The Operations Stack You Need From 0 to 8-Figures

Hey there,

Welcome back for another bite to chew on

First of all; Happy Diwali to everybody who celebrates it!

In this week’s newsletter, we’re talking about one of those topics that we feel is rarely talked about in the DTC space

… and that is;

Operations.

And more specifically; Operations stack.

Why?

Because - although you can brute-force your way to some level of success (in any industry), there is also a time when you either need to add more people or add more/better tech to help fuel your operations.

Now… For Obvi - we grew from $0 to $40 million in sales with a team of less than 10 people

The reason behind this is that we focused A LOT on leveraging the tech tools we had at our disposal - and empowering the few employees we had with tools that could make them significantly more productive.

… But

Your operations stack (in terms of tools) can also only get you thus far.

We won’t sit here and act like you can just use tons of tools and grow to $100 million, or $1 billion in sales.

Even growing from $40 million to $55 million in sales - our entire focus has been on adding more people and better people

Now, with that being said - we do think there’s a way to grow to a significant size (for us, $40 million) with just very few people and the right utilization of tools.

So, that’s what we’ll talk about in today’s newsletter…

Although we can’t cover ALL of the +40 tools we use to fuel our operations - we want to tell you about a handful of the ones that can make your life easier, from tomorrow.

And then in the coming newsletter, we’ll talk more about hiring and recruiting.

… but before we dive into today’s newsletter - we have a quick thing we wanted to share with you;

We just released our Season 2 Finale of Chew On This, with the one and only Harley Finkelstein from Shopify. In this episode - we talk about; The future of eCommerce, AI, entrepreneurship, and much much more. You don’t want to miss out on this episode. Click here to listen to it

Now - let’s buckle up and dive straight into it!

Bookkeeping & P&L:

In the age of AI and automation, manual bookkeeping and accounting makes zero sense. Here’s why;

A) It’s prone to human errors

B) It can easily take up to 20 days for you to receive your financials and therefore have a solid overview of how your business is doing

Not knowing your numbers is the easiest way to kill your brand.

So please, find a solution where you can always have (accurate) data at your fingertip.

For us - that solution has been Finaloop

Engineering Cashflow & Runway:

Cashflow is the name of the game in DTC.

It’s not just a nice-to-have, but a need-to-have (especially in tough environments)

To extend our runway and increase our Free Cash Flow - we do a handful of things;

A) Turning our suppliers into our “lenders”.

This is not a tool per se, but we wanted to include it here - as it’s been quite important for our growth at Obvi.

The way we turn our suppliers into “lenders” is by negotiating a HIGHER price point with them, in exchange for an extended runway and therefore - increased cash flow.

Yes - it sounds weird to negotiate a HIGHER price… but if you think about it, it can be a cheaper solution than using financing tools or lending from a bank.

Why?

Because… by paying your supplier somewhere in the range of 3-5% more than what they quoted you - you can typically get away with 30-60 more days to pay.

And this… can realllllyyyyyy have a significant impact on your growth trajectory

So, the takeaway here is;

If you haven’t tried to negotiate a higher price point with your suppliers in exchange for a longer runway, you definitely should

B) Strategically using financing tools & credit cards to give us additional runway

Now - although you definitely CAN get a longer runway simply by re-negotiating with your supplier, you don’t need to stop here.

By using different financing tools and credit cards - you can extend that runway even further by stacking net terms on top of each other.

Here’s a concrete example;

- We get Net 30 from our suppliers

- We use Melio to pay the suppliers invoice through a Parker credit card

- The Parker credit card gives us an additional 30-60 days

By doing this - we’re able to get a lot more days to pay any bill and therefore, we get one step closer to a negative cash conversion cycle.

On the flip side - we also pay upwards of 5-7% for this. And yes - that is steep!

But…

If you know that you’ll have these financing fees and costs, then you can bake it into your margin from the get-go.

By doing this, you allow yourself room to use these tools without sacrificing profitability.

The credit cards we use always change. In short - we always use the ones who gives us the best terms - and that always changes as we constantly re-negotiate.

Right now that is Melio + Parker for paying invoices through credit card and getting net terms - and then we use Ampla for our credit line.

Again - this changes frequently based on the terms we can get, but as of right now… this is the best combo for our business

Tackling Chargebacks;

Did you know that the eCommerce industry suffers from a yearly revenue loss of $31B through chargebacks?

If you sell at a high volume it’s almost impossible to avoid chargebacks - especially when they come as a “friendly-fraud”.

Chargebacks are one of those things that, for some reason, eCommerce founder just doesn’t want to talk publicly about (even though we all experience them)

Not too long ago - we started working with a tool called Chargeflow , to help us handle our chargebacks

… and it’s been phenomenal compared to what we were doing before
Here’s why;

Before using Chargeflow, our Chargeback win-rate was 20% and we used to pay a freelancer $40 per chargeback (regardless of whether it was won or not)

Fast forward to today, we are winning no less than 54%.

In total, we have been able to recover almost $10,427 in lost revenue and added $7,820 to our bottom line without literally doing anything. They handle everything for you from A-Z.

The best thing is their model is success-based - so they charge you 25% only for the cases they win (if they don’t win, you won’t pay).

If we would still hire the freelancer to handle our Chargebacks using this model, we would pay $13,360 while only winning 20%, making us actually lose revenue in that model.

Not too bad for an app that we installed in less than two minutes.

People Management

Here’s another thing you don’t hear anybody talk about.

People management and HR systems

The more you grow, the more people you need to help you.

But adding more people also means you need to focus more on HR and making sure your employees feel safe.

Because, unlike you (as the founder or entrepreneur) - employees don’t thrive in chaos.

They need systems, consistency, and clear signs of legitimacy.

To solve for this - we use a tool called Gusto where we store everything in relation to payroll, PTO, contracts, and ESOP (Employee Stock Option Program)

This is an underrated, yet extremely important tool.

3PL and logistics

Having a solid 3PL is also one of those thing that most founders and operators really underrate as well.

A lot of founders choose to go with the cheapest option out there… which - to be honest is fair.

We’ve done the same.

But… there’s also so many other factors you should vet your 3PL by - other than price

Here are some of them;

1) Communication & availability

Are they hard to reach?

Can you text them 24/7?

Like most other things in business & life - communication is an absolute necessity. Especially when you’re moving fast.

2) Inventory tracking

Your 3PL needs to have integrated inventory tracking where you get live updates of how much inventory you have.

With Obvi we have a massive Google Sheet which is updated every minute with inventory updates.

This, similar to the 1st point, just makes us sleep A LOT better at night (and also help us save money on inventory management tools)

3) Location:

The best place for your 3PL to be located is in the middle of America.

Why?

Because it’s able to cater to both the East and the West Coast in the most cost-effective manner.

The 3PL we use is called FlatFee and they are based in Wisconsin. If you’re in need of a better 3PL, we can definitely recommend you to contact Doug and tell him Obvi sent you

Project Management :

It almost sounds embarrassing to say - but for the first 4 years of building Obvi- we didn’t use a proper project management system.

Like - we tried to use Notion , Monday, and Asana a bit here and a bit there…

But we never REALLY got to make it something the entire organization used religiously.

Here’s why

…we had a relatively small team of just a handful of people, and therefore it was relatively easy to manage everybody’s tasks and expectations.

Because, everybody sort of became a Mini-CEO of their own little department

Being such a small team, we always knew exactly what everyone was working on - and communication was never an issue. 

But… 

Over the past couple of months, we’ve added 10-15 people to our team which has vastly changed the team dynamics.

Now, with a bigger team comes bigger complexities and more projects to handle. 

Now, we have to delegate tasks to each one and stay on top of what task is being done by whom and how well it’s being executed.

… not to mention the layer of QA that’s needed between the people doing the work, and the people overseeing the work. 

Therefore, we’ve had to hone in on a project management tool that most effectively and efficiently manages all the projects and tasks at hand. 

… and that means;

1). Using a project management tool like Monday religiously and pushing everybody on the team to always using it

2). To make our workflow more efficient using Zapier automations and the like.

Now - some of you will be shaking your head right now and thinking “WTF - these guys first got started with using a project management tool”

And we fully get you

One thing we have yet to figure out is;

Were we just good at setting expectations to our team and therefore didn’t need it before now - or…

Were we just lucky that it somehow worked out without one until now?

We don’t know the answer tbh.

Tool of the week:

We’ve already talked about this tool in this newsletter but they really do need to be talked about more…

Chargeflow is one of those tools that just MAKES SENSE for literally anyone.

Here’s why

• You only pay when they win a chargeback case for you

• You get a 4x guaranteed ROI

• You stop loosing money on chargebacks and freelancers to handle those chargebacks

• It takes 2 minutes to set up, and after that - you literally don’t have to do ANYTHING

It just MAKES SENSE

BFCM season is coming up - and more new customers means even more chargebacks.

But…

… Chargeflow is running a special offer during Q4 where they’re offering their service for FREE during the entire holiday season.

Which literally makes it a Double-No-Brainer.

The offer is time-limited, but if you sign up today - you’ll get FREE chargeback recovery until the end of the year (after which you’ll only pay 25% on WON chargebacks)

Click here to sign up

#ProudPartner

Thanks for reading along

As always, thanks for reading along.

We appreciate you and look forward to serving you again on Wednesday.

Before you go…

Here’s a quick disclaimer we want to make for the curious one;

Please be aware that our relationship with several of the tools mentioned in this newsletter includes affiliations or sponsorships. Specifically Finaloop, Chargeflow, Melio, Parker, and FlatFee.

Our endorsements and content remain impartial, reflecting our genuine positive experiences and the benefits these tools have brought to our brands. We believe in the value they offer, irrespective of our business relationships.

All the best

Ron & Ash