Proactive Financial Planning: Addressing eCommerce Economic Challenges With Carla Titus

TLEP 69 | Financial Planning

“People want to do business with people, and live shopping is just that.”

Special guest Carla Titus is a finance expert with over 15 years of combined corporate financial planning, analysis, strategy, and established online business consulting. She provides fractional CFO services and financial consulting to business owners. Her approach is to empower business owners to achieve financial clarity and peace of mind so that they can get back to what they enjoy. The priorities for her clients range from having cash in the bank, paying themselves, and having a long-term profitable business that allows them to build personal wealth.

Sign up for her newsletter here: www.wealthworthwithin.com.

She shares her insights on how to increase your profit and customer retention by rethinking your pricing strategies and planning proactively. Carla also talks about the potential downsides of not preparing your business for the unknowns and how to demystify your numbers to make informed financial decisions. She gives valuable tips on how to plan and project your business finances and prepare for profit and owner payments even in difficult periods. Carla also discusses the pricing strategy framework that has helped her clients increase profit margins and stay ahead of the competition in a competitive market. Additionally, she shares her ideas on how to incorporate retention strategies to help consumers feel connected to your brand and turn them into ambassadors. Carla also covers cost-effective marketing strategies and financial planning for the short and long term, along with the pros and cons of recurring income like subscriptions and buy now, pay later. She gives insights on the benefits of investing in customer retention and shares how she thinks through increasing profit by driving customer behavior and creating urgency. Tune in to gain a deeper understanding of how to plan for the unknowns and turn your customers into ambassadors!

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Proactive Financial Planning: Addressing eCommerce Economic Challenges With Carla Titus

Our special guest is Carla Titus, who is a finance expert with over fifteen years of combined corporate financial planning, analysis, strategy, and established online business consulting. She provides fractional CFO services and financial consulting to business owners. Her approach is to empower business owners to achieve financial clarity and peace of mind so that they can get back to what they enjoy.

Their priorities for clients range from having cash in the bank, paying themselves, and having a long-term profitable business that allows them to build personal wealth. She has a wonderful newsletter, great social media presence, so much to offer, including free calls if you are interested in her services. Before we get into this conversation, a quick word from Nicolas about what’s going on with eStreamly.

I’m so excited about this conversation because we are going to talk about a topic is very important for a lot of business owners, brand and retailers, which is profit margin and customer retention. How do you optimize that? There’s a lot of pricing pressure right now with the economy going on. Everything finance is an interesting topic. I can’t wait to dive into the conversation with you, Carla.

Before we go there, I want to share to the audience that eStreamly will be attending Shoptalk, the super wonderful trade show that is happening in Vegas. If you are there, if you want to say hi, I will be there. I will be with someone not from the team, but that’s going to help us out for this event. Please come say hi.

Come and hang out and chat about live shopping video commerce. This is always topics that I will direct out art. Before we go there, let’s dive into the conversation. Carla, I’m so excited to have you. I wanted to dive into this conversation and bring into the someone how this financial expertise to this show. On this show, we have talked quite a bit about the host, the fear of going live. We have talked about eCommerce from different perspective from how do you personalize to how do you do your event? All the different aspects, but at no point, we approached this from a financial perspective.

We felt it was an interesting topic to bring up, especially in this context. Maybe we are not at the verbal for a session. This is debatable. A lot of people are talking, “It’s coming.” Some are saying, “It’s a soft landing, so everything will be fine. Close your eyes and brace for the storm.” Pricing pressure, especially because inflation is here, is something that a lot of brands are facing.

Thinking about this, I was reading an article from Bain & Company that was saying that one of the great way to increase your profit, and they were saying like by almost a whooping 95%. I’m not sure if it’s true or not, but that’s the big company saying that. He say, “It’s increasing customer retention by 5%.” I’d love to start from that standpoint. When you chat with brand and retailers and people that are in this space, how do you think about increasing profit and is retention something that you brought up as the topic of reflection?

Thank you so much for having me here. I’m excited about this conversation. I think that the finances of the business do not get talked enough about, but they are such a critical aspect of succeeding in business long-term. I’m glad to be able to bring some expertise in that area. Before we get into that pricing pressure perspective and client retention, which I love to talk more about. What I see often happen is there’s this hope and praise strategy, especially when bad time comes and there’s a lack of preparation or planning and proactiveness that is missing in the finances of the business.

Even if you have a CFO or don’t have a CFO, you should be thinking about what is that economic environment going to do to my business and how it’s going to put pressure even from a competition perspective, from the things that you are doing. Start to think about what are some creative ways that you can attack it and address it before it becomes an issue.

Once it’s an issue, it’s a lot harder to correct and a lot more reactive for business owners to have to get out of it. If you plan out and thought through a few scenarios and a few things that could happen and then prepare for it, so then when it does happen, you are able to take action instead of being paralyzed by the fear of something bad happening.

That’s where financial planning and the work that we do proactively to help business owners become more profitable and see these things coming and prepare for them helps them feel at ease and at peace and have some clarity on what actions do they take once those things start to become a reality. We don’t wait until then.

With that being said, you asked a lot of great questions in this quotes that you provided from the article you read. Pricing pressure, I think of it as it’s always happening. It might not be as noticeable as it is right now, given the economic environment we are in. Recession or not, it doesn’t matter. People are being more mindful about where they spend their dollars. Is it necessary, and how does it make me feel when I buy this item?

TLEP 69 | Financial Planning
Financial Planning: Given the economic environment we’re in, recession or not, it doesn’t matter. People are more mindful about where they spend their dollars.

They are going to be a lot more pickier with where they are willing to spend their money on. That’s something we, as business owners, need to be very mindful of. What value are you bringing to the customer that you are selling this product to? What are the qualities or things that make it special? How does it stand out from the competition and how does it maybe even solve a problem for them that they are still willing to spend those dollars with you regardless of the price? Let’s start with that.

As far as pricing pressure and margins, we need to be able to actively be managing that. A few things that we do is we look at pricing pressures and what is the competition doing to start. Not to copy that or do exactly what they are doing, but to get an idea of what is the area that we are playing in the arena? How are things moving?

This is something you should be doing every 6 to 12 months anyways. It’s not something we do one time and forget about it because price is fluid and it’s always adjusting, and we need to be able to adjust with it. I’m not saying you have to change your prices every 6 or 12 months. You have to be mindful of what’s happening in the environment and make sure that you are taking that into consideration to react by providing better clarity on your marketing campaign or doing more marketing than you normally would. Then deciding if a pricing change needs to happen now or needs to happen later.

Some strategies around pricing that people forget is sometimes we don’t even have to change the pricing. What I mean by that is I had some of my clients who decided, “Instead of changing the price because people are so sensitive about pricing right now, we are going to change the size or the quality of the things that we are selling. Maybe we will offer an in-between quality product to cover the gap between being high-end or low-end in the market and provide people options.”

People maybe don’t want to stop buying. They want to have alternatives on how they can fit that in their budget. At times we are so stuck with we have to change the price, we have to make it cheaper, and we don’t want to charge more. Not always is that the solution. Sometimes the solution is to charge more because we have a more of a premium product that’s solving a bigger problem.

Often, we decide to go to the race for the bottom where we now need so many more people buying in order to generate the same profit margin or generate the same type of outcome that we need for our business. Now we are trying to compete with the low end and have to sign up so many more. People put so much more effort for a lower profit margin.

People need to start rethinking that equation and consider the alternatives because there are luxury brands out there. They are still selling no matter what economic environment we are in. There will always be people who are willing to spend the money for something high quality that solves a problem that they have and that they are willing to invest their money to fix that.

No matter what economic environment we're in, there will always be people who are willing to spend the money on something high-quality that solves a problem they have. They're willing to invest their money to fix that. Click To Tweet

It made me think about the pricing strategy I was listening to. I don’t know how effective it will be in a product strategy, but I think it has its place. It was someone that was saying, “We didn’t increase our pricing. What we did is that we took the same product and then we created a fake artificial, more premium quality one, which has a higher price. We created on paper and then we did create indeed like a lower quality.” Now, instead of having one choice when you go to a product, you had free choice, and generally, what’s the tendency of the human being is to always take the middle.

It’s an interesting idea. I haven’t seen many people doing that. It’s something that a lot of people are doing in the software industry. You always have free pricing and people tends to go to the middle one, but it’s not something that is so much applied in this space. This is the fundamental concept of Amazon. Amazon will always propose you like a higher end and a lower end and you decide if you want to buy the one you are seeing or if you want to refer to the one on the bottom and have those two options. From an Amazon perspective, they are doing that. Maybe for you as a brand owner, something that you may want to think about.

Since you brought up Amazon, I started to think about a few things. One is, as a consumer, when I go on Amazon, I know that the price fluctuates a lot. A lot of brands will raise their price up a little and then drop it down a little bit. Sometimes that can feel unnerving, and then sometimes I’m thinking, “Maybe I need to be a little strategic.” That gives me pause as a consumer because I might wait to see if there’s a sale. I might wait to see if there’s a price drop.

It’s an interesting experience and I’m curious about what that might be like as a brand, but that also leads me to on the topic of Amazon. The power of marketing, specifically video marketing and exactly why we emphasize live shopping so much is because consumers these days need to understand the value, like you are saying, Carla.

It’s hard to convey, in marketing in general, what the value is, especially if you are unfamiliar with a product. Using a tool like live shopping where you can hire somebody or you yourself can be the host to explain exactly why this product is valuable, what makes it different, and answer questions in real-time. It creates a deeper connection with the consumer and maybe addresses their concerns and shows them why they should spend their money on it, and I’m curious if you agree with that, Carla?

Yeah. Consumers are getting more sophisticated and we as business owners need to be able to cater to those more sophisticated needs. People are price shopping, they are comparing, they are looking, “Does this store have it for cheap, cheaper than free shipping? How quickly can I get to my house?” That’s what Amazon is trying to do with they are discounting. There are flash sales. They are in urgency. Get in now so that you pay a cheaper price.

They are also driving the behavior of their customers. They are telling customers to wait for the sale because it’s expected. Now you know that there might be a sale a week from now, so I’m going to hold on, not shop right now, because maybe I don’t need the item badly enough. I’m going to wait for that sale to come, then I’m going to buy it. You are also incentivizing a certain behavior by putting things on sale.

Be mindful of that because if you make it a pattern and a consistent expectation, then people are going to wait for that and hold on and maybe stock up. Maybe not. They will still buy the one. At the end of the day, what I notice is people want to do business with people, and so live shopping is that. They see someone live, they are like, “What a great product they are pitching me. They are talking about all the objections I might have had and why I didn’t want to buy this product or questions on how it functions and questions on how it’s going to improve my life in some way, and the quality aspects of it. Having those questions answered in the moment helps the buying decision and it makes you make progress toward hitting the buy button.

TLEP 69 | Financial Planning
Financial Planning: People want to do business with people. Live shopping is just that.

Those aspects of it are super helpful and incentivizing for customers to know. Have answers to the questions in the moment they are trying to shop for that item. Also, what you are creating is a longer-term relationship with your consumers. What that means is you are increasing the lifetime value of a customer as far as retention goes.

What we know about retention, going back to Nicolas’ article, is that it’s harder and more expensive to get a new client in the door or a new customer to shop for your products than get a recurring customer or client to purchase again if they are satisfied with your product. They know your brand, love it, and want to buy more from you. What are you doing to incorporate retention strategies to help your consumers feel more connected to your brand and want to continue to shop and support your business? That is what’s going to set you apart from the competition and also create a new revenue stream or revenue models that can help this recurring revenue come into your business.

It's harder and more expensive to get a new client in the door or a new customer to shop for your products than to get a recurring customer or client to purchase again. Click To Tweet

You are not working so hard for the same money because you are going back to your customers who already shop with you and saying thank you. How awesome that you are a customer. How can we get some feedback for our products or incorporate you in the decision-making and the design of our products next time so that you feel more part of the business and brand and now you want to shop for our product?

If I hear you correctly, what you are saying is the cost of acquisition is getting higher and higher by the day, as of with ad spent not being as precise used to be, and so for brand and retailer creators. It’s getting harder to get through the crowd and noise and create those connections that are going to transact. What you are saying is like by investing in the retention, now all of a sudden, you have a significant impact on your bottom line because retention will cost less than customer of acquisition. The lifetime value of your customers could increase, and that’s going to translate into profit.

How do you pitch that from a perspective of a business owner? Retention is something so important, but there’s like it’s not always easy to create retention and create that awareness. We talked about the live shopping strategy, but are there any other strategies that you see from a financial standpoint and are there any other thing that you can do to also increase your profit margin if it’s not retention?

Let’s go to what you can do as a business owner to tap into your existing customer base. You can give them a thank you note. It’s as simple as that. People love to be told, “Thank you for shopping with us. Thank you for supporting a local business.” Sometimes it’s women-owned or veteran-owned, whatever is that you think your customers would value. Maybe it’s giving back to the planet in some way.

TLEP 69 | Financial Planning
Financial Planning: People love to be told, “Thank you for shopping with us” or, “Thank you for supporting a local business.”

Making that stand out so that you show that you have a bigger purpose than like you are shopping with us, which is totally okay too. If you have something beyond that you want to convey is good to be able to touch base and say, “Thank you for shopping with us. On your next purchase, if you refer someone to us to shop with our brand or get them engaged in some way, we are going to give you some reward,” and you can defy what that is.

Financially speaking, you want to make sure it makes sense and that you are not giving away everything. Sometimes it could be, “I will give you free shopping on your first purchase.” Sometimes it could be a 10% off discount. It could be anything that could be, “Tell your friends and family that we are here. We love what we do and the products that we sell. We want to get more people to know about it.”

Sometimes people will be compelled to share if it’s a product that they found value that they like. You will be surprised how many people tend to be ambassadors that are completely doing it because they love the product. Let’s not overlook that as well because besides getting people to shop, you also have a network of people that this person is part of communities and friends and families that you could tap into as well by providing some of those extended discounts or benefits to people around them.

Overall to increase margins besides retention. We want to be very mindful of cost allocation. We, as business owners, haven’t been taught to manage it well, and financially speaking, we practically plan for to ensure that we have the right margins. What I mean by that is that depending on your product type, have your costs gone up lately? What are your margins?

We should be evaluating this constantly because things are in flux. Maybe your vendors are asking you to pay in full the moment you place an order maybe for materials and what you want to be doing is asking for payment terms. Get 30 days to pay them. Let’s go make those sales, get cash in the bank, and then pay our vendors.

It’s not about not paying our bills. It’s about planning and giving a little bit of breathing room for the business to generate the money back before we go pay all of our costs that we have. People sometimes overlook the power of asking. Obviously, vendors are also business owners, so they might not be able to do that for you. Even getting a 10-day extension or 15-day could be a huge way to generate margins in your business.

People sometimes overlook the power of asking. Click To Tweet

That’s helpful advice. It sounds almost basic, but sometimes we need to be reminded of it because when things get tough financially, our judgment can get clouded. We might feel panicked. We might need to return to some of the basics. Speaking of that, one thing it seems like a lot of businesses overlook is marketing.

I have been working in the content creation world for so long and I can’t tell you how many brands over the years have said, “We don’t have a marketing budget.” That no longer feels acceptable in 2023. It made sense several years ago when I was doing this work, but now influencer marketing is so big. We have talked about ads. We have talked about all these different angles of marketing on this show. I’m curious what your advice is for planning out your marketing budget and making sure that’s a priority, and also, I’m curious, how much of a priority or where does it fall in the priority list? When should somebody start prioritizing marketing?

Marketing is important, but it can be done in ways that is cost-effective. Sometimes “free” because it’s also taking your time. If you are not paying free it, you are probably doing it. Therefore, your time is going into the investment instead of money. Once you outsource it and delegate it to marketing support, you are paying money instead of time, but there might be a time component still there to manage the team.

It is important because if you don’t have customers purchasing, you don’t have a business. You are going to be paying bills out and not getting any money in. It’s that important that you have some way of generating sales. Not all marketing efforts are the same and there are some strategies that are more short-term marketing versus long-term marketing. Make sure you understand what those are for your business and also invest in both.

TLEP 69 | Financial Planning
Financial Planning: Not all marketing efforts are the same. There are some strategies that are more short-term marketing versus long-term marketing, so make sure you understand what those are for your business.

You can’t invest in one because a long-term is also as important as creating sales. Make sure that you have a good allocation of either time or money going into activities that generate sales now that you can convert right away. The live streaming for purchasing and things that are going to motivate people to buy now versus things like social media and such that are maybe more longer-term, staying visible, being present, and make sure you understand what is the return on investment on those activities.

I see so many people throwing money at ads and at a team that does social media and then they never see a return. Nobody ever buys from their social media posts. That is a missed opportunity. We want to make sure that our efforts are aligned with what we are getting back from making that investment of time or money and that we are clearly able to quantify and measure that result so that there is no guessing.

There’s like, “I’m not sure. I think I made this much money from social media. I want you to track it. There are metrics and there are ways to track engagement and, ultimately, how many of those people are converting to paying consumers. If you don’t have a way to do that, you need to put some tracking mechanisms in place, either give some code or something that you can track on your backend when people are shopping to know. I got ten people from that campaign coming to me and paying me X dollars. Therefore, that was my return on investment for that particular activity.

It’s very interesting this conversation so far. I’m taking on the pricing strategy and framework in an environment where there’s so much pressure on pricing and so much uncertainty with commerce what’s going on commerce. The eCommerce, in general, is growing. It’s a growing market. Even though we face pressure, we are facing uncertainties, and the market is growing overall. They are opportunities out there. It’s about us to find a way to address and attach opportunity. What I’m hearing from you is when you are into this phase of my business in the pace of struggle, what can I do for it? What I’m hearing is, first of all, make sure you have a very clear sense of the data of what you are getting.

What’s costing what, where, why, and how? Do you know what’s your lifetime value of your customer? What can you do to increase that retention, because the retention will generally cost you less than your acquisition cost? It’s going to improve your bottom line overall. The other thing that I’m hearing and some of the strategies is pay working with payment terms. We talked about payment terms from the supplier perspective, but there are some strategy and some people that are doing payment term from, the consumer strategy.

Elon Musk is selling the Cybertruck in advance with a security deposit of $200 or something for the future potential when that truck is ready. You may be doing a drop. You may have a very strongly engaged community. We had, per the past, people talking about selling digital goods like the NFT is an interesting one. If you want to provide future value for a future event, that’s a way to cash in on things right now.

It’s this notion of the reaction versus the planning. I think those are interesting points. There is some interesting financial strategy playing with Stern. Playing with that notion of trying to reinvest this on Rick, returning customer, grabbing those customer, making them longer. I wonder when we talk about this notion of retention. How do you feel about the subscription model? How do you feel about trying to get people into a subscription plan? That is a steady recurring income that you can build upon. I don’t know if it’s something that you advise your client to look at. I love to hear your feedback there.

I think that subscriptions are loved or hated by people. Either you are in that camp, you like the monthly charger for something and then you hate that it’s monthly. I think we need to be able to give people options. For the people that hate it like myself, I’m not opposed to a subscription, but maybe I want a yearly plan instead of a monthly plan. Maybe I want some quarterly options instead.

It’s not about not wanting a subscription. It’s in the way that you want to do those subscriptions from a budgeting perspective, personally. I love one-time charges because then I don’t have to worry about that recurring for the rest of the time. Some people prefer to have a monthly charge because they don’t want the lump sum payment up upfront.

It’s back to giving your customers and clients options, and then from a business model perspective, we benefit from recurring revenue. Having a baseline of recruiting revenue model is super helpful for consistency in business. Not having to find clients every single time, but clients expect that something will shop at their door because they sign up for a subscription and then you are delivering product to them.

Other things to be mindful of when increasing profit in the business is also average order size. How do we upsell people? How do we add to the order that they are purchasing and say, “Other people have shopped for this, another item that’s benefiting you. I want to make sure that you are thinking about that.”

Just to address really quick payment plans or subscription types. When you are giving extending terms to clients on payment plans, make sure your accounting backend is able to follow up with that. What happens is people pay the first payment and then maybe their credit card bounces or there’s no follow-up and then you already delivered a product so you have no leverage. Make sure that you have a solid follow-up on your receivables to ensure that you are getting paid the full amount and that doesn’t fall through the waste side when providing payment plans to your customers.

I personally haven’t seen any data on that side and I wonder how many of those buy now, pay later are something that you get the money for. I’d love to see that. I’m uneducated in this space. If it’s an insurance to buy now, pay later is paying you or if you are the one making that finance and supporting the liability. Speaking of liability, a lot of eCommerce and retailers have inventory and inventory costs, they are the number one after labor. We have seen a lot of startups that have flourished over the years something that are offering financing on inventories.

They finance your inventory and they recoup money out of the sales. I wonder if you have an opinion on those because I tend to feel that it’s pretty high they are lending. I never had someone give me a perspective on those guys because they are everywhere. It feels like there’s a new company popping up every day. There’s probably a lot of money to be made. From a retailer perspective, how should you think about those? Is it something you should be looking at or going back to traditional financing is better?

It’s going to depend on the business owner and their level of risk and their appetite for taking on maybe a bigger operation and getting financing for that versus do doing it on their own. At the end of the day, you need a product to sell in order to have that business. Let’s start with that. Either you finance it personally or putting in some money in the business to finance it or the business can come up with a cashflow for it.

At the end of the day, you need your product to sell in order to have that business. So either you finance it personally or put some money into the business to finance it, or the business can come up with a cash flow for it. Click To Tweet

Regardless, you are going to need to buy product or create product in order to be able to generate sales. It’s a non-negotiable though we can plan for a different ways. You can finance it and pay those high fees that they are going to give you because you are in need of cash and they know it. They have a leg up on you. Therefore, the fees are going to be high.

You can save for it over time with the sales you are making and slowly scale to a point where you have enough working capital, which is essentially cash in the bank that allows you to buy the inventory you need and then you reinvest that back and then you have a certain amount dedicated to that because it should not be a surprise that you are going to have to buy inventory again and again.

We should have a plan for that we cashflow on our own as businesses as we grow, or you are going to ask for some payment terms from the vendors you are purchasing it from and maybe they are extending your credit in that way without the outrageous fees, because you have a longstanding relationship and you are doing enough business with them that it makes sense for them to extend your terms.

That requires a longer-term relationship. It’s not going to happen with the first order that you place. You have to show them that you are doing volume, that you are good for it, and that you can pay for it. Funding and financing is a viable option. Just be mindful of the fees and make sure you take that into your calculation because now you are committing future sales to pay that back.

Make sure you are not accounting for a full budget on future sales because now you have maybe 20% less of your sales going to pay this back. What I see is people are not properly planning their cashflow to have only 80% of their sales instead of 100%, and they are budgeting on 100% when you know you have to pay this back. Keep that in mind, put it in your plan and make sure that you are able to cover those costs.

Carla, I have been truly blown away by your knowledge. You have provided us with so much wisdom and I thought you are a wealth of knowledge, which is perfect for the name of your business, Wealth & Worth Within. I’m so grateful for that. I imagine the reader is too. It’s disappointing that we have to wrap up the episode, but we might have to have you back because there are so many angles that you can address. Your answers are spot-on from my perspective. For the reader, I think it’s often great when you leave wanting more. She has a newsletter, great social media, and a way for you to set up a call with her to discuss if her services benefit you.

We are also hoping Carla joins our private community over here at eStreamly, which has amazing people in it. We don’t have anyone right now that’s speaking from your angle, Carla, so we would be overjoyed to have you in there. We are aiming to be a place that you can go to for support when you are thinking through eCommerce, when you are thinking through your live strategy, marketing, working with influencers, and all these different angles that we address on the show all the time. If you want more help, that’s what the community is there for.

We will be back with another episode next time. If you haven’t yet subscribed to the show, please do because we strive to have more people raise the bar like Carla did. Join us there at any point and you can find more resources at eStreamly.com. Thanks again to Carla for joining us. Nicolas, you have asked phenomenal questions. I loved listening to what you were saying and how Carla responded. We will see you again, Nicolas, next episode and Carla, we hope to see you in the community soon.

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