In this episode, host Josh interviews Pradeep, a scientist-turned-entrepreneur who built a seven-figure Amazon business in under a year. They discuss advanced strategies for Amazon sellers, focusing on negotiating cost of goods sold, building strong supplier partnerships, optimizing inventory and cash flow, and avoiding the pitfalls of launching too many products at once. Pradeep shares actionable tips on supplier negotiations, payment terms, and expense management, emphasizing the need for a sophisticated, business-minded approach to succeed in today’s competitive Amazon marketplace.

Chapters:

Introduction to Pradeep and His Background (00:00:00)
Josh introduces Pradeep, his scientific background, and transition to Amazon e-commerce and asset acquisition.

Beyond Basic Amazon Strategies (00:00:37)
Discussion on moving past common optimization tactics to focus on COGS, supplier negotiation, logistics, and inventory.

COGS Negotiation and Supplier Relationships (00:01:45)
Pradeep explains the importance of negotiating COGS, exclusive agreements, and sophisticated supplier relationships.

COGS Tracking and Unit Economics (00:04:19)
Emphasis on tracking COGS, using software, and managing multiple brands and inventories.

Inventory Management Pitfalls (00:05:44)
Analysis of overstocking, poor forecasting, and leveraging inventory in distressed asset acquisitions.

Amazon Warehousing Changes and Cash Flow (00:06:53)
Transition to how Amazon’s warehousing changes impact cash flow and inventory strategies.

Cash Flow Mistakes and Overspending (00:07:13)
Discussion on unnecessary spending on consultants, poor HR choices, and excessive conference expenses.

Negotiating Payment Terms for Cash Flow (00:09:42)
Advice on negotiating 30-120 day payment terms with suppliers to improve cash flow and acquisition leverage.

Launching Multiple Brands: Cautionary Advice (00:11:50)
Warning against launching multiple brands/products without sufficient cash flow and the risks of overextending.

Key Takeaways and Action Steps (00:13:04)
Josh summarizes actionable steps: focus on supplier partnerships, negotiate terms, and improve cash flow management.

Expense Management and Exit Planning (00:15:08)
Highlighting the impact of recurring expenses on business valuation and the importance of efficient spending.

Closing Remarks (00:15:57)
Final thanks and acknowledgments as the episode concludes.

Links and Mentions:

Tools and Websites 
“Jungle Scout“: “00:12:30”
“Helium 10“: “00:12:30”

Key Takeaways 
“Supplier Partnership”: “00:13:45”
“Negotiation with Suppliers”: “00:14:10”
“Cash Flow Management”: “00:15:08”

Transcript:

Josh 00:00:00  Today I am excited to introduce you to Pradeep. He is trained as a scientist at Oxford University and Harvard University, and then he became the vice president of Global Business development for a biotech company. During the pandemic, he found himself in a unique situation which led him to start his Amazon e-commerce business. He became a seven figure seller in just 11 months and now has a new business model of acquiring distressed assets, and he also owns a boutique Amazon account and launch management agency. So welcome to the podcast, Pradeep.

Pradeep 00:00:36  Thank you so much.

Josh 00:00:37  I love that you made the mention of when we go to conferences. And as you listen to speakers speak on stage or even listening to podcasts time and time again, we hear the same optimization strategies and the same keyword strategies, and it’s just a new tool that people are using. But instead what you’re saying is like, the hard stuff is what people aren’t necessarily talking about. People aren’t getting into the weeds of cogs and negotiating with suppliers and renegotiating on an ongoing basis, and the finer details of logistics and where you’re warehousing things.

Josh 00:01:14  And with Amazon, you know, reducing inventory limits across the board for people. What are people doing now to kind of prepare themselves for a world where Amazon does limit you completely and with maybe 1 or 2 months worth of inventory and that’s it. And how are you staging your inventory and still winning on Amazon in that environment and then cash flow? I mean, all of these things are such great topics. So yes, let’s do a deep dive into each of these. Let’s start with the cogs first.

Pradeep 00:01:45  Yeah, sure. so what we see is quite interesting with cogs. the cog numbers to start off with, sometimes a minimum, we say 3 to 5, but as Amazon and e-commerce goes more expensive, I think it’s about 8 to 10. So if you’re buying something for $1, you should be above 8 to 10 in terms of selling prices, if not more, right? What we see is again and again people are saying, hey, we have particularly beginners, hey, we have this 3 to 4, but with inventory, PPC, shipping and all these things, it’s just the profits are gone.

Pradeep 00:02:21  Before the pandemic or during the pandemic is very profitable. And this is, by the way, experienced. This sounds stupid. I find I find myself finding myself stupid explaining this to someone, but we actually see it every day. Seven, eight, nine figure sellers saying you want this brand because the cogs have gone too expensive because they haven’t worked out. Fundamentally, the multiples and the multiples have to be really strong now and the bigger multiple margin to sell. So those cogs are fundamentally negotiable, and you have to have the right product and the cogs are cheap. Price number one. It sounds stupid, but that’s what we see. Number two is the negotiation. Hey, we bought 100,000 units. Next time we’re going to have three 400,000 units. But you’re still selling for the same price. Why? Your your factory should be giving you a note or, you know, handle cash flow or a cheaper price because they’re getting raw material cheaper. And what we see is, you know, I sign NDAs, but what we see is some of these aggregators and others who are famous when they go back and some of these factories are quite savvy, say, hey, you raise X amount of money.

Pradeep 00:03:29  All of a sudden your cogs are gone up. So, you know. So I think that’s again how you negotiate and how you have exclusive agreements for a period of time, particularly on your best selling products. We do this in pharma and other business tools all around the world. You want it for five years. This is the price. If the if if inflation goes down or if the market changes, this is going to be a price. We have the power to change it not you. So it might be having exclusive agreements. And that’s how sophisticated you guys we have to get in e-commerce. Because this is no longer a, a mom and pop kind of operation. This has to be sophisticated. Even if your mom and pop or a guy in a basement. That’s how you should be thinking. you know, solar. It could be a corporate on your own, but you’ve got to think like that. So, cogs and how you define the first cogs, the renegotiate the cost is very important.

Pradeep 00:04:19  Then thirdly, how are you people storing cogs, right. How are you doing unit economics and how are you storing Excel sheet or software and so forth. And that has to be updated on a daily basis. we see fundamental mistakes and we see fundamental errors as well. You can pick it out straight away from, profit and loss statements as well. so that’s something people have to be aware of. And it gets really hard because if you have multiple brands, multiple products, multiple inventory, you know, it’s all over the place.

Josh 00:04:50  Gets complicated really quick. So basically what you’re saying is that especially in the environment, the inflationary environment that we’re in today, a lot of sellers, I think are stuck between a rock and a hard place where their cogs have gone up dramatically. Right? And then, let alone the container prices have come down recently, but those were sky high for a period of time. But yet what I found on Amazon is you still find a lot of those overseas manufacturers still charging the same price for their product, or even less.

Josh 00:05:24  And so while people should be raising their prices, they’re doing the exact opposite and just squeezing every, you know, dime of, of margin from their business, which is, you know, dramatically impacting them. I love that, Pradeep. Let’s go on to number two there with inventory. What issues are you seeing. Let’s deep dive there.

Pradeep 00:05:44  Inventory. It’s everyone’s overstocked. For some reason they thought Q4 is the time. This is kind of formula. And I’ve seen in different industries if we pharma hey go off to this hot topic drug or this is a, you know, rule of thumb, Q4 lets everyone stock up. It’s going to be our biggest quarter. It doesn’t work out sometimes. You know you don’t have a crystal ball. So too much overstock of inventory. excuse of expensive three. Please get somewhere cheaper. actually, it might be easier to have shorter bursts of supplies coming in than a huge one is storing it somewhere or, you know, people we’ve seen. Ridiculous deal. 100,000 units, 300,000 purchased for a year, and they can’t sell out.

Pradeep 00:06:31  So both inventory management forecasting and also shipping as well. I think it’s really bad. And that’s where when you’re picking up distressed assets or even healthy assets, you can really get creative and say, hey, give us a seller note to inventory because you’re overstock. So that’s a real leverage point people can use. and you really need to manage that very well.

Josh 00:06:53  Yeah, I completely agree. And I think that with a lot I mean Amazon’s changing the game as it relates to, you know how their warehousing product and that leads into cash flow. So let’s talk about, you know, cash flow. Excessive spending is what you kind of mentioned. What issues do you see there that sellers are making.

Pradeep 00:07:13  Yeah we we see three things particularly, unnecessary spending on, outside consultants, gurus or external agencies, poor human resources, and also poor negotiation of terms as you just mentioned. So, number one, you know, I feel everyone obviously trying to make money and everyone consultants, gurus, agencies know like actually quite nice.

Pradeep 00:07:41  I go to conferences that mean well. But as a seller you really need to pick and choose. It’s like a kid in a candy store. Most of the sellers are in their 20s or early 30s and they’re very, highly influenced. Right? Do you like boom, boom, boom, boom boom? You really say, hey, here’s my weakness. for the next six months, can I just spend on this case study. beauty product doing very well. One rebrand, one thing, trying to get a good, manager paying, I think, $10,000 per month for brand management. Not even pictures, but consulting went down. Distress asset. Now, another, prominent business which has five, six good brands. Hired human resources, a a former US Army supply chain expert. I’m sure this guy is super bright, brighter than you and I, Josh. He used to get bullets and tanks into Afghanistan and Iraq, apparently. And they hiked him up. but they were paying when we saw it.

Pradeep 00:08:43  They were paying 100, 120,000, 140,000 for this guy. You don’t need that kind of expertise for $0.10 or six aces into Amazon USA. So sometimes it’s just overthinking. You’re still a Amazon seller and you’re not a corporate. I think that’s who am I and the aggregators might be listening, saying, who is this guy? But I think that’s also a space where aggregators are failing out as well. You know, you can get 5 or 6 guys Vas for the price of one MBA. I’m not saying MBA is bad, but MBA might not be the right thing for that job description. So poor. Human resources. Poor. Excessive spending. Conferences. We see a lot of expenses on conferences. You only see the same guy, same talk every time. It’s just a what we call in England a piss up. And you just get drunk with the same people with the same knowledge. How much time can you say, well, if they’re paying for you, if you’re a guest speaker, if you do it once locally or one internationally, it’s fine.

Pradeep 00:09:42  Use that money to actually go to cheaper countries like Vietnam or India. China. Make good networks with people at cheaper price than see the same guys in the US or UK. And there’s nothing wrong with these guys, but you can use the money more fruitfully and cheaper. And really, I mean this we see the panels and this is this is a real issue. And the third is four terms. So you need 30, 60 day, 90 to 90 day terms, sometimes even 120 day terms. We’ve used as well to say, hey, we would order this much. You got to give us terms 30% deposit, 15% deposit. So it helps your cash flow as well. Coming back to the point, if you’re going to acquire brands, cash flow is king. The quickest thing you can do to increase revenue is by revenue. So buying brands but the brands cash flow has to be cash flow positive. Even if you’re buying a distressed asset, you have to go in there, say, I’m cutting all this spending out to make a cash flow positive, so it pays for itself.

Pradeep 00:10:46  So now this cash flow and we look better. And then you leverage that cash flow to buy even more. And there’s more cash flow and the surplus going. so terms are very important for that as well. And how do you negotiate terms is very important. You can actually, you know, get a guy, You know when you when when you go to a new field or a new category, you might bring someone along. Say, here’s my friend Josh. Josh used to do party. Now, when you bring Josh along, you’re actually credentials are now matched with Josh. And Josh has to agree to come along. So now Josh can say, hey, I know Purdy. can you give him terms? Not like 120 days for me, but the 30 day term for Purdy, because he wants to go into the party space, and I know him. I can vouch for him. So cash flow and terms might be also about networking a local group as well, bringing some people along as well.

Pradeep 00:11:35  So that’s the solution.

Josh 00:11:37  I love that pretty. What great insights that you shared with all of us. thank you so much. Last thing here is creating multiple brands and trying to launch multiple products simultaneously. Tell us more about that.

Pradeep 00:11:50  Yeah. don’t do it if you can’t afford it. It’s very simple. It sounds so stupid, but because you I think I personally think. And I’m guilty of this going through, you know, Jungle Scout or Helium ten. All these softwares or, Amazon Scout, by the way, no one’s giving partnerships. I’m still mentioning your name anyway. but going through these places. Right. It’s addictive. You as a as an entrepreneur, as an Amazon e-commerce person, you see that the cause, you see the growth and margin. You’re like, oh my God, let’s do this, let’s do this, let’s do this. And it’s fun. And then you go to try and make deals. It’s fun. But the thing is, if you can’t generate the cash flow, don’t do it.

Pradeep 00:12:30  And we’ve seen time and again big companies, small companies trying to launch brands. And they go distressed very quickly because the PPC spend is so much now in the launch criteria, so much now, you just can’t catch up. The best thing is to level your business, make sure you got a healthy profit coming in for 3 to 6 months, and you have that buffer, and then you slowly launch as well and use as much momentum you can and cash liquidity if you can, or leverage to launch that one product where you think it’s kind of a home run at this stage where the market is so fragile.

Josh 00:13:04  Yeah. You know, I completely agree with you. Pretty. I love to leave our audience with three actionable takeaways from each episode. Here are the three takeaways that I noted. Pradeep. Let me know if you think I’m missing something. But number one, I think you need to be like focused on your supplier partnership first and foremost, right? Like, if there’s anything that you can do as you set goals for the following year or for the next six months, whatever it is, I would focus on highlighting and improving the relationship with you you have with your supplier and manufacturing partner and seeing them as a true partner in your business.

Josh 00:13:45  that’s foundation step number one, which then kind of leads into foundation, you know, action. Step number two, which is start negotiating with your supplier. Right. Start asking those hard questions. Discuss your terms. Right. See if there is an opportunity to get better terms for your product so that you you can get the product and start selling it before you’ve paid for it, right? That can be a game changer. Talking about, you know, opening the curtain and peeling back the onion, so to speak, so that you can know the price of all the individual components that are going into that product to manufacture. And maybe there’s an expensive component that you don’t necessarily need product packaging as well. And so that would be action. Step number two is start opening those negotiation conversations. And then I would say kind of the the last takeaway for our audience is to be better at cashflow management and really analyzing all of the expenses that are going into your business. We’ve had, previous podcast guests. Scott Dietz was on here with the northbound group that talked about how one expense, a $1 expense now could actually be considered a $5 expense when it comes time to exit, right? If you’re paying 500 bucks a month for a particular software.

Josh 00:15:08  Well guess what? And if you’re not fully utilizing that software, it’s not necessary. When it comes time to exit. That then becomes a $6,000 a month type of expense to the business. Times that by 12 and then times that by your, you know, what you’re going to get. And you can see like all of a sudden your $500 expense can be a, you know, $1,000, multiple thousand dollars expense to your business that you don’t need. And like you said, cutting back on a lot of those the conference like spend and always thinking like, do I really need this? Does my business need this right now? and and being efficient with it, not taking too much capital out of your business. So that would be my final takeaway. Thanks so much for joining us today. It’s been a pleasure to have you on the show.

Pradeep 00:15:57  Yeah. Thank you Josh. Really appreciate it. It’s a good chat. And thank you to Amy as well for connecting us.