Josh Hadley 5:25

that’s amazing. Well, obviously, you’ve got a lot of deep experience here, because you lived and breathed that, you know, in reality you lived in China, you saw how things were getting made. And I love that, like, from a young age, like you were actually creating products and selling them had a very successful business while going through college. And so I’m super excited to hear all the ins and outs that you’ve learned, especially since you lived in China, and you understand a little bit more about that culture and how what you have been able to learn can apply and help our listeners that are trying to take their brands from seven figures that you’re already established to eight figures and beyond and what are the the sourcing tips, and that they need to understand. Because there’s one thing about supply chain and product sourcing that, you know, may be a common myth is that, hey, I already got this started. And we’ve already got an existing relationship with the manufacturer like it’s on autopilot, I don’t need to spend any more time and attention on it. And, Nathan, I’m sure you’ll you’ll help kind of dispel that myth that, you know, that’s not necessarily the case, if you want to scale your brand, there are things that you’re going to need to pay attention to as it relates to supply chain and sourcing your product. So maybe we can begin there, Nathan, like what are some of those tips and strategies and experience that you’ve been able to gain that require people to continue working on their sourcing and supply chain to be able to scale their business? To eight-figure? Yeah,

Nathan Resnick 7:01

yeah, totally. I mean, there’s kind of three main components that I like to look at when thinking of a seven figure seller that’s now trying to get to eight figures, I think number one is your on cash conversion cycle. And that’s more so focused on payment terms, right of, you know, when you’re starting out as a ecommerce brand, typically, you’re paying kind of 30%, down 70% before shipment, which is totally standard. But as you grow, you should start being able to being able to pay some of that balance on net 30 or net 60 terms. And eventually, your goal is to get everything on, you know, net 30 or net 60 terms. So the simplest way to explain cash conversion cycle is basically can you sell your product before you have to pay for it? Meaning can your customers have your product and pay for your products before you have to pay your supplier for it? Most brands, that is not the case. But if you look at some of the fastest growing brands in the world, like Jim shark, they really were able to grow based on their cash conversion cycle. So I would Google just GymShark cash conversion cycle, there’s some really cool case studies around how they were able to do this and really fuel growth. But you know, if you’re a brand, I think, number one, as your POS growing should always be negotiating your payment terms. So ask yourself, when’s the last time I negotiated my payment terms? And number two, you know, if your factory isn’t willing to give you payment terms, and you believe this is the best factor for you, can you work with a third party that would finance your purchase order. So that’s another potential Outlook to improve your cash conversions conversion cycle. Number two, I would say is really just around, you know, renegotiating the unit unit price, that’s something we really focus on at Sourcify is just, you know, our goal with any customer we work with is to improve their unit margin their product margin by at least 10%. So you know, if you’re paying $10, for your product, right now, you know, we’re gonna get you down to $9 or lower, the way that we typically do that is a lot of brands, they, you know, when they start, they’re just on Alibaba searching for a factory in there, you know, have a higher baseline of a price that should be paid BP paying for their product. But when they actually go in and start scaling up their POS and placing larger POS, it’s a matter of how do you now you know, lower that price, and most of the time, that means, you know, working with another factory, which can take some time to transition production. But if it’s going to save you 1020 30%, it’s going to obviously make a huge difference in your bottom line. And number three is something that I’ve been, you know, more and more interested in is actually section 321 Where you warehouse some of your products in Mexico, you know, there’s a lot of providers, outside of Tijuana and to CoQ de like XP fulfillment or Baja facilement that do a great job on this. And for Amazon sellers. I think a lot of times this is overlooked, but at the same time, if you can offset some of your duty and tariff costs by we’re actually in Mexico and bringing them in as you need product. That means that you don’t have to pay that you know tariff and duty costs right up front and one big gulp so I think that’s kind of the three The main factors I look after brands from a supply chain perspective of how do you actually, you know, use your supply chain as a strength to improve your bottom line, improve your margins, and also improve your cash flow.

Josh Hadley 10:11

Yeah, man, Nathan, you dropped a lot of value real quick with those three, you know, points that you talked about there. One of the important things for people to understand is, you know, your supply chain has a direct impact on the bottom line of your business. And honestly, just as Nathan, you know, really did a great job of eloquently laying out the importance of those that cash conversion cycle, you want to talk about something that’s going to allow your brand to exponentially grow. That cash conversion cycle and getting payment terms with your manufacturers, is going to be like one of the holy grails that you need to be striving towards. You know, because it’s not requiring you to give up equity of your business, it’s not requiring you to go pay exorbitant interest rates, you know, from external Capital Partners, right. And we all get pitched, you know, capital pitches all the time, it seems like and Amazon’s always willing to lend us money. But at decently high interest rates, sometimes they’re up to eight, nine, even 10%. Now, imagine if you could have a 0% interest rate, that’s effectively what can change as you you know, change things with your cash conversion cycle with your man, you’re your manufacturing partner. So Nathan, if you don’t mind, let’s, let’s dig deeper into that one to begin with. Because I’m sure with your experience, you have probably some good negotiation tactics, you’ve probably have a few case studies of people that you’ve helped navigate getting bit better payment terms with their manufacturer. So would you mind just kind of diving in and sharing more there?

Nathan Resnick 11:54

Yeah, totally. I mean, I think first off, you got to understand how valuable your business’s to your factory, right? So I would do that by really trying to understand, you know, you make up most of their production output, you know, of all the factories production volume that you work with, what percentage are you? Is it 30% 10% 50% 80%? You know, what, what is it, and then you kind of understand where you’re at from a negotiation position, right, because if you’re a brand that makes up the majority of a factories output, obviously, you have a much stronger lever to pull, if you’re kind of minority customer for them or a smaller customer for them, then, you know, maybe that’s not even the right factory for you to be working with, because you don’t have a strong lever to pull. So I think, you know, number one, you’ve got to see eye to eye with them in terms of forecasting, and helping them better understand, well, hey, you know, this year, this is how many units I’m planning and produce. And I think there’s a big disconnect between supply chain teams at factories when it comes to forecasting, because a lot of supply chain team members don’t understand or a lot of brand owners don’t understand, you know, that factory has to go purchase raw materials to produce your products as well. So they have their own cash flow challenges when it comes to, you know, making sure they have enough factory workers to produce your product, make sure they have the raw materials produce your product, and then they aren’t getting paid, you know, for 30 or 60 days to produce your product if you’re negotiating your term as well. And so you’ve got to understand it from their standpoint, as well as, you know, Hey, how is this going to help their factory grow, because it can also put them in a cash flow position, which is challenging. And so that’s something you need to be aware of, when you go into your negotiation. So I think number one, I would just make sure you’re seeing eye to eye with that factory that you’re working with to understand, you know, how big of a customer am I for them, you know, what is their cash flow look like? And have I done a good job, making sure they understand my forecast. And that’s when I would go into the negotiation of saying, hey, you know, we’re trying to grow and to grow, we need more, you know, cash flow to scale up our ads to get more customers, right. And so that’s how I would approach it. I think if you’re a brand that is, you know, a smaller customer, like sub 10% of the factory’s output, it’s gonna be really hard for you to negotiate that. And honestly, in that position, I might actually, you know, kind of take my option to have, you know, trying to ask yourself, am I the best customer for this factory? And can I find a factory where I’m, you know, a much larger customer that I can grow with more? So that’s, that’s another kind of question that I would ask of trying to understand. Like, if you already know your small customer for this factory, are they even the right factory for you? And then, you know, it’s

Josh Hadley 14:34

just real quick before you continue on that. My question would be on that. How do you have that conversation to say, Hey, by the way, how much of your business do I make up right? Like that could be an awkward conversation to have with somebody so how did you find out that information? Yeah, I

Nathan Resnick 14:52

mean, it’s easiest to do with boots on the ground, right? So if you can have your own team that can go to the factory that’s great or you know, hire a company like Sourcify to help understand or look at their audits, you know, say, hey, we need a financial audit of your factory to sell into, you know, X retailer, or whatever it may be, you can get some financial information through an audit that’s been conducted on that factory. And so those are kind of the main ways that I looked at it. But I would also just try to build a relationship with a sales rep or a project manager that you’re working with at that factory and help understand like, hey, you know, what else are you working with? What else are you producing? You know, are we a big or small customer? For you? I mean, just ask these questions, like, simple questions. But for whatever reason, a lot of owners or a lot of brand, you know, founders don’t, don’t ask. And especially as they grow, you know, they become more focused on growing top line and kind of overlook well, to grow top line, you know, your cash conversion cycle is such a key component of that. Yeah,

Josh Hadley 15:47

yeah, those are, those are great insights. So, well, we’ll clue you back into where I interrupted you on. But I think that is an important thing. And also, like, just creating a good relationship with your manufacturing partner is, like probably the number one takeaway there, right? Not just seeing them as like somebody that I just shoot a quick email to, and say, Hey, can I need to place another order, like, we’re talking about building a deeper relationship here and seeing your manufacturing partners as just what I said, a partner in your business, right? Because they truly are.

Nathan Resnick 16:21

Yeah, and that’s, that’s so vital to, you know, kind of Guan chi and the whole, you know, there’s literally a term in the Chinese language and Mandarin of Guan chi, and it’s just the kind of business relationship that you have. And I think that is the essence of doing business in China. And, you know, I think a lot of people say that, but at the end of the day, especially in times of the past, you know, three years, when we had COVID, and very few people were going back and forth, it was hard to build a relationship with your factory. And so I think, you know, now you have the opportunity to travel back and, you know, meet them and show that you care and show that they’re, you know, a vital part of your business, it can mean even more for them to, you know, continue to grow with you. And I think that, you know, like you said, it’s such an important factor of your businesses, how do you have more transparency with your factory? And I think one of the best ways to do that is, you know, being more transparent in regards to forecasting,

Josh Hadley 17:14

very good insight. Do you have any examples or case studies that you could share of maybe brands that you’ve been able to help? And what type of terms they’ve been able to get from their manufacturing partners? Just to give people some ideas of like, here’s the potential that’s out there?

Nathan Resnick 17:31

Yeah, yeah, totally. I mean, one of the, you know, brands we work with at Sourcify is Jackson, they’re a big men’s jewelry brand. You know, I can, I mean, they publicly said, they were Forbes 30, under 30, I think last year, year before, and they did 70 million in revenue. So just impressive, really impressive brand, and their jewelry is just incredible, if you go to jackson.com. So, you know, we did two things for them. Number one is cut costs, you know, we really improve their margin across all skews. And we did that just by, you know, working with better factories than they already had, because when they started the brand, you know, they just had a higher baseline and what they should be paying for the jewelry. And as they scaled up to the, you know, multi eight figure range, there was, you know, obviously, a lot of opportunity to cut costs. And number two is better payment terms, you know, as we started placing bigger POS and working with them to, you know, place bigger POS, we, you know, told the factories in order to unlock growth, you know, we need better payment terms here, we can’t be paying everything before it’s shipped. And so they’ve unlocked, you know, net 30, and even net 60 terms on some of their items. And so, you know, I think that took time, you know, we’ve been working with them now for three and a half, four years or so. So it’s not something that happens overnight. But you know, something that I definitely would keep a pulse on as a brand founder, as you continue to grow is, you know, how do I get better payment terms from my factory. And the best way to do that is kind of like what you mentioned, Josh is really seeing eye to eye to them and making your factory a real partner in your business, and making sure that they’re aware of, you know, hey, in order to grow in order to place big orders, we need better payment terms. Because otherwise, you know, we don’t have the cash to spend on marketing

Josh Hadley 19:07

makes a lot of sense. So when you talk about, you know, net 30 net 60 days, does that mean you have received the prot like, when does that net 30 days? You know, start is it

Nathan Resnick 19:19

It starts from the time it’s the time is delivered to the warehouse,

Josh Hadley 19:24

okay, in the US or wherever? Yeah, final desk? Yeah, yeah, so

Nathan Resnick 19:29

there’s different terms. I mean, it could be from the time that it’s, you know, leaving the factory, or the time that it’s, you know, arrived at the warehouse, you know, definitely something you should specify with your factory, of course, but, I mean, the best bet is obviously, from the time that it arrives at your own warehouse, I mean, a lot of factories might give you, you know, till the time it arrives at the port or time that shit but, you know, getting a container from China, especially during COVID. I mean, that was, timelines were crazy, but, you know, now fortunately They’ve, they’ve gone down quite a bit. So you can get a container a lot quicker. But at the end of the day, you know, obviously, the farther you can stretch that out the better.

Josh Hadley 20:09

What are some, just maybe some creative payment terms that you’ve seen amongst all of the different companies that you’ve worked with just to throw out some ideas of Yeah, hey, here’s some creative like payment structures I’ve seen.

Nathan Resnick 20:22

So probably one of the most creative is I’ve seen a brand, just do like a flat monthly payment every month, they’re saying, Hey, okay, we know, we’re gonna order, you know, a million dollars of product this year, and every month, we’re gonna pay you, you know, add $3,000 for that product. So they committed to the factory saying, Hey, we’re gonna order them, we forecast, we’re gonna order a million bucks of product, every month, we’re just gonna pay you that same amount. And some months, that’s great, some months, that sucks for the business. But at the end of the day, it’s just very consistent. And it doesn’t matter, you know, how many POS are placing or how many products are actually being produced. That month, it’s almost like the factory’s giving you a flat, you know, mortgage on your business from, from a product standpoint, right. So you know, you’re paying, you know, the same balance every month, that’s one unique way. And other one is just, you know, breaking down the figures in regards to whatever works best for your business, right, at the end of the day, you’re gonna have to pay a factory 100% of the balance owed, whether it be 10%, down, and, you know, 20%, upon production, completion, and another 20%, when it, you know, hits your warehouse, and then another, you know, 30%, net 30, and then the remaining balance paid net 60, right. So, you know, I would just try to break down that 100%, as much as you can. And though it may sound funny to break it down so much at the end of the day, you know, the more you can get on line, your payment terms, the better for your business, right. And so I think just making the factory comfortable, and just being creative with ways that you’re paying for your product is a huge win.

Josh Hadley 21:59

Awesome, those, those are some great ideas. I think that you know, that mortgage payment, so to speak, the monthly payment is very interesting. And you can only get to that point, if you are solid on your own demand planning, right, which brings up right conversation of sharing that forecast as well with your team, which also just goes back to like, you know, the importance of having somebody on your team that’s specifically focused on supply chain, and demand planning and writing into account, you know, seasonality spikes, and how we’re bringing in product. And when we are that there’s so much that goes into it before you can even have this conversation of like, yeah, monthly payment makes sense for our business. So don’t immediately go out and change things, you know, first, right? Sure. You’ve got all your, your ducks in a row. Be totally you start pulling triggers, right.

Nathan Resnick 22:52

Yeah. And I mean, like, you know, for most ecommerce brands, q4 is obviously the biggest right? And factories know that. And so, you know, maybe instead of doing a flat mortgage, you’re saying, Okay, well, hey, we’re gonna pay, you know, a smaller portion of that the first six months of the year and a greater portion of it the last six months of the year, I mean, I would just have an open mind going into negotiation in regards to payment terms with your factory. And, you know, factories can tell how your business is doing based on the order volume, right? So they’ve got a strong pulse on your business, and hopefully, your orders are growing with them. And that’s going to be a great avenue into negotiating your payment terms with them.

Josh Hadley 23:28

Are there any negotiation tactics that you’d like to throw out? Or strategies that you would recommend as people work with their manufacturing partners?

Nathan Resnick 23:39

I think it depends on what you’re trying to negotiate, right. Like, if you’re trying to negotiate price, the best way is to set your you know, start with your baseline being set very low. You know, I mean, if it’s a new factory, that’s how I would start. If it’s true, just in fact, your partner, then, you know, you know them best, you know, how you interact with them best? It’s a good question. But I mean, I mean, one example, I remember, just in the markets when I was living in China, when I was 15, and 16. And even again, when I was living in cuando, when I was 22, is just, you know, in those markets, they start by saying, Oh, these shoes are going to be, you know, 2500 RMB. And I would immediately wipe 90% of whatever price, they would tell me off the bat and say, oh, you know, this vendor over here, so they could do it for 250 RMB. Right. And they’re just like what, you know, and it just starts the baseline point much lower. And then you know, hopefully kind of work from the baseline up versus from their high price down. So I think that is a tactic that could be used for a new factory. And then, you know, for an existing factory, I think it’s just a matter of being more transparent in regards to you know how your business is doing your forecast. thing. And also, you know, making sure the factory understands that, you know, the challenges that are involved in their business to produce your product, right, because, you know, they have labor, they have, you know, the raw material cost, they have their building costs, they have electricity cost, I mean, they have so many costs associated with your product that for them to break down, your product is really hard even to get a final price per unit. And so, I would even ask them, if you haven’t before, it’s surprising, like a lot of brands don’t ask, like, what’s the actual like, you know, breakdown of my product that makes up this price per unit. And so if it’s like, you know, let’s say, it’s, let’s just say it’s this hat, for example, right? So you’ve got like the stitching, you’ve got the coloring, you’ve got the labor, you’ve got the electricity, you’ve got the facility costs, I mean, there’s probably like, I don’t know, at least a dozen dozen and a half costs associated with this hat as an example. And so having them actually break down the costs to get to your price per unit is, I think, a great negotiation avenue for your existing factory as well, because it’s surprising, right? So many brands don’t even like, ask, like, oh, what actually gets me to the price per unit that you’re giving?

Josh Hadley 26:14

Yeah, yeah. What, those are some great strategies. And I think going back to what you you spoke about earlier, that kind of price anchoring, or just anchoring in general, is a very powerful negotiation tactic. Now, you want to be cautious when using it because they people could completely disregard you and be like yours. Yeah. You know, or, you know, again, it needs to be semi realistic, right. Right. To show that you’re, you’re in the ballpark, you understand, like, okay, like, this person is knowledgeable. That sounds like a, okay, somebody may be willing to do that. But that’s, uh huh. Yeah,

Nathan Resnick 26:53

feel it. Josh. That’s definitely the right. That’s definitely the right term for it is price anchoring you. You have the right, you know, description for the tactic. So that’s awesome.

Josh Hadley 27:04

Yeah, so yeah. But use it with caution. That doesn’t just mean like, I should be paying five cents was just totally to pay for it. You need to be knowledgeable and show like, yeah, you understand? And the same thing applies, I think, for your payment terms. Right? Start high. Be, you know, you could even throw out, hey, so I know, you know, I’m in a mastermind group. And I’ve got some of my other business partners that have 180 day. net payment terms. That’s what I would like to get towards. Right. And they’re probably like, Oh, my goodness, like, right. I don’t know that we could get there. But yeah, when you settle it, maybe 60 days, that terms? Right, they are happy because they’re like, oh, man, like, I can’t imagine that or an 80 day terms. Your end goal was 60 days anyways. Right? You you set this kind of anchor at a higher point,

Nathan Resnick 27:56

though. Yeah. I mean, that’s, that’s exactly what, you know, even the big big brands do, right? Like,Sourcify, we’ve worked with Anheuser Busch quite a bit. And Anheuser Busch, like their payment terms are net 180. Like, it’s insane. You literally as a supplier for Anheuser Bush, you know, their starting point is net 180. That’s it. And so, they have the buying power, right. And they have, you know, the credibility, which makes them able to go to their suppliers and say, Hey, we only pay net 180. But, you know, for smaller e commerce brand, it sounds like outrageous to say that to a supplier, but that’s literally what these you know, fortune 500 are doing is just going to suppliers and saying, hey, you know, we’re Anheuser Busch, we only take net 180. And if you want to work with us and get our POS, then net 180 is what it is. And it’s it’s how they operate and how they work. And you know, sometimes you can get around it in different ways. But the other option too, you know, when you’re working with a fortune 500 or fortune 1000 is, you know, you can often finance their POS, which a lot of factories do too, but you know, think of yourself as a fortune 1000 and take that negotiation position, right. Yeah,

Josh Hadley 29:08

yeah. So there, there, you’ve now heard it, right. 180 days is realistic, it is in the realm of possibilities. Maybe use that as as your anchor, so to speak. So yeah, Nathan, this is great. Let’s let’s pivot now to product costs. So why is it so important? If somebody’s scaling up to go back and revisit their product costs? Maybe they thought they originally got a great deal when they found somebody off of Alibaba, right. What should they be doing now?

Nathan Resnick 29:36

Yeah, totally. I mean, I think when someone starts an E commerce brand, right, like their first Pio is anywhere from 10,000 to $50,000. Right? It’s not a lot of money for a factory and most of the time when they produce that first production run their work with a smaller factory, and so if you’ve scaled up with that same factory, chances are the baseline price that you started to pay for your product is much higher than similar brand that’s spending, you know, a million dollars or so a year on that same product. And so I think you have to go look at the landscape of factories and understand, you know, number one is this factory is still the best fit for me, even if you’ve now become, you know, their biggest customer, they might have, you know, equipment that makes the price per unit higher, they might not have the right technology, they might have not have the best negotiations with their raw materials, suppliers. I mean, there’s a whole number of factors as to why that factory price that you’re getting is higher than other factories. It might be location, I mean, there’s so many factors that go into it, right. But at the end of the day, I think every, you know, year or two years as you grow, because a lot of E commerce brands are trying to grow, you know, 50, to even, you know, to 300% a year, right? I know, a lot of brands are in COVID, that are growing to 300% in a year. And, you know, to go to the same factory and produce, you know, two to three times more product and pay the same price. Seems a bit crazy to me. And so I think, you know, every two years or so you should go and do a factory analysis and understand, you know, is this the best price to pay for my product. And you know, these changes in your supply chain don’t happen overnight. But if if there is a factory that says, hey, you know, I can produce this product for 10 or 20%, less, it’s worthwhile to place, you know, a test Pio with them and say, hey, you know, we’re spending a million dollars at Factory A this year, you know, we’ll spend 100,000 with you this year, and start ramping you up and see if you can produce the same quality product for a better price. And if you can, we’ll start transitioning, more production to you. And I think to this goes into my belief that you should never be single sourced. So at the end of the day, if anything, this is gonna help strengthen your supply chain, because then you know, you have a backup factory that can produce your product in case something happens with your primary factory. Yeah,

Josh Hadley 31:57

that’s a really important takeaway there. I mean, what horror stories have you seen from people that only have a single factory,

Nathan Resnick 32:04

I mean, so many, I mean, so many just situations that either were out of a customer’s control, whether it be, you know, anything from a fire at a factory, or labor shortages, or the factory being, you know, shut down by the government to, you know, just them completely screwing up lead times, and then missing a deadline for, you know, a big box customer, right. And so, there’s so many stories that I could tell around why you should never be single stores. But at the end of the day, you know, as you ramp up, there’s so much to focus on an E commerce brand that a lot of, you know, founders and a lot of supply chain teams just get so caught up in their one factory that they forget to have a backup plan, and especially as they launch new products, they, you know, it’s a lot of work to have multiple factories that can produce that same product, right. And so, at the end of the day, it’s it’s, it’s more work to do, but it’s completely worthwhile, especially when something goes wrong with that primary factory, and you’ve got deadlines to meet.

Josh Hadley 33:07

Yeah, yeah. I think that’s a great anecdote. And so Nathan, the next question is like, so how do you balance between wanting to be somebody’s primary, you know, customer, and sending as much of your business to them as possible, so that you are their largest customer? Ideally, verse, hey, I want to have a backup option, you know, what is it you’re sending them? Maybe 10% of your orders, but then maybe you’re paying a higher cost of goods over there, etc? Well, I mean, it’s a juggling act. Tell me how, yeah, that right. Yeah, I

Nathan Resnick 33:42

mean, I think for your backup supplier doesn’t mean that you have to like place, you know, 10% of your volume to them, or even 5%, it’s just that, hey, I know, this factory can produce this product in case something happens to my primary factory, right? So I’m not saying you constantly have to produce product there. It’s just something that, you know, as you do a cost analysis for your, your supply chain this year, you should understand, okay, you know, I now know that this factory over here can produce my product for a price that is, you know, a little bit higher, but, or even if it’s a little bit less, right, like at Sourcify, we found that the thresholds to change factories, in terms of the work that’s required, is you need to be saving at least 10% of your unit cost to change factories. I mean, that’s really when it becomes worthwhile. So, you know, if you’re going from paying $100 for your product, and $90 for your product, that’s a significant difference. And so we think 10% from our data just shows that it’s really worthwhile to make that switch, you know, if you’re saving three or five or 7%, you know, sometimes it’s, it’s not worthwhile, especially as you have, you know, most of the time build a really strong relationship with that primary factory. But if you know, this new factory can save you at least 10% then often it’s worthwhile and that switch doesn’t happen overnight like I did. scribed, right, you’re struggling to place, you know, 10% and 25%. And eventually, gradually moving it over. But, you know, at the end of the day, it’s definitely a threshold you be aware of, and something needs to keep in mind.

Josh Hadley 35:13

Yeah, no, that makes a lot of sense. So, Nathan, where is somebody to begin? You know, if they, maybe they launched their business three years ago, they’re doing more than seven figures. Now. They’ve never, you know, touch the product price ever again, they’re just working with that same manufacturer, where did they begin to go back out, you know, getting quotes from the market again, to see what another competitive quote might be? Yeah,

Nathan Resnick 35:40

I mean, the best is, you know, I have played ourselves here, that’s literally what we do. And that’s, you know, how we win business is just go to Sourcify and book, a free sourcing consultation, I mean, we literally do a free price, you know, pricing your product analysis for you, we do all that work, all we need is samples and their existing factory name, because we don’t contact your existing factory, because we don’t want to, you know, get involved with that relationship with whatsoever. Yeah. And so, I mean, that’s the best bet you could go have your supply chain team, do it yourself, you know, if you’ve got boots on the ground in Asia, whether it be in China or whatnot, you know, a lot of those factories are located in the same cities. So that’s another angle. Or you could go on, you know, Alibaba or global sources and start doing, you know, the work yourself and doing the research yourself to, you know, get another price quote for your product. So, you know, those are kind of the three main avenues. I think, a lot of times, I mean, what more and more people are realizing is like Alibaba, and all these marketplaces pay to play, right? Like if I Google, or excuse me, if I search on Alibaba, hat manufacturer, that hat manufacturer, that’s, you know, number one is paying Alibaba the most to be the number one search result, right. And so it’s same with any marketplace. And, you know, it’s pay to play for suppliers on Alibaba and global sources. So, you know, just because they’re ranked the highest doesn’t mean that they’re the best factory. I mean, I’ve literally been to, you know, some of the biggest factories I’ve ever seen in my life that weren’t even on those marketplaces, because they’re working with, you know, big brands already, that they have long standing relationships with. And they don’t, you know, need to be or want to be on those marketplaces. Because even for most factories on Alibaba, they know, you know, 90 95% of those inquiries are going to be very small, you know, startup brands, that’s not going to move the needle for them. Right. And they know, you know, with with production, it’s a big fish game, right. The more products you produce, the more money you’re gonna make. Yeah,

Josh Hadley 37:36

yeah. I think that, you know, there’s so much that goes into sourcing products that ultimately, I think a good recommendation is like having somebody that has boots on the ground, whether that’s your own team, right? Or whether that’s a third party, like yourself, saucify, you know, but somebody that’s an expert in there, right? And I think Alibaba can be a good start. But don’t see that as the end all be all, there’s so much like, that’s networking is so important, right? And getting to know the people that can get you access to those factories that just like you mentioned, they’re doing bigger volume, bigger stuff, better cogs, all of it. But you don’t get access to those unless you know, the right people. Right.

Nathan Resnick 38:20

Yeah. And I mean, as part of that, one thing that I’ll add that, like it baffles me that brands don’t do is like, on every single production run, you know, you should be doing a third party inspection, or at least on a few of them randomly, right. And so many brands don’t do this. And it’s like, literally just like, it’s like simple insurance for your product, right. And that costs you only like, two 250 bucks, depending on who you use, you know, for all of our satisfied customers, we do that. But there’s a ton of, you know, QC companies like Chima are factored quality. I mean, there’s so many out there right now that will offer this service for your brand, that it’s really a no brainer, especially when you’re producing, you know, 50 or $250,000 worth of product. It’s like, would you spend, you know, 200 or $300, to make sure that your product is actually what you expect it to be

Josh Hadley 39:10

before you put it on a ship and it goes into containers. And then, you know, months later it shows up and it’s the wrong thing. And you’ve lost all that time. Right? Yeah, exactly.

Nathan Resnick 39:18

It’s it’s crazy that, that a lot of brands don’t do that. I don’t know why it baffles me. Yeah.

Josh Hadley 39:26

Very good. Very good takeaway for our listeners as well. Now let’s move into that third and final kind of tip and point that you shared with the audience. And that is, you know, warehousing your products kind of outside of the US in Mexico. You talked about Tijuana this is kind of news to me. I haven’t heard many people talking about this Strategy. So I’m interested to learn more about this Nathan, tell me more.

Nathan Resnick 39:53

Yeah, totally. I mean, section 321 is basically a practice where you can you know, import, you could still bring your product in through Long Beach, but they’re still in bond and their truck down to Mexico to a warehouse there. So you don’t pay any duties or tariffs, their warehouse there. And then as you bring them across the border from Mexico, then you’re paying duties and tariffs on this products as you bring them across a lot of ecommerce brands, if they’re shipping directly to the consumers will, you know, use the law where if the package is valued at under $800, you don’t have to pay any duties or tariffs on them. And so you know, there’s some big providers that do this. They’re like I mentioned, Baja, fulfillment, XP fulfillment. I mean, there’s a lot of them. I think, even shipmonk Does this now too. But it’s a great value add service that helps you alleviate some of the duty and tariff costs in your business. So if you’re a business that’s importing a product that has a high tariff, then it’s definitely worthwhile to check out to alleviate some of your cashflow. And then also, if you’re, you know, shipping a lot of your products direct to consumer, I think it’s a no brainer to do this. And, yeah, I mean, the Will you know, what’s not to like, it’s completely safe, there’s good serve good food, good drinks, it’s, it’s, I think, really just a great opportunity for ecommerce brands. Yeah. And

Josh Hadley 41:09

you’re not doing anything illegal, right? That’s why your first thing is like, it’s in the tax code, right? So right, this is completely compliant, that you’re able to do this, and right,

Nathan Resnick 41:20

and it’s not going to change it. And even even even if, like, even if, you know, let’s say the law change, which it won’t, but let’s say if it were to change, a lot of these facilities are better than three PLS, here in America anyway. And oftentimes, they’re more affordable, because they’re, you know, obviously, you utilizing labor that is in Mexico. Yeah. And is

Josh Hadley 41:41

the Strategy to bring your products in at amounts that are less than $800 at a time, is that really where the value is at all that

Nathan Resnick 41:50

is, that is definitely where the majority of value is for, you know, mostly ecommerce brands that are selling through Shopify, or Zoomer, but for your audience that is, you know, mostly Amazon, the value is, hey, I don’t have to pay, you know, let’s say you have a 20% tariff, and you’re bringing in 150k a product? Well, that’s, you know, what, like, $25,000 or so you don’t then have to pay that all upfront. And let’s say you only need, you know, 20 or $30,000, that product at your warehouse or at FBA, you know, you then can pay that, as you bring it across the border in Mexico and your warehouse and costs are going to be, you know, oftentimes more affordable than they would be at your own warehouse in America. So, I mean, I think it’s a it’s a no brainer, and at least it’s worth doing a cost analysis on because, you know, if they can save you even, you know, 10 15% of your warehousing or, you know, fulfillment costs, it’s definitely going to increase your bottom line, right.

Josh Hadley 42:50

Oh, yeah. And it turns back into that cash conversion cycle, right, that we just talked about, seeing that Tara is, you know, part of that, that unit cost at the end of the day. And again, being able to push that off in a legal format, I mean, can definitely help your business continue to expand exponentially? So I think that’s great. I only follow up to that. Nate Don’t be, you know, how do you know is that something that salsify helps brands with? is kind of getting that set up? Or are there other people that you would recommend if people want to execute that Strategy? Yeah, I

Nathan Resnick 43:25

mean, we can make introductions, if you want to reach out to us, we can make introductions, we don’t facilitate that ourselves. You know, there’s a lot of companies there that do it. I mean, I think I mentioned a few like XP and shipmonk and Baja fulfillment, it’s definitely worthwhile if you do it to go make a trip and see the process because it can, it’s gonna make you a lot more comfortable with the process. I mean, I’ve personally been to, you know, kind of all the providers down there, and it’s just really eye opening and incredible to see their process and how they operate. And then also to you see major brands down there that are doing this, like Taylor guitars, I remember it was a neighbor of one of the big, you know, third party fulfillment providers there.

Josh Hadley 44:05

Interesting. Very cool. Well, those are some great leads that you’ve shared with us. And so I appreciate that insight. Now, Nathan, as we begin to wrap up this episode, you know, what I love to leave the audience with is three actionable takeaways. From every episode, I think you already dialed it up from the beginning, you already had three kinds of points. So I’m going to reiterate everything that you kind of shared, let me know if you if if I’m missing something from these three actionable takeaways, but number one would be the actionable takeaway is to create a relationship with your manufacturer, okay, and not just seeing them as somebody that I send an email to and I click the Reorder button, and they send the products to me, actually spend the time jumping on the phone with that manufacturer, or getting on a zoom call or whatever it is. The more you get to know them at a personal level, the more that doors and the opportunities are going to open up for you. Because that’s what kind of relates, you know, I’ll tie this into action item number one is negotiating your payment terms with them. So if you’ve already crossed off the box, that’s like, I have a solid relationship with my supplier, I know their family, I know their children, I know you know so much about them, then you’re probably at that stage where you haven’t negotiated your payment terms. We talked about a lot of creative ways to do that today, and then go and execute one of those strategies, and that is going to change the game for your business, you’ll be able to launch more products more frequently, you’ll be able to, you know, order higher volumes at the same time and have a better cash flow, and save a lot of money on interest if you’re taking loan payments or anything like that action item number two, kind of parlays into that building a relationship, but re revisiting your product unit cost, right? So obviously, renegotiating your unit cost with the manufacturer can be possible. But the other Strategy is on a regular basis. And I think you mentioned maybe it’s every one to two years, you go out and you just kind of do a new cost analysis, right? You reach out to sourcing experts, like yourself, that have these relationships with manufacturers, and you say, hey, what could I get? Here’s the volume that we’re doing, here’s how much we would be ordering. What could we get our product at that allows you to kind of get a better understanding of what the market price point might be for your products. And I think the ultimate recommendation there is if you can save 10% on that product unit cost. That’s when that decision point to say, hey, maybe it is worth switching is that 10% inflection point there. Yep. Then last, last, but not least is. Third takeaway is start warehousing your products right outside of the US in Mexico, and we talked about that, it’s going to allow you to save, you know, or push off those tariffs to a later date. And if you’re importing your items at quantities or units at less than $100 in value, you don’t even need to pay those tariffs as well. So imagine how game changing that can be to your business, if you’ve got a 20% tariff. And Nathan did a great job. He shared some of the company recommendations that he would recommend to set something up like that. Use them as a three PL again, game changing for your business in terms of cash flow management, and also saving costs in general with three PL warehousing of your product. So those are my three actionable takeaways. Nathan, is there anything I missed or anything else you want to elaborate on there?

Nathan Resnick 47:58

I think you hit the nail on the head. Josh, that sounds great.

Josh Hadley 48:01

Awesome. All right, Nathan, as we wrap things up today, I love to ask every guest three similar questions. So the first question is, what is the most influential book that you’ve read? And why?

Nathan Resnick 48:13

Honestly, it’s got to be The 4-hour Workweek. I think sometimes, you know, people think it’s a little kind of cliche. And Tim Ferriss has gotten a lot popular. But, you know, I read that book, I think my freshman year of college, and it really kind of changed my mindset, you know, talks more about optimizing your time doing analysis of how you’re spending your money, and also how easy it is to you know, start a business, right. And I think in today’s world, it’s so important to understand how you’re spending your time and also kind of understanding well, how much do I have to earn to, you know, either own or live the life that I want to live? Right. And so I think it’s a really good way of analyzing and understanding both your life and your business and your time, which I think are, you know, hugely important to any entrepreneur.

Josh Hadley 49:05

Yeah, I 100% echo that in terms of that book, being a good mindset shift in terms of really better understanding like what is possible when you really pull back the curtains and you focus on what matters most at any given point in your in your workweek. Let’s move on to question number two here. What is a new or productivity tool or software that you might have discovered that has helped you and your business that you might see as a game changer going forward?

Nathan Resnick 49:36

Yeah, I mean, this one I kind of struggled with a little bit because I’m super basic when it comes to productivity and all that stuff. Like, you know, I barely use Slack. I actually use WhatsApp for some of my businesses like literally just WhatsApp messaging. And I think what’s more important in terms of productivity is I always ask myself and In our team is how are we aligning our, you know, incentives with our goals? Right. And I think my favorite line is, you know, show me the incentives, and I’ll show you the outcomes. And so whenever it comes to, you know, contractors, team members, factories, whatever it may be, you know, I always think about that mindset of how can we align our incentives to, you know, really reach our goals?

Josh Hadley 50:25

Awesome. Is there any formal system that you set up those incentive structures for Are they as simple as like, having Google Docs that are published, you know,

Nathan Resnick 50:34

I mean, most of it is around like, like, for example, you know, I know a lot of brands listening, they spend money on ads, right? Whether it be through Amazon, or Facebook, or whatever. And so they either have an in house media buyer, or work with a contractor. And, you know, you want to spend a certain amount of money every month, and you want to meet a certain CPA every month. And so I just create brackets of saying, hey, you know, if you reach this span, and the CPA, you know, earn additional X amount of dollars, right, that that will pay you out. And so aligning our growth and our performance with that team member, I think is huge. And I think a lot of people just overlook it and say, Oh, I’m gonna pay you a, you know, flat, like, a lot of agencies are like, Oh, I’m gonna pay you, you know, charge you a flat, you know, 10% of adspend, or whatever it may be. And I’ll say, Look, you know, you can charge us 5% on adspend at this rate, but you can charge us, you know, 15% At this rate. So, I think really creating a sliding scale with that is a huge win win.

Josh Hadley 51:29

Yeah, that’s a great takeaway. Real good golden nugget there to leave the audience with. So the last and final question Nathan, is who is somebody that you admire or respect the most in the E commerce space that other people should be following and why?

Nathan Resnick 51:44

I would say Dylan Whitman, he used to rant run brand value accelerator, which was a big Shopify Plus brand. And Dylan now runs, I’m gonna blank, I’m gonna mispronounce the name, but it’s called in vet terrae. It’s a membership subscription app for Shopify brands. And it just helps really create community for your brand. And also, I think, alleviate and help a lot of cash flow concern for your brand, because you have a monthly membership that you’re charging your community and I’ve seen so many brands have a lot of success with it. And Dylan is just such a thought leader in the e-commerce space.

Josh Hadley 52:20

That’s awesome. That’s definitely one people should go check out and follow bill and Nathan, this has been an excellent episode, you’ve shared a lot of knowledge with us. Where can people reach out to you and learn more about Sourcify and, and you know, hire you and your services? Yeah,

Nathan Resnick 52:23

our domain just Sourcify.com was an expensive one. So hopefully, you know, you find it. And for me, personally, I’m pretty active on LinkedIn and Twitter. So if you just search Nathan Resnick, R E S N I C K, I’ll be there and feel free to connect with me.

Josh Hadley 52:53

Awesome. Well, Nathan, thanks so much for sharing value and your advice and recommendations on this podcast today, and appreciate your time.

Nathan Resnick 53:01

Thank you.

Outro 53:04

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