In this episode, host Josh interviews Steve Simonsen, CEO of SYMO Global, about strategies for private label sellers and brands facing economic challenges like inflation, rising Amazon fees, and shrinking margins. Steve shares actionable advice on SKU-level profitability analysis, disciplined inventory management, negotiating with suppliers, and liquidating slow-moving products. He emphasizes the importance of understanding financial statements and maintaining financial discipline. The conversation offers practical tips for navigating uncertain demand and highlights the need for proactive, data-driven decision-making to thrive during tough economic times.

Chapters:

Introduction & Economic Context (00:00:00)
Josh introduces Steve Simonsen and sets the stage: inflation, rising Amazon fees, squeezed margins, and a pending recession.

State of the Economy & Inventory Focus (00:00:55)
Steve discusses the reality of the recession, economic slowdown, and the importance of managing inventory on the balance sheet.

SKU-Level Profitability & Declining Unit Sales (00:02:03)
Emphasis on granular SKU-level profitability analysis and the impact of declining unit sales despite higher top-line revenue.

Supplier Negotiations & Cost Control (00:04:04)
Strategies for negotiating with suppliers, leveraging currency shifts, and pushing back on costs to improve margins.

Inventory Valuation & Trash to Cash (00:05:58)
Advice on devaluing inventory, taking write-offs, and converting slow-moving inventory into cash.

Liquidation Strategies & Q4 Considerations (00:07:21)
How to liquidate inventory, use Q4 for retail-value sales, and categorize inventory for effective action.

Actionable Takeaways Recap (00:08:46)
Josh summarizes three actionable takeaways: SKU-level analysis, turning trash to cash, and cautious inventory forecasting.

Financial Discipline & Mindset (00:11:06)
Steve stresses the importance of understanding financials, cash flow, and developing discipline during tough economic times.

Closing Thoughts & Contact Info (00:13:44)
Final advice on mindset, encouragement for entrepreneurs, and where to follow or contact Steve.

Links and Mentions:

Tools and Websites
Parsimony

Additional Resources
Steve Simonsen on LinkedIn

Transcript:

Josh 00:00:00  Today I’m speaking with Steve Simonsen, owner and CEO of SYMO Global. Steve, you’ve got such great experience. You have. It sounds like a great network in terms of supplier relationships. Because of your vast experience with SYMO Global, you’ve already got so many different contacts in those different countries as we were in a difficult economic period right now. Right. We have inflation that’s been going up. Amazon fees continue to go up, right. margins are getting squeezed. And then we have this pending recession on our hands where consumers are starting to pull back on some of the consumer spending. I think we’re seeing that. I want to ask what you’re seeing from your perspective. And then for our audience that are established brands that want to take it to the next level. What should they be doing? What strategies should they be employing over the next little while?

Steve 00:00:55  Gosh, yeah, that’s there’s a lot in there. And the truth is, like we’re already in a recession, right? It doesn’t matter what the politicians say.

Steve 00:01:04  It matters only what the numbers say. And the numbers are very clear, right? There is a slowdown, not just a slowdown, a reduction of economic output. And that doesn’t mean the world’s coming to an end. It just means there are some economic, reasonable laws that have to be dealt with. Right. It’s like gravity. You can’t argue whether gravity exists or not. It’s there and you have to deal with it. So, what that means to us is like dealing with, you know, a reducing kind of economy and an increasing level of inflation. This is the ultimate squeeze. Nobody wants to see it, but where it’s upon us. So we’re we’re we approached this from a very disciplined mathematics perspective. Like we especially we look at the balance sheet. It’s like what is the biggest thing on the balance sheet we need to manage. And for private label sellers it’s all about inventory, right? There’s nothing bigger on your balance sheet typically that inventory. You know, maybe you got some cash here and there.

Steve 00:02:03  But if you’re a growing business, inventory is dominating that balance sheet. And that means that inventory, which, you know, may exist as a single line item on your financials, I don’t know. But we get granular. We want to know every line item. We want to know every Asin, every SKU. However you refer to it and we want to know its profitability. We want to know what people are going to do when it comes to crunch time, right. If demand goes down, I’m here’s a little insider secret. It’s already gone down, right? Yeah. Units sold are already down the the cost or the pricing. In other words, the sell through may be higher, but that’s that’s a misleading stat. Yeah. Even if sales are up 8%. You got inflation units are down for sure. Correct. It’s not in every category but many categories are experiencing it. So we’ve got to get scrutiny to level ten on every, every line item on that inventory sheet.

Josh 00:02:57  Yeah, I think that’s words of wisdom right there, because we are also seeing that from our perspective.

Josh 00:03:03  You know, a lot of our products are more in the, you know, consumer discretionary items here. And so they’re not essential for people. But we have also started to see year over year sales declines in the number of units that are being sold. Now our, you know, top line revenue looks good. Well, that’s because we’ve increased prices to make up for the increase in Amazon fees and inflation and all of that. So to your point like don’t just look at you know, hey, this aggregate number amount of money that’s being sold or whatever, you know, Washington wants to, you know, state publicly, you know, with, oh, things are just fine. Like, look at these numbers. At the end of the day, there are fewer numbers of fewer units being sold. you know, the consumers are starting to pull back. So, Steve, what is something that you do as you work with, you know, your suppliers? Is there a way that you can reduce, you know, whether it be your Cogs or reduce like your mocks for certain products.

Josh 00:04:04  Like how do you navigate this delicate balance of like, I don’t know how big of a pullback this is going to be, but I don’t want to just I’m not going to order and say, hey, whatever we did in 2021, let’s let’s do that because that’s what’s going to happen.

Steve 00:04:17  Well, it is it’s the ultimate question, but it’s it also just goes back to the most simple, basics. It’s like, you know what? Every controllable variable you better push on. Right. So currency is wildly shifted year over year between China and the US as an example. You better take advantage of that and at least understand that many times if you try to just call your supplier and go, hey, great news. There’s been a 10% shift in currency. That means I get a 10% discount on my products. Now they’ll go, no, no, no, we had a cost increase of labor and the cost increase of Covid. You know, there are plenty of reasons they want to they want to fight against you.

Steve 00:04:54  but I’m telling you proactively that every point, whether it is the inputs of raw materials and checking those commodity prices, whether it’s currency, like every piece of that puzzle you need to push back on in a I would call it a professional way. So you’re just throwing a fit and go your price is too high is ignorance. But having a market price, getting a price from other suppliers, and understanding what the market price looks like now you’re adding some sophistication into it. A little bit of data into it. I can tell you that many of our China suppliers right now are down 50% in purchase orders. Oh my goodness. Yeah. So this is not a sign of strength, right? So a year ago we couldn’t get product to ship out of China because there’s so many POS, right? Yeah. freight was also high last year. It’s crashing now. By early 2023, it will be at 2019 levels or below. And so all of these supply demand factors you have to balance in. But the the interesting thing I don’t think a lot of people fully understand or appreciate is Shaders.

Steve 00:05:58  If you bought your inventory over the course of the last 12 months, you’re price at a higher level than your competition. Who’s outputting it now? Most likely because you got a lower currency. You’re probably a little squeezed power on the supplier. Lower freight. Even just on freight alone, it could be a material impact. So this is where the discipline of you know what? I can’t be emotional. I have to apply mathematics. And believe me, I’m at least of all. Do I like doing math every day? But this is an area where it makes sense, right? You got to know the score. And so that means either you need to take a write off on that inventory and devalue it based on the fact that, you know, what, if I bought it today, it would be cheaper. Yeah. So that you can be competitive in the market. Or you have to do what we call the trash to cash operation. It’s like, I got to take this much inventory off the balance sheet and move it into cash as quick as I can.

Steve 00:06:49  And you see large big companies, global companies like Target and Walmart doing this in huge fire sale ways. So this is not just crazy Steve talking. This is happening across the board.

Josh 00:07:01  Yeah. What are some of the ways that you can, you know, liquidate some of that inventory, right. And obviously I think you’re getting a hit. I think you’re lowering your price. Right. So you’re going to squeeze your margins that much more. But you’re talking like it’s important to start doing that now. Right. what are the ways that sellers can do that?

Steve 00:07:21  Well, there are several ways I may get into a couple of them here. One of them is just the reality that it’s Q4. So a lot of times we get into preservation mode, right? Oh, boy. It comes some margin. Here comes the volume. Let’s get let’s get nuts. I would say take a very practical look at it and decide if what if your sell through of last year doesn’t come to pass right. What if you don’t get that many number of units? and so now I’m going to be a little bit more margin, flexible if that’s a thing.

Steve 00:07:52  So that might mean increased promotions and holding the price. It might mean lowering the price and and mixing in some promotional elements. it might mean finding liquidation channels. Like, you should really think of your inventory as kind of a, B, c a is the good stuff that’s going to stay around. B’s on the, you know, on the tipping point, you’re not sure if it’s a, if it’s a runner or a not, but it’s it’s still not enough to cut it. And a C’s or less are like you got that’s got to go. And so the C’s you should be moving into immediate you know, fast focus on sales and take advantage of Q4 to liquidate at a quote unquote retail value. Makes sense by the time Q1 comes around next year. Liquidation chances are now, you know, at or below cost, and you don’t want that reality to set in because that’s pennies on the dollar.

Josh 00:08:41  Steve, as we wrap up here, I’m going to ask you a few wrap up questions at the end.

Josh 00:08:46  But before we do the wrap up questions, I’d love to leave the audience with three actionable takeaways from each episode. So here are the three takeaways that I noted. Steve. Let me know if you think I’m missing something here. Number one, first and foremost, people need to start implementing skew level profitability analysis on their products, like figure out a system that is going to work for your business. It could be a bunch of spreadsheets, if that’s what you love. But, you know, Steve offered up a software that he’s been you guys have worked on for not only your own business and have spent, you know, millions of dollars in R&D and development in your own time, developed developing it. That’s parsimony. Com people can check out that tool. I know that’s one thing I will be doing after this episode. And then action item number two is turning, you know, your trash into cash. I love that phrase turning your inventory cash trash back into cash. And, you know, going through your SKUs.

Josh 00:09:51  And you’ve got to kind of lose the emotional, feel that you have to each of your products, and you need to cut the ones that just frankly, aren’t making you money, or the ones that you know maybe are trickling in. A few bucks here, a few bucks here and there. But at the end of the day, they’re sucking up so much of your time, you need to be able to just cut those off. And then last but not least, is being smart with your cash. As we look into 2023. Right. Not assuming this is what I did in 2021 and in 2022. So this is what I should project for 2023. I think people, as they do their inventory forecasting, need to be a little bit more cautious so that they don’t get hung out to dry, sitting on large amounts of inventory on their balance sheet. That’s where you started this conversation is inventory is typically the largest thing on a seller’s balance sheet. So being wise with that, I think as we head into 2023 is something that everybody should be implementing.

Josh 00:10:54  And just being a little bit more cautious instead of bullish in their forecasting. Is there anything else that you think I didn’t mention that you want to leave with our audience here with actionable takeaways?

Steve 00:11:06  No, I think you nailed it. Josh. The the you know, if I put a kind of a little, cap on on all of those topics that you just mentioned is takeaways, it’s getting your financials tight and well understood. If you’re not looking at your financials, you know, by the 15th of every month for the preceding time, or even better, having kind of live access to it as, as the the month progresses, you’re not applying financial discipline. You’re not running the business as a business. You’re running it as a kind of hobby. Right? Getting good financial, chops and and understanding what’s a cash flow statement, what’s a balance sheet, and how does this balance sheet impact the PNL or vice versa? Understanding those components is a discipline. And frankly, I hate financials, I despise it.

Steve 00:11:51  It’s my least favorite thing to do. But it is the scoreboard for our business. And you know, we have a saying no score, no game, right? You better know the score if you’re going to understand if you’re winning or losing. And there are many opportunities. I want to just kind of stress this point. I started one of my first businesses in a recession. I didn’t realize it exactly, and I didn’t know you’re not, you know, that wouldn’t be something that most people would advise, but I say the opposite. I’m like, get good in a recession because you have to get tight. You have to get lean, no fat on the bones. This is what gives you the discipline and the kind of the hearty upbringing to be better than average. Right. We average is going to go away. You’ve got to be better than average. You got to be somebody or something as a company that stands out and can survive the trials and tribulations of, you know, basic economics, that’s a really positive thing.

Steve 00:12:45  So, you know, people can cry or moan or doom and gloom whatever they want. But it’s like this is an opportunity to really get good at being a practitioner of, you know, running a business.

Josh 00:12:56  I think that’s that’s great advice in terms of, you know, let’s add it as our fourth action item. Right. Get good with your financials. But also don’t be scared. And don’t be fearful. Right. Because when you’re fearful you’re in the scarcity mindset. You start to actually make worse decisions when you’re in that scarcity mindset and you’re fearful, but instead just go go through things with a logical standpoint with data on your side. Right. I myself, I can understand numbers, but do I love, you know, looking at numbers on a day in, day out. I don’t enjoy excel. Can I interpret data? Yes I can. That I think is becoming more and more essential, like you talked about. No. Not having any fat on the bones there. Steve, thank you so much.

Josh 00:13:44  I know you’ve expanded my mind today. I’ve had a lot of different mindset shifts, and I hope our audience will, have had those as well. But thank you for joining us again.

Steve 00:13:54  My pleasure. Happy to happy to be here and, you know. I love entrepreneurs. I, I it’s I don’t just, like, love quesadillas, right? I really love entrepreneurs. So I hope everybody out there understands. It’s a it’s a real honor and a privilege to be an entrepreneur. Just go be good at it and do hard stuff.

Josh 00:14:12  Yeah. And, Steve, where should people follow you if if they want to contact you or follow what you’re doing after this?

Steve 00:14:18  Yeah. They can find me on the the YouTubes or the Facebooks or the whatever there is out there. you know, the Alzheimer’s, dot com podcast is I try to record those from time to time. We have some Q4 stuff that’s, that’s pending. but to be honest with my time is, is, not always easy to allocate, even though I have the thinking time.

Steve 00:14:37  That’s thinking time. And, so my my best advice is I hang out on the empowering, masterminds and I donate my, my free time to empower you. So, find me there if you, if you can.

Josh 00:14:51  Awesome. Well, we’re lucky to have had an hour with you, Steve. Thank you so much.