In this episode of the Ecomm Breakthrough Podcast, host Josh Hadley shares nine vital lessons from over a decade of e-commerce experience, having scaled his own brand from zero to eight figures. He covers key topics including the difference between opportunistic selling and true brand-building, the importance of hiring top talent, Amazon’s continued dominance, the challenges of omnichannel selling, cash conversion cycles, and return on invested capital. Josh also warns against comparing yourself to other brands. He closes with a bonus lesson reminding entrepreneurs that family and relationships ultimately matter more than business success.

Bullet Points:

Timestamps:

00:00:54 Lesson 1: Brand Building vs. Opportunistic Selling
Defining the difference between building a true brand with a customer journey versus being an opportunistic arbitrage seller on Amazon.

00:06:43 Lesson 2: The Best ROI is People
Hiring talented people who are smarter than you provides the greatest return on investment and leverage in your business.

00:09:21 Lesson 3: Amazon is Still King
Amazon will continue to dominate e-commerce, so entrepreneurs should lean into its strengths rather than trying to diversify away completely.

00:11:42 Lesson 4: The Difficulty of Building an Omnichannel Brand
Building a successful omnichannel brand is extremely difficult because each platform (Amazon, Shopify, TikTok) requires a completely different skillset.

00:14:49 Lesson 5: The Importance of the Money Model
A business model with compounding customers, like subscriptions, is ten times easier to scale than one focused on front-end acquisition.

00:18:17 Lesson 6: Active Management and Adaptability are Required
E-commerce is not a “set it and forget it” business; it requires constant learning, adaptation, and active management to succeed.

00:21:13 Lesson 7: Understanding Return on Invested Capital
Knowing your return on invested capital is a critical, yet often overlooked, metric for making smart inventory and business decisions.

00:25:02 Lesson 8: Avoid Harmful Comparisons
Comparing your brand to others is damaging because you don’t know the financial reality or unique circumstances behind their success.

00:29:39 Lesson 9: Cash Conversion Cycle is Everything
The time it takes to get your capital back after investing in inventory is the key constraint to scaling an e-commerce business.

00:35:57 Bonus Lesson: Family and Relationships Matter Most
The greatest fulfillment in life comes from family and relationships, not from the money or success achieved in business.

Links and Mentions:

Tools and Websites
“Amazon“: “00:00:00”
“Shopify“: “00:00:00”
“TikTok Shop“: “00:00:00”
“FBA (Fulfillment by Amazon)“: “00:10:48”
“AWS (Amazon Web Services)“: “00:10:48”
“Meta (Facebook/Instagram)“: “00:12:49”

Podcasts and Videos
“Ecomm Breakthrough Podcast“: “00:00:00”
“Podcast on Building a Brand“: “00:04:48”
“Podcast on Cash Conversion Cycle“: “00:34:39”

Summary of Lessons
“Opportunistic Selling vs. Building a Brand”: “00:00:54”
“People Over Everything”: “00:07:51”
“Amazon’s Dominance”: “00:09:49”
“Omnichannel Challenges”: “00:11:42”
“Compounding Customer Base”: “00:15:55”
“Active Management”: “00:19:04”
“Return on Invested Capital”: “00:22:14”
“Avoiding Comparisons”: “00:25:02”
“Cash Conversion Cycle”: “00:29:39”

Bonus Lesson
“Family and Relationships”: “00:36:32”

Transcript:

Josh Hadley 00:00:00 Today, I’m going to share with you the top nine vital lessons that I have learned while selling in the e-commerce space for over a decade. Welcome to the Econ Breakthrough Podcast! I’m Josh Hadley. I’ve scaled my own ecommerce brand from 0 to 8 figures, and I’m actively building towards nine figures in sales. This podcast is where I document that journey and share the systems, the strategies, and the lessons learned in real time so that you can learn what actually matters and scale your own business. My name is Josh Hadley. First and foremost, I’m a man of faith. I’m a husband to a beautiful wife and the father of four children. I’ve been selling in the e-commerce space for over a decade, doing over $20 million in annual revenue and selling multi-millionaire on channels such as Amazon, Shopify and TikTok. Shop. And last but not least, I am also the host to the number one business strategy podcast for eCommerce entrepreneurs, which is E-com breakthrough. As we dive in today, I’m going to be sharing with you the top nine lessons that I have learned that I wish I would have known and had.

Josh Hadley 00:00:54  These lessons kind of taught to me prior to starting in the e-commerce space over a decade ago. These are going to go in ascending order. And so when we get to number nine, this is what I believe is one of the biggest lessons that I learned and the biggest lesson that I wish I would have understood. And the biggest thing that I’m trying to communicate to anyone that is starting in the e-commerce space here, brand new today. So here’s lesson number one. Lesson number one is defining the difference between an opportunistic e-commerce opportunity versus actually building a brand. Those are two very, very different things. And honestly, in the number of conferences that I go to, most of the time, everybody considers themselves as a brand, when in reality they are nothing more than an opportunistic arbitrage seller. So what are those differences and how did I learn this lesson? I learned this lesson because guess what? Even though I thought I was building a brand over the past decade, I have not been building a brand.

Josh Hadley 00:01:52  Over the past decade, I have been a very opportunistic keyword arbitrage seller on the Amazon platform over the past decade. That lesson has finally clicked in my mind. Lots of people think that they own a brand when they have the trademark, or they set up their brand store on Amazon, or they have the domain for their brand, and they’ve published a few products on their domain, Shopify website. That’s still in and of itself, has nothing to do with actually building a brand. So the distinction is this on the Amazon platform a decade ago, what were most people taught? Hey, you need to go find keyword opportunities. You need to go find where there’s a lot of keywords. There’s a underwhelming amount of reviews on competitor products, and the competitors aren’t really doing very well over here. The price points are this and the number of competitors are that. That is the entire framework that everyone was taught when they began selling on Amazon over a decade ago. And so guess what? Most people’s brands were built around just that.

Josh Hadley 00:02:53  Hey, I found this opportunity, I found these keywords. And so I’m going to go exploit that opportunity. There’s some arbitrage over here. And that’s exactly what has happened. And that’s exactly what our brand did. And we kept finding arbitrage opportunity after opportunity after opportunity to a point to where we had over 1600 SKUs. Now, I’m very proud to say we have since boiled that back down. We are now less than half of those 1600 SKUs, but that’s one of the most important, like frameworks and mindsets that had to shift for me, because guess what’s happening when you are an arbitrage opportunity seller, people don’t really care about your brand. You’re just the next best option that they found on Amazon. And so guess what happens? This is the easiest business to go and disrupt. This is why so many people have faced compression and margin compression on Amazon over the past few years because, frankly speaking, the overseas sellers are eating their lunch because the overseas sellers don’t know how to actually create a brand.

Josh Hadley 00:03:51  Period. And that’s what a lot of the US sellers kind of like struggling with, is they thought they were building a brand. And just because you have an eloquent brand name doesn’t mean you’re actually building a brand. And the difference is in actually building a brand. This is something that is communicated across channels. It has a cohesive kind of like target, customer and avatar, and then you have a customer journey built in. So when they buy your hero product, it solves one pain point, but then it scratches another itch, and then your next product that you need to sell them is what alleviates that next itch that you created for them. And so you’re walking them through an actual customer journey. Whereas I was never doing that. I was just saying, hey, I think there’s a great opportunity over here and I see this other opportunity here. Our manufacturer can do X, we can do Y, and let’s just go exploit those opportunities. And we had a very fragmented business. Yes. We thought we were communicating to one target customer avatar.

Josh Hadley 00:04:48  But like there was no true customer journey that we were walking them through. So that’s what I would boil this down to. Branding is nothing more than the associations and the trust that you establish with a particular customer, and how you walk them through a customer journey, period. If you’re not able to walk somebody through a customer journey and have a defined set of products that meet those needs, then you’re not actually building a brand. So if you want to know how to actually build a brand, I would encourage you to go check out my podcast where it is an hour and a half long deep dive into the 16 steps that are required to actually build a true brand, and not just an arbitrage opportunity. Now, one thing I want to add on here is there’s no right or wrong answer. I think it’s just understanding the business model that you are choosing to ride or die on. And if you are the opportunistic seller, guess what? There is still a lot of money to be had being in very opportunistic seller.

Josh Hadley 00:05:42  The challenge with that is that this business model is easy to be disrupted. You’re constantly have to tweak and pivot and adapt. And ultimately, I would arguably say this is not a business model that you’re going to be able to pass down for generations to come. Like, you’re lucky if the current business model survives a decade, let alone being able to survive 100 years in business. So just understand, like that’s what you were like. If you’re going to be opportunistic, good. Exploit the opportunity. Make as much cash as you possibly can and then move over. Move into your next opportunity. But like don’t don’t tell yourself a lie and think that you’re actually building a brand when you’re actually just an opportunistic seller. So that’s the biggest lesson that I have learned a brand. This is something that arguably is something that you’re building over the course of a decade. It becomes much more valuable when it comes time to exit. If you actually have created a true brand, but it’s a much longer play, and that means you’re going to maybe sacrifice some short term profits to be able to build a long term vision.

Josh Hadley 00:06:43  So just understand what business model that you are in. Because I I know in the Amazon space, there are brands that have $100 million that are nothing more than opportunistic sellers. That’s it. But it’s also much harder to defend against down the road. And frankly speaking, not something that I’m interested in playing in anymore. Let’s dive into lesson number two. Lesson number two that I have learned is that the best ROI that I have ever found in business comes back to one thing, and that is people over the course of a decade. Yes, we have launched some stellar products and those have had some good ROI opportunities. But the biggest change and difference that has been made in my business is being able to spot and identify talent. People have been the biggest ROI ever, because if I can hire somebody that’s smarter than me or more gifted than me in specific domains or areas, and then I tack them onto the business, I can get so much more leverage happening in my business. It allows me to go double down on the things that I am gifted in, and the things that I am more talented in, and then it allows them to compound the results over the areas that they manage where they are more gifted in.

Josh Hadley 00:07:51  Way too many people I see are so focused on how much money am I bringing in personally. And I just want to hire cheap team members because at the end of the day, I want to keep all of the capital myself. Well, okay, that’s that’s a fine kind of mindset to have. And yes, you can exploit that. But again, the seller who’s willing to kind of see a ten year time horizon and be willing to maybe lose more money up front to be able to go make that senior hire that is extremely talented and arguably smarter than you, that is going to provide a 100 x return than just going and finding a VA that you could pay, you know, a thousand bucks a month to. And you’re just kind of arbitrage that opportunity in the moment. And so again, learning the skill of how to hire, how to spot very, very good talent and then how to onboard them, sell them on your your mission, your vision for your business and then to be able to retain that talent, I would argue, is probably one of the number one skills that you could develop as a CEO.

Josh Hadley 00:08:51  Because this is a skill. It doesn’t matter what business opportunity you come across for the rest of your life. It’s a transferable skill, an asset where you will get more leverage by working through people than you will just trying to do everything on your own. Again, one of the biggest things that people come to me asking about is like, who should I hire? How do I know when it’s time to hire? And most people are very reluctant to give something up because, well, I’m the PPC expert. I’m the expert at product research and development. But I promise you, there are people that are ten times better than you out there. And when you add them into your business, that’s where you’re able to hit kind of like exit velocity. And it makes your business so much more sustainable in the long run. Lesson number three Amazon is still king and will be king of the e-commerce space and arguably of the retail space over the next decade. I have heard this over and over and over again, even though so many people want to diversify off of Amazon.

Josh Hadley 00:09:49  And we’re all a little jaded about Amazon because, you know, the amount of money and margin that they take from us only continues to increase year over year over year. Well guess what. Just anticipate and know that that’s going to happen. And then guess what? You don’t need to be surprised or upset every year when they increase their FBA fees. And the cost of PPC continues to rise, like that’s just the new reality. And that’s going to happen over the over the next decade, every single year. I would bet $1 million on it. Now, with that being said, Amazon is not something you should be running away from. I still think that those that got their start on Amazon and understand the Amazon ranking and algorithm, that’s only going to change with AI over the next decade, for sure. But understanding the entire Amazon ecosystem and the best way to optimize for FBA and AWS and transfers and all of that, Amazon’s is only going to become a more expensive platform, which is good. Like the barrier to entry is only going to get higher, which means arguably speaking, there will be less and less competition over the next decade.

Josh Hadley 00:10:48  Okay. Now, with that being said, it is still one of the most important channels to understand because even for the biggest CPG brands, even those that are getting into retail and have their own Shopify site dialed in really well and have their own TikTok shop dialed in really well in the omnichannel brand. I have never seen Amazon take up less than at a minimum 30% of their revenue. But what I have heard over and over again is most of the time, even getting Amazon below 50% of your revenue is the biggest challenge. So guess what? I’m going to lean into that. If Amazon is still going to be 50% of my revenue, even when I’m in retail and even when I’ve got Shopify dialed in and humming, and even when I’ve got TikTok shop dialed in and humming along, Amazon is still going to be 50% of my revenue. So I’m going to double down on that. I’m going to put more of my best team members on that platform, and we’re just going to keep getting better and better and better.

Josh Hadley 00:11:42  So the lesson learned is not, hey, diversify yourself away from Amazon. It’s lean into that strength of Amazon while trying to build that omnichannel brand. This is a perfect segue into lesson number four, which is building an omnichannel brand is extremely difficult, extremely difficult. And I don’t think many people give it the credit of how difficult it actually is to move from an Amazon only brand to a more omnichannel brand, especially a brand that’s in retail and a brand that’s on Shopify and TikTok, etc.. And here’s why this skill set that is required to succeed on Amazon is very different from the skill set that is required to absolutely crush it on TikTok shop. Okay, because the business model on TikTok shop is much more relationship creator driven. So you’ve got to be really good at being able to get people on board and get creators to buy into your company, your vision, your mission, why they should keep posting for you versus the competition, etc. it’s not a sit behind the screen look at some keywords and arbitrage, some PPC opportunities, right? And then the same thing on Shopify.

Josh Hadley 00:12:49  This is an extremely difficult skill set because not only are you now required for conversion rate optimization and now managing your own website. The biggest constraint for a Shopify storefront is like, where are you getting your traffic? So you either need to be a Google Google Keywords master, or you’ve got to get really, really good with your creative on meta and being able to drive external traffic to your own website and then converting that, that I guess external traffic into your own domain and then actually making money on that. That’s so much easier said than done. Especially when like the customer acquisition costs on average on meta right now hovers around 40 to $60. So how are you going to make a cost per acquisition work if your product is only $25 on Amazon, right? That’s the extreme challenge that is happening right now for a lot of these Amazon brands that are like, oh, I need to diversify myself away from Amazon. Okay, that’s great. But how are you going to do that? Because the business model is completely different.

Josh Hadley 00:13:47  And the money model that has to sit behind a Shopify brand is very different than the money model that sits behind a Amazon brand that is just like front end acquisition centric. Okay. And then last but not least, the skill set to actually succeed in retail is a completely different behemoth in and of itself. You are looking at a totally different way of managing your cash flow and your inventory. If you are going to be selling into retail, because the way you optimized for your inventory for, for retail is going to be completely different from optimizing for FBA, storage fees, inbounding fees, etc.. So just understand that the reason why it’s so extremely challenging to create an omnichannel brand is because essentially you have to be a master at every single one of these business models, which goes back to lesson number three. Hire extremely smart people so that they can be your subject matter domain and say, this is my head of Amazon. This is my head of Shopify. This is my head of TikTok shop. This is my head of retail.

Josh Hadley 00:14:49  You need to have domain experts if you are actually going to pull off omnichannel presence in a meaningful way. I’m not saying you can’t make $1 million on each of those sales channels. We’ve proven that even without a head of Amazon or even without a head of TikTok shop and ahead of Amazon, we haven’t scratched the retail itch yet. We’ve been able to generate millions of dollars on those platforms, but I’m talking about like, meaningful volume that’s actually scalable, not something that’s like, oh, we left out. We got this thing kind of working. I’m talking about something that’s going to help you grow to $100 million brand. Lesson number five, the money model that sits behind your business is one of the most important things that you could focus on. And here’s what I would say. Anyone that has a compounding customer business has it ten times easier in the e-commerce space. So let me talk about like what does that actually mean? A compounding customer base is this if you can acquire a customer this month, and then that customer is going to need to purchase from you again, whether it’s on Subscriber and Save or whether they need to come back and replenish that product.

Josh Hadley 00:15:55  Recurring versus reoccurring customers. That allows you to scale ten times faster, and it makes your life 100 times easier. And to be honest with you, that’s one of the constraints of our business. This is why I feel like over the past decade I have been chasing this like figurative, like growth curve that would never actually come to fruition because all we’ve been focused on is just front end acquisition. The customer that I acquire today is not coming back to repurchase that same product, or even the next product next month. That’s the fundamental problem of that arbitrage business. If you’re just arbitrage in keywords and exploiting this opportunity, that opportunity, and there’s no cohesive like customer segment that you are moving them up a specific customer journey month after month after month. It’s all about like cohort retention, the number of customers that I bring in this month, how many of them stick around with me next month and are repeat buying next month. So that’s why you would arguably see a lot of the subscription brands have it ten times easier to get to $100 million faster than somebody who is front end customer centric.

Josh Hadley 00:17:02  Okay, yes, you can get there. Like I said, I know people in the Amazon space that have got to $100 million while having just like an opportunistic business, but my goodness, it is a very unsexy business to be in. And you’re on hard mode every single day, because every single day you start with zero customers. You have to go out and find new customers every single day. It’s just a lot harder. So the future version of myself is like, if I’m starting a brand new e-commerce brand today, that is priority number one for me. Find a business model that will allow me to compound customers. Arguably the easiest one up front is something that’s consumable, something that can be put on, subscribe and save. Those are the things that will make your life ten times easier as a business, and the money model that sits behind it just gets so much easier. But there’s also its own headwinds right in the supplement space on Amazon, sometimes your cost per click is well over $10, even $20, because people know the lifetime value of their customers.

Josh Hadley 00:17:59  So they’re willing to go in the read up front like so. Look, every business model has its own challenge. The grass is always greener somewhere else. But if it’s going to be hard no matter what, I’d rather lean into the hard. That will compound in my benefit over a decade, rather than having to start at ground zero every single day. Lesson number six operating in the e-commerce space requires active management and adaptability. Ten years ago, when everybody was selling the get Rich on Amazon course, they were all saying how this was the, you know, create a private label brand and just let it ride, right? Like once you get it set up, just let it print money for you. You get to go sit at the beach and you get to retire yourself, right? I can’t think of anything less true than that statement. I think anybody that’s been in the e-commerce space over even a year can see that the tactics that worked last year no longer work this year. I think that the e-commerce space is probably one of the fastest moving and most difficult and challenging spaces, because you’re competing with a global audience and a global workforce.

Josh Hadley 00:19:04  Okay. The brands and sellers that want to exploit the US market overseas, some of the best operators overseas see the US market as a massive opportunity. And so you’re not just competing with your local market, you are competing with the entire world. That number one makes it challenging. Number two, Amazon, Shopify, AI, TikTok shop. Every single year we are seeing changes and the things that worked last year no longer work again. So what does that mean? You have to be constantly adapting. You have to constantly be changing with the time. This is not a set it and forget it. Probably one of the most like challenging businesses to actively be involved in. If you just think you’re going to walk away and say, hey, I’ve hired my team, they know what to do. Execute this playbook over the next year. I promise if you do that, your business will start to go backwards over the course of one year. If you just keep executing the same playbook over and over and over again, there’s nothing more important than continuous improvement and constant education in this space.

Josh Hadley 00:20:06  So I’m a big advocate of why you should go to events to hear like what is actually working right now, networking with other sellers to hear from their perspective what’s now working. Those are some of the most impactful things that you can apply into your business. This is not a passive management business if you want some of those. Arguably, I would say you go back to the trades that are out there, right. Go own a local HVAC business because guess what? Now you’re only competing in a local market. And arguably, if you’re a smart e-commerce operator that has crushed it like you’ve competed on the global stage and one go compete on the local stage and you’ll probably, like, absolutely smash it. Now there’s different challenges that happen if you’re in the trade business. Again, every business has. It’s hard. That’s for darn sure. It’s it’s a heck of a lot harder to scale a local HVAC business compared to a e-commerce brand. But with that being said, you can take those lessons learned. And again, there’s going to be like a rinse and repeat playbook if you’re just on a small local level and things aren’t really like adapting or changing that much, people need air conditioning equipment that’s going to break down and you can have a very systematic funnel there.

Josh Hadley 00:21:13  So just understand the business that you are in. And if you’re in the in the e-commerce space. This is an active learning, active engagement, active management, and adaptability that is required in order to succeed. Lesson number seven nobody ever talks about this in any of the conferences that I’ve gone to. And this is not a topic of conversation that comes up with any of the operators that I’ve ever talked with or networked with, but probably one of the most important metrics that you need to know in your business, which is the return on invested capital. Nobody’s talking about that. Nobody’s coming out with podcast episodes about that except me. Everybody’s talking about the flashy, shiny newest hack or marketing tip or things like that. But like at the end of the day, all you’re doing is investing capital into this business and the e-commerce space is hungry for cash. You’re only able to scale. The difficult thing is like if you hit 100%, 200% year over year growth targets, it’s just going to consume more of your cash, more of your cash.

Josh Hadley 00:22:14  And profit then has to turn into inventory. And so this is one of the hardest things. Inventory management return on your invested cash. It is so easy to lock up your cash that ends up sitting on a on a distribution or a warehouse shelf for five years if you place the wrong bet and vice versa. It’s also a great opportunity where you could see 500 X returns on your capital. When you find the right opportunity and you continue to double down in those opportunities. But ultimately speaking, like in the e-commerce space, you have to know your numbers extremely well. And that return on invested capital makes all the difference before investing in another SKU, and especially when we had 1600 SKUs, the reason why we pulled back to 800 was because all we had to do is look at our return on invested capital and say, good grief, some of these products, yes, they were making us a profit. Okay. Yes, they were making us a profit. But if I’m only making call it 20% return on my money and that money is extremely.

Josh Hadley 00:23:14  Like I’m having to place a bet. I’m having to wait for that. That inventory to be manufactured has to ship, and then I have to have a team that’s actually going to sell that product, like a 20% return on my money is not enough. It simply is not. Nobody can run a business if you’re just barely making 20% return on your inventory. Like, you need to be over a 100% return on your invested capital. Otherwise, like it does not make sense to keep that skew alive. And so that’s why we cut things back. Yes, they were profitable products, but it would be so much better for me to go put that same amount of capital in some REIT, right, or some private equity fund that is going to pitch you on 20% returns, because guess what? The risk is about the same. Now you have a little bit more control. Obviously if it’s your own business that you could argue like, oh, I have more confidence I can produce a 20% return on my capital versus some private equity fund or some REIT syndication or something like that.

Josh Hadley 00:24:10  But look, if you’re only hitting 20% returns on your invested capital, I would go put it in the stock market. Right now, we’ve seen the stock market is up over 20% year over year today. So like it would have been better if you’re going to invest $1 million into inventory to go put and you only return 20% return on invested capital, it’s a heck of a lot easier and more passive to go invest that in the stock market. Now there’s risks associated with everything, but that’s the framework that like nobody’s talking about. That’s the unsexy stuff. That’s just like the numbers where you have to nerd out on that. And most often most of the entrepreneurs don’t nerd out on that. They don’t even know their accounting numbers, letting no, let alone return on invested capital, which is where you get into kind of like CFO level status. But even as a CEO, like you should understand what your return on invested capital is. And so that is a fundamental premise to succeeding in the e-commerce space.

Josh Hadley 00:25:02  Inventory is going to eat and consume your cash. And if you don’t know how to allocate your cash properly into inventory, you could easily find yourself going bankrupt. You could easily find yourself not making a whole lot of money, while also chasing your tail around in circles over and over again. Lesson number eight comparing yourself to other e-commerce brands or other operators, especially when you go to networking events and you hear, oh, they’re at 100 million, or they’re at 50 million. They’re at 10 million. They’re at 5 million. Comparing yourself to them is one of the most damaging things that you can do. And here’s why. As I’ve had a chance to peek under the hood of some other e-commerce brands and seen some of the numbers that other people are touting, revenue is vanity. Profit is sanity. You would be astonished. The number of brands, especially on TikTok, shop, that you see at the very top. Oh, here’s our top 100 sellers on TikTok shop. I would argue this over 80% of them are losing money hand over fist every single month.

Josh Hadley 00:26:02  Now they’re making their money up with whether it be a halo effect or using that content to grow their retail business and awareness. Getting them inside retail doors or it’s part of their Shopify acquisition system. So like that’s what I mean by you cannot compare yourself to somebody else because you don’t know the money model that sits behind their business. Period. Flat out okay. You don’t know if the guy that you’re talking to at the networking event, if he just has a rich uncle and he’s able to make like, ridiculous bets because his downside risk is very low and he’s not worried about going bankrupt, he’s got a rich uncle that’s going to bail him out if he makes or if he makes the wrong decision. So he’s going all in on certain initiatives, whereas you have other people. And this has been myself, where it’s like I’m more of like slow, steady, fundamental growth with a solid foundation because we’re 100% bootstrapped. And I don’t have a rich uncle that I’m falling back on. Like, this is now my family that like, if I bankrupt the business, this now impacts my family.

Josh Hadley 00:27:02  Like that’s a very different like framework to be operating out of. And then you also can’t compare yourself with like a grooms, right? We saw grooms exit for over $1 billion and you’re like, oh man, why am I stupid? Why can’t I not do something like that? Well, to be honest with you, you have somebody that was venture capital backed like millions of dollars invested and injected into this thing to go hit these, like, certain metrics, like they just reverse engineered it and they took a wild bet on it. And that came because, like, they had experience, they had seen the business fundamentals. They knew the return on invested capital, like they had a high degree of confidence. There was still risk associated with it. But like, you can’t compare yourself to grooms, you can’t compare yourself to some of the other $100 million brands, especially if you don’t know how they’re financed. And a good portion of e-commerce brands actually take on a loads amount of debt. And so again, you just don’t know what somebody else has in their business.

Josh Hadley 00:27:57  And so it’s one of the most damaging things is to say, because you’re at 10 million and you’re my competitor, I should be at 10 million. And why? Just know that at the end of the day, I believe like everybody’s given unique stewardship. And so it’s like, do your best with what you’ve been given. Continue to learn and grow and kind of like optimize, no matter how small that business opportunity is that’s in front of you or how large your stewardship is to grow and improve it and compound it. And so you should be like, look at yourself over like measure yourself against yourself year over year. Hey, am I getting better as an operator, as a leader, am I? Am I improving my stewardship even though I might not be hitting 100% year over year returns on my business? Am I getting better over time? Because if you’re getting better over time, is that nothing more than the game that we’re all playing right now in the game we call life, which is it’s all about personal development.

Josh Hadley 00:28:49  At the end of the day, the the game we are all playing is not who can be the richest person. Congratulations. You win and then you die. Like at the end of the day, we are all going to take whatever chips and money that we acquire and then we give it all back to the game and we leave with nothing. And so again, don’t compare yourself to other people. It’s one of the hardest things that I have had to do still is a challenge, and I have to remind myself this on an ongoing basis. But it’s one of the most important things. Any business that you step into. Don’t compare yourself to other people because you don’t know what dead bodies they have inside the closets. If you were to actually open that up. So run a healthy, profitable business on your own and enjoy what God has given you. I’ve talked about the top eight lessons. Now I’m going to dive into lesson number nine. This is what I would argue is the number one constraint that you need to understand.

Josh Hadley 00:29:39  If you were to enter the e-commerce space today, this is what I desperately wish I would have known when I started my business. Lesson number nine is cash conversion cycle is everything. If there is a silver bullet in generating a CPG brand or scaling an e-commerce company. The silver bullet is the cash conversion cycle that works inside of your business. It’s simply the money model. So how do you influence this? Most people do it the lazy way and they take on debt. But if you can create partnerships with your manufacturer, the cash conversion cycle is this. How much time does it take from the time I outlay my capital? So let’s say I’m going to invest $10,000 for a SKU or a product. Okay. How long does it take me to where I actually get not only my money, my $10,000 back, but when do I actually bring in the profit for that $10,000 investment? There’s a positive cash conversion cycle. There’s a negative cash conversion cycle. A positive cash conversion cycle means today I’m going to place a $10,000 order with my manufacturer.

Josh Hadley 00:30:53  I have to wire him the funds on day one. Okay. That sucks. Those are bad payment terms. But let’s just imagine this, okay? And the reason why I say that is because guess what? When I started in the e-commerce space, guess what I did? I had to pay for that inventory 100% upfront, and it was one of the biggest mistakes. And I wish I would have known that because I would have scaled the business so much faster had I understood this cash conversion cycle thing. So number one, you’re investing all of your capital $10,000. On day one, it’s going to take 30 days for the products to be manufactured. Then it’s going to take an extra, you know, let’s call it 45 days for it to sit on the water. And then maybe it’s we’re at 60 days by the time that that hits your warehouse or Amazon’s warehouse. So now we’re all in 90 days. That’s a positive cash conversion cycle thus far of 90 days. Okay. Now let’s talk about how long till you actually make your $10,000 back.

Josh Hadley 00:31:47  Okay. Well, the day you launch on Amazon or your own website or whatever it is, guess what? You’re not making $10,000 day one. Now, maybe if you hit it big, maybe you you’ve done that. But guess what? On Amazon you used to get your money in about two weeks. Well now they added DD plus seven. So now Amazon’s like yeah we’re going to keep your capital for an extra week. So now what turned into two weeks is now 3 to 4 weeks. Great. So let’s let’s assume best case scenario I sold I ordered 1000 units. Okay. They cost me $10,000. I sold all 1000 units. Let’s call it. We’ll be generous. We sold them all in week number one. Congratulations. Okay, well, guess what? You’re not getting your capital back for that and all of that profit for another. Let’s call it another four weeks. 3 to 4 weeks till Amazon actually gives that to you. And it’s sitting in your bank account. So and by the way, we haven’t even talked about like you probably had to generate some ad spend in order to actually produce that.

Josh Hadley 00:32:44  So again, your money walked out the door well before you ever got profit back on that. So with all things being said and done, best case scenario, if you put all of your money in up front, you are at 120 days of a positive cash conversion cycle. Now, how do you flip that? How could you actually have a negative cash conversion cycle? Here’s the way that this could look. What if you had a manufacturer that you’re willing, like willing to create a partnership with or strong relationship where, hey, yeah, we actually won’t bill you until, let’s call it. Like, let’s imagine you have 120 days. Okay. That means I’m going to place my order. The customer is going to manufacture or sorry, my manufacturer is going to manufacture that product. Then they’re going to ship it. It arrives. It’s now in Amazon’s warehouse. Let’s say it by day 90. Okay. And now let’s say same thing. I have been able to sell all of those units in week number one.

Josh Hadley 00:33:40  Amazon pays me back. Well guess what? I now got my money back and at the exact same time, I now have to pay that $10,000 invoice. So I turn my money from, let’s say we doubled our money. So I got $20,000 back from Amazon and I had to pay the manufacturer $10,000. So in that scenario, we’re at a cash conversion cycle of zero. So now what are other ways that you could influence that? Well, what if you’re able to pay that supplier with a credit card and that extends your payment terms, like the money actually doesn’t leave your bank account for another, depending on how you optimize, the way you pay on credit cards doesn’t leave for another 50 days. So now you’ve brought in $20,000. Yes, you have a credit card bill that’s going to be due 50 days from now for another $10,000. Or maybe it’s $10,000, $10,300 because you had to pay the credit card fee. That’s all good. Do you understand that this, like, cash conversion cycle, is everything? I can launch an infinite number of products if I have a cash conversion cycle that is negative for me.

Josh Hadley 00:34:39  So in that scenario, if I tack on a credit card. Right, well guess what? Now I get the money in before I that I’ve ever outlawed that capital. So if I have 50 days on my credit card now. My cash conversion cycle is a -50 days, so this is a whole deep topic. I actually have a podcast that’s just about how to optimize your cash conversion cycle, using credit cards to finance inventory and the ad spend that you’re committing to. And it fundamentally changes the business, the unit economics completely change, and your ability to scale the business changes in a dramatic way. If you don’t understand that, that’s why you have to take out loans. That’s why e-commerce is so challenging and so cash intensive is because, frankly speaking, you probably have really bad payment terms with your manufacturer, and you’re not leveraging all of the financial instruments that you can without taking out loans in order to expand and extend your cash conversion cycle, which allows you to continue to reinvest and grow faster without taking out loans and capital.

Josh Hadley 00:35:38  That is the key point that I wish I would have understood on day one, rather than me go into my manufacturing and given him $10,000 upfront. That was one of the worst things I could have done. And one of the reasons why the first three years of our business were extremely slow, because it took me forever to get my return back on my capital, to be able to reinvest in the next product launch. So you want to go faster, fix your cash conversion cycle. As we wrap all of this up today, I’m happy to share with you I’ve got one bonus lesson that I’ve learned that I want to share with you guys. And I would say this after operating in the e-commerce space for over a decade, one of the biggest lessons that I have learned is that at the end of the day, this is just a game that we’re playing and the most important, the most fulfillment that I have found in life in general is through raising and developing a family. Period. Because guess what? You’re no matter what happens in business.

Josh Hadley 00:36:32  Yes, it’s cool to say, hey, I grew a $100 million brand. It’s cool to say I grew an eight figure brand. It’s cool to say whether you become a billionaire and billionaire or not. That’s cool. But guess what? All of the chips and the money that you accumulate in this life just goes back into the middle. It just goes back. And so if that’s true, and yes, you’re going to give it to your posterity, things like that. Great. Well, what if number one, you don’t have posterity, but like this is one of the most important things that I’ve learned in my life, especially as like, yes, as the business has become profitable and I see even more growth ahead. I look at my life right now and I say, at the end of the day, there is nothing more important than the time that I am spending, developing and raising children to help them further themselves and hopefully become even smarter than me at the end of the day, to become even more successful than me and to develop positive relationships with other people.

Josh Hadley 00:37:26  My my spouse being number one and then my children being next to it. Those are the most important relationships, because when I’m on my deathbed, I’m not going to care. I’m not going to care as much about the money, in fact, like, listen to all the people once they hit 60, 70 years old and they laugh at like how consumed they were about like making money. And they said, I had the world in front of me when I had my children at home. That’s when life was stressful. I was busy and it was hard making ends meet at times. But like one of the most fulfilling times in my life, when I’m on my deathbed, I want my loved ones around me because I’ve developed positive relationships with them and I’ve impacted them for the better. And then they’re teaching their own children the same principles, because the only thing I’m taking with me into the next life is the relationships that I’ve developed in my family into the next life. Everything else goes away, and it’s just for fun.

Josh Hadley 00:38:17  And the money that’s made just goes back into the goes back into the pot, goes back into the middle at the end of the day. So don’t lose sight of what’s most important in life. That’s the key takeaway. Yes, it’s important I find so much fulfillment out of business. And you might say, Josh, I’m not a family guy, I don’t like kids, blah blah blah. It’s like, I love business and I wish I could do business 24 over seven, but I don’t. I have to stop and then I have to go be with the kids and coach their teams and and develop them. And it’s a different level of hard, but it’s one of the most rewarding and the most fulfilling things that you could ever do in this life. Hands down, I would argue that to the day I die is much more fulfilling to raise a family than even build $1 billion business. So with that, that’s my bonus lesson there for you. I hope you take away some of these lessons and if it’s maybe news to you, go implement it in your business today.

Josh Hadley 00:39:06  If you’re just starting out, hopefully these lessons give you a much higher leg up than what I had when I first started. But ultimately, if you know somebody that needs to hear this message or one of these lessons applies to them, please share it with them. Share this with your mastermind group. Drop it in slack channel. Drop it in the WhatsApp channel where you’re talking to some of your friends and other e-commerce business owners. And then last but not least, the biggest way you could say thank you is by leaving me a review, giving me your feedback and help, and spread the word with other people. So remember systems and focus scale while distraction kills. And until next time, good luck!