Putting Profit First

This weekend I almost went blind.

It’s been the shittiest 72 hours, but I’m glad to say I’m alive, can see, and am typing this out for you live on my Sunday afternoon. On Friday night I was cleaning my bathroom and accidentally got this chemical cleaner in my left eye. My eye started to burn like crazy so then I dug into my eye to rip out my contact further spreading the chemicals into my eye.

Things got ugly quickly and my eye was bloodshot and burned like hell. After four hours of it not going away and every Web MD doctor saying it should only last 15 minutes I decided to go to the ER. They flushed my eye out with saline for over an hour and made me visit a specialist in the morning. I was scared as hell thinking I was going to wake up seeing dark spots or losing my vision. I’m now on these super strong eye drops that is making everything better and I should be back to normal in 3-5 days.

Life’s crazy. Something so stupid could of just changed my life for the worse. It’s time for me to slow down and thank god for insurance. A trip to the ER, a specialist, and medication only ran me $300.

Anyways this newsletter isn’t about my eye or how dope it was to see my guy Sugar Sean take home the UFC belt last night. It’s about fixing things and getting your company in the best position to be as profitable as possible by the end of the year.

The Road to a 20% Profit Margin

This year has been a rebound year. The CROSSNET boys are feeling like Shawn Kemp. Halfway through the year, we’re back to profitability after taking a fat L last year. We’ve cleaned house, simplified things, prioritized making our retailers happy, and doubled down on our Amazon efforts.

Now is the fun part.

How do we increase profit on a monthly basis now that we’ve trimmed the majority of the fat?

This won’t apply to every business but I’ve brainstormed my own list and pooled Twitter & LinkedIn to come up with my favorite tips. Even if just one of these areas applies then this newsletter did its job.

Review Shipping Costs:

  • Is your 3PL charging you what they quoted you?

  • Can you save money by switching to UPS, FedEx or USPS? Have all three quote and fight for your business

  • Can you negotiate your pick & pack costs or your storage costs?

  • Are you paying for warehouse workers who are sitting on their phone all day? I remember going to our warehouse back in the day and seeing a temp worker we paid for a day of work just sitting on his phone watching a Brazilian soccer match for the 4 hours we were at the warehouse. Dude was just chilling on all my boxes with his feet up. The shit that went on at that warehouse when we weren’t there!

  • Would it be cheaper to work with a 3PL with multiple locations to save on freight or to consolidate everything to one location?

Wholesale Margins:

  • If you’re selling into retail can you increase your wholesale costs by a couple percentage points? We’re increasing our hero SKU by $3 next year for product improvements and this will help us put out a better product, while pocketing more margin. Even if we sell just 50,000 CROSSNETS next year this will be $150k to the bottom line.


  • How much are you simply giving away in discounting? We’ve eliminated nearly 80% of discounts from last year. Stop giving away free money! Customers are willing to pay full price. Stop thinking you need to give them 10% off every time, it devalues the brand and makes them expect a discount. If anything customers care more about fast and free shipping than saving a dollar or two.

  • We’ve been using Fondue to give cash back instead of $ off up front. Customer pays up front and in 30 days they get an email to opt in for their cash back. Less than 20% of the people end up doing it. So good.

  • Sell to a niche group like a gym teacher or camp? Stop giving them wholesale pricing. Sure give em 5% or 10% to make them feel better, but we were giving out fat fat discounts to convert them when they came inbound anyways to buy!

Shopify Apps:

  • What are you honestly paying for right now? Besides apps that cover your customer service, email, sms, or mobile app you shouldn’t be paying for much. Review the cost of every single app right now. Does it make you more than it costs this year? Cool. Now do the math on if it makes more than it costs It costs in actual profit? So if an app costs $1000 a month and your net margin is 10%, you actually need to generate $10,000 in revenue from that app to justify the $1000 cost 1:1. Of course there’s things to be said for LTV, growing brand, gaining customers, and increasing top line but you get what I mean. If an app is just making you a 1:1 return you’re probably losing, you’ll need to see atleast 3-5x ROAS minimum.

  • Negotiate all SAAS apps. Threaten to leave. See how much they really want you.

Credit Card Bill:

  • When’s the last time you went through every line item on your credit card? Our co-founder is a hawk! Every month he sits through it and makes sure we are spending 100% to our budget we put into place. No random expenses allowed. If it wasn’t in the budget its either charged back or stopped immediately. Easiest way to catch stupid mistakes, things that are on auto renewal and to keep us disciplined.

Full Time vs Part Time:

  • Is your business seasonal? They may be pissed but can you transition full time workers to part time or flex them up and down based on what you need. The worst thing is to be paying an employee for 40 hours of work when you only need them for 10. I get its hard as hell to find good talent but if your treading water employee costs are sadly a good place to start.

  • Making a full time hire? Why not try starting that person at 20 hours a week and without the insurance & benefits. If you find you actually need them more than 20 hours then add em full time. You wouldn’t move in with a girl after the first date, so why make them 100% full time if you’re on the fence about the hire. Obviously some hires are no brainers, but sometimes positions we’ve hired (like graphic design) are just nice to have.

Product Availability:

Riley said it better than I ever could. Super relevant.

Review Your Cost of Goods:

  • I’m so shocked by how many businesses do not know their true numbers. Container costs have gone down. Your product costs may have increased or decreased. Your labor costs and shipping costs may have changed. We’re halfway thru the year, it makes sense to do a refresh on your costs and update that spreadsheet so you can fly that plane a little bit straighter.

Increasing Costs:

  • This applies to both your products and your shipping costs. Maybe you can’t justify raising your hero SKU but is there a 2nd product that is frequently bundled in that could help raise the margin? We’ve realized we’d rather not sell a product at all if its going to force us to take a loss.

  • Charge for shipping on low cart value orders to incentivize larger orders.

  • Focus on doing a better job of cross-selling and upselling other products in the cart and post purchase.

Improving Customer Satisfaction:

  • Returns suck. Unhappy customers are worse. Rather than just accepting whatever return rate you have work with your customer service team and warehouse to make people happier. Ship faster. Communicate better. Create better and sturdier packaging. What are the biggest reasons people bitch? Just go through your reviews. I can tell you lately our net quality has been poor and I’m seeing way too many rips from our customers. I’m addressing this directly with our factory rather than trying to just play customer service and make the customer happy with some emails.

Michael’s a stud. Great ideas here.

The Founders Club

This week is sponsored by me. We are officially launching The Founders Club this month. We have been hard at work behind the scenes hiring a full-time team to help organize incredible events and interview the best of the best.

Looking for a world-class community that provides you access to elite founders, a crazy network, and most importantly constant new ideas to grow your business & also yourself?

Then take two minutes and apply to The Founders Club here or send me an email back to get the fast pass. We are nearly at our first 50 members with masterminds & events starting soon.

All the love in the world,