:09

Yeah, that was incredible, by the way. I mean, I can personally say that that was amazing. I got a lot of insight from that. I'm sure people watching or listening definitely will too. I can echo the I haven't gone all the way to all through all those stages.

Ben Smith: 43:21

I can definitely echo at least the hiring and managing people piece and I feel like you know, for me at least, as and I see in a lot of other Amazon sellers is, if you started like four, five, six, seven years ago or even recently after like seeing a course or something like that, a lot of us started because we want to maybe escape, like our job or something, and maybe we don't actually want to have a team. We think that we can just start it and, you know, build a multi-multi-million dollar business and, as you said, like there are people still doing that. So it's definitely still possible. But oftentimes the most successful brands do need to eventually, you know, build, build a team out. You can't be the one that's doing especially, you know, once you get past a couple of skews. You can't be the one that's doing all of the phone calls of seller support and doing your books at night and everything in between. Right, it's just not tenable anymore if you still want to continue growing.

Ben Smith: 44:11

So I can definitely echo that piece, but that was. That was awesome. I think there's a lot of value in just the things that you said there. I'm going to ask you a little bit of a lighter question, and it's going to be followed, though, by another challenging one. The light question is does pineapple belong on pizza? And maybe this is actually a challenging one.

Tyler Jefcoat: 44:27

I mean, I would not order pineapple on a pizza, but I would eat it. So I'm, I'm a neutral territory. I would say generally, well, yeah, I mean I'm not because there are people that are like, passionately, it's almost like coconut, right, like you either love coconut and a dessert or you hate it. I'm pro coconut. I'm not going to go like you give me, like a standard meat lover pizza and then the one next to it has pineapple, I'm probably reaching for the one that doesn't have the pineapple, but I'm not one. I'm not militant about it because people are militant about it. There are people out there that are like you put pineapple on a pizza that's in the same room with me and I'm going to throw a. I'm going to throw a damn fit. That's not me. I'm going to let you have your pizza, pineapple and chovies, and I probably not going to bring that into the kitchen, right? But like pineapple, I'm kind of neutral. What about you, man? I'm curious, are you a pro pineapple guy?

Ben Smith: 45:10

I'm a pineapple guy and it's um, it's funny. I've noticed that the trends for this season of our podcast is the first. Like 70% of guests I feel like every single one it was like pineapple yes, yes, yes, yes, yes, okay. Then I got to, I think, my first person who was in living in Italy, and they were like don't even like ask me that question, like I can't say yes to that. Like pineapple does not belong anywhere, it doesn't belong near like a pizza oven at all. Um, and then now the trends actually been like, I feel like my last few guests have all been like no, absolutely not. That sounds horrible.

Tyler Jefcoat: 45:43

So I just keep my mouth shut. I'm like, yeah, in the beginning of the season you always call your best guest right, the ones that you know are aligned with you, and you get to the rest of the fear and we're like you know what, man, I don't know, ben, I'm not sure if I get you like those other guests did, but yeah, that's got to be it.

Ben Smith: 45:59

I'm going to go with that, yeah, but yeah, the reason I asked Tyler is, um, this is like what we call our controversial take section. So I like to ask everyone of our guests if they have some kind of, you know, debatable or controversial topic that they believe that, um, you know, maybe the rest of the industry does not believe or doesn't believe yet when do you kind of zig that maybe others are zagging?

Tyler Jefcoat: 46:20

Well, I think, two things that come to mind here, and I know you asked me this in advance and if this is not what I said, you can. You can bring it up to me. But, like, I think return on investment is more important than profit, and so I. There are a lot of people that even if you talk about profit like even other CFOs, by the way in the space they're like hey, if we can just optimize around profitability per per skew, we're going to win. I disagree.

Tyler Jefcoat: 46:42

I think you have to optimize around return on inventory investment and return on capital, because I might be making a profit with a skew, but if I'm sitting on three years worth of that inventory, I'm not that happy. I'm never going to get that money back, and so I think I'm a big proponent, probably the loudest voice in the space, in terms of saying don't ignore the balance sheet. I was advising some boards of these aggregators as they started acquiring and I was shocked to find that a lot of them didn't even get a balance sheet as part of this due diligence process and trying to help them understand that what I the illustration I gave you earlier. I don't know how happy I am with that profit number been until I know what I had to invest, what's the networking capital needed in this machine to generate it. And so I think that's the.

Tyler Jefcoat: 47:28

The soapbox that I stand on more often than not is don't ignore return on capital. Don't ignore return on capital. Don't ignore return on capital, and I don't know if it's controversial, but that's the. That's the box that I'd be.

Ben Smith: 47:40

Oh, I mean, I think people will probably be listening to you. You know about this time of our cycle. I'm curious if they are still listening to you. And it's like, ah, money is everywhere and aggregators are crushing it again, and because you know it's, it's a lot, it's a lot different, just everywhere. Again, everyone's winning in a genius when the market's doing great. But yeah, no, that's great. I appreciate you sharing that. Tyler, I wish that we could actually continue talking for another hour here, so we're going to have to have you come back home to show. But I want it to be mindful of your time and I also want to turn it around to you and give you a chance to kind of tell us you know anything. That maybe one I don't know if there's anything I haven't asked you I should have, so there's anything like that. And two, where people can kind of find you if they want to get in touch, if they might have you know further questions or anything like that.

Tyler Jefcoat: 48:24

Now. Thank you for the opportunity to be here, ben. This has been a lot of fun. I mean, I think you've asked great questions. Guys, pay attention to your numbers and you can win big time through a recession. Obviously, if you need help paying attention to those numbers, then firms like Seller Accountants can be good partners. I mean, we, we do the bookkeeping and fractional CFO and we're happy to partner with you. You can find us at selleraccountantcom. I do have that. If you could take a podcast and make it as nerdy as possible, but have the intersection of Amazon and investing, you're going to have Return on Podcast, which is my show, just like these guys. By the way, these guys have a great YouTube channel. They have a great presence around different social media. Really love your product here, ben, and we kind of have the same thing with Return on Podcast. So feel free to check us out. That stuff's free. We don't need your money. Just follow the stuff and give us feedback so that we can make better content for you.

Ben Smith: 49:14

Appreciate that, tyler. Yeah, and I can echo that, you know, definitely check Tyler's stuff out. We'll put links to everything you know talked about and how you can get in touch with Tyler and either the show notes or, if you're watching this on YouTube, in the description below. So, tyler, I just wanted to say thank you again so much for being here today, really appreciate everything. I really, again, I love those insights that you dropped, that the eight-figure sellers are doing differently, but that's what I one of the big pieces I took away from this. But I know that there's a lot more here to unpack. My mind's probably just trying to shield shield itself from thinking about all of the balance sheets and all the money questions, but I'm going to have to rewatch this one after it comes out as well. All right, so that brings us to the end of this episode. Thanks to Tyler from Seller Accountant for joining us today. That was an awesome discussion. We hope that you got some kind of insight or a strategy that you can pull away from this episode and really implement with your business or share with a friend, as always. Thanks so much for tuning into the Amazon strategy show. If you did find some kind of value in today's discussion. We'd love it If you could leave us a rating or a review on your favorite podcast player, or if you're on YouTube, let us know by hitting that thumbs up button.

Ben Smith: 50:19

Leave a comment down below if you have any questions or anything like that. The feedback helps us a ton. It's going to help us reach new e-commerce enthusiasts just like yourself. Last but not least, don't forget to follow us on our social media pages. You get updates, behind the scenes content and so much more there, so you can find all of those linked down below in the description or the show notes. So that's it for today's episode. Be sure to mark your calendar and join us again next week. We've got another awesome guest coming up, so more captivating discussions to come and, of course, expert insights, game changing tips, all that stuff. So until then, I'm your host, ben, signing off and wishing you happy selling.