Summary
Stephen Brown from LedgerGurus sits down with Nate Littlewood, founder of Future Ready CFO, to talk about why most ecommerce founders struggle to turn financial data into action. They dig into what happens when operators have reports, dashboards, and metrics, but still feel stuck or overwhelmed. This episode speaks directly to founders dealing with messy data, scattered priorities, and decision fatigue.
You’ll learn why more data rarely fixes decision problems, how to spot the numbers that actually matter, and how to escape the cycle of overwhelm and avoidance. Nate breaks down simple frameworks for prioritizing work, identifying bottlenecks, and using financial clarity to reduce stress. The goal is confidence, focus, and better decisions without needing to become a finance expert.
Takeaways
- More data does not lead to better decisions without context.
- Founders often focus on what they enjoy instead of what the business needs.
- Not knowing what “good” looks like creates decision paralysis.
- Gross margin problems make most growth efforts pointless.
- Too much inventory hides cash flow problems instead of fixing them.
- Cash flow issues often come from overstocking, not low sales.
- Bottlenecks show where effort will actually move the business forward.
- Financial clarity reduces stress and burnout for operators.
What We Cover:
00:00 Why data doesn’t lead to decisions
01:20 Nate’s background and founder perspective
04:30 The real cost of ignoring financial context
08:15 Why good data still creates confusion
11:10 The context vacuum problem
14:20 Founder archetypes and blind spots
18:05 Focusing only on what you’re good at
21:30 Why ecommerce is harder now
24:45 Inventory as a risky bet
27:55 The four stages of financial maturity
32:40 Turning ideas into priorities
36:00 Cash flow and inventory mistakes
40:10 Why too much inventory hurts quietly
43:00 Staying on the path to clarity
45:00 Where to find Nate and final takeaways
Guest Information
Nate Littlewood is the founder of Future Ready CFO, where he supports early stage purpose-led founders in the eCommerce and CPG space achieve their business and financial goals by bringing clarity to their numbers and showing them how to use financial data to make better decisions on topics like marketing budgets, product portfolio, sales channel focus, team and business strategy.
Unlike other CFOs in the space, Nate has walked the walk – having bootstrapped his own eCommerce business, served as Lead Mentor for a NYC based startup accelerator program, and he spent nearly a decade on Wall St with a global investment bank before entering the world of entrepreneurship.
Through content, courses and 1:1 coaching, he’s on a mission to make finance education and support more accessible for startup founders, and ultimately aspires to put an end to finance being the #1 reason that startup businesses fail.
Work with LedgerGurus
If your numbers feel overwhelming instead of helpful, our CFO advisory team helps ecommerce founders turn data into clear, confident decisions.
Transcript
Stephen Brown (00:00)
Too business leveraging their financial data. They have plenty of it, but not using it to make better decisions. Welcome to The Ecommerce Finance Podcast. I’m Stephen Brown with LedgerGurus. In this episode, I have Nate Littlewood from Future Ready CFO here to discuss bridging the gap between financial data and action. Nate, thanks for joining me today.
Nate Littlewood (00:21)
Absolute pleasure, Stephen. Thank you for having me on. It’s great to be here.
Stephen Brown (00:25)
So to get started, introduce yourself and most importantly, give me your background on how you got into ecommerce.
Nate Littlewood (00:34)
Yeah, of course. So as you just mentioned, I am running a business called Future Ready CFO at the moment, which is a fractional CFO consulting business. We specialize in working with early stage Ecom and CPG founders to basically help them achieve their business and financial goals by bringing clarity to their numbers and finances and essentially showing them how to use financial data to make better decisions that stack the odds in their favor and bring clarity to topics like, you know, setting marketing budgets, expanding product portfolios, opening up new sales channels, you know, we’re across hiring and firing type decisions and, you know, more general business strategy type products.
In terms of how I personally got into the space, ⁓ I have been doing this for a couple of years now, but prior to that, I was running my own ecom brand, ⁓ which we bootstrapped from a pretty modest Kickstarter campaign into a seven figure business. Along the way, I spent a couple of years serving as the lead mentor for a New York based accelerator program called Food Future Co, which basically specialized in food, Bev and Agtech startups.
And my finance experience largely came from working on Wall Street. I spent about a decade with a global investment bank across ⁓ Australia, Canada, and most recently the US. So what I do at the moment is basically provide content courses and one on one coaching. ⁓ And my mission is really all about making finance, finance education and finance support more accessible for and ultimately what I’m aspiring to achieve here is putting an end to the reality that currently, finance and lack of finance knowledge or problems with finance is the number one reason that these businesses fail. And I’m basically on a mission to put an end to that.
Stephen Brown (02:41)
Love it. As a side note, one of things we discovered is both you and I have undergraduate degrees in civil engineering.
Nate Littlewood (02:50)
I know, there we go.
Stephen Brown (02:51)
The difference is you actually worked with your degree. I ended up getting sucked into tech, but both of us have had a circuitous career from civil engineering to ecommerce finance. It’s kind of crazy.
Nate Littlewood (03:04)
I know, who would have thought that a civil engineer would end up crunching numbers for ecom businesses?
Stephen Brown (03:11)
My thought is if you can design the complexities of civil engineering, calculations, financial calculations are not that much. They’re a lot easier, let’s just put it that way. No disrespect to finance. Question about your brand. What was it that you guys were doing and what became of the brand?
Nate Littlewood (03:27)
Yes, I agree. Yeah, I agree. agree.
So the business was called Urban Leaf ⁓ and we basically specialized in indoor urban gardening. ⁓ So I think microgreens, herbs, mushrooms, fruit and veg, we did a lot of hydroponic equipment as well. ⁓ Sold millions of dollars worth of product through Amazon and Shopify and I guess having that first hand experience as a brand owner has really helped me get a lot of, you know, empathy and perspective for the founder role, right? Like we were a bootstrap business and I never had the luxury of millions of dollars in the bank. So I know what it’s like to be stressed about payroll. I know what it’s like to be negotiating with MCA lenders and figuring out how are you going to finance your next purchase order? Like I’ve been through that and I know how stressful it can become. You know, one of the things that I, you know, took, I’ll admit it took me a while to learn this lesson. But one of the things I eventually learned through that role was the power and benefit of focus and prioritization. I mean, when I first got started, I’ll be honest with you, Stephen, I was like a freaking kid in a candy store. Like, when you, when you tell someone that you’re starting an ecommerce business, like everyone wants to help everyone’s got a, you know, friend, who’s a graphic designer or someone who can help with your Instagram ads or God knows what else. And initially it’s really fun and exciting to go and pick up all these shiny objects and play with them. And in hindsight, I can now see that I probably spent way too long doing that before I really learned and discovered how to focus, prioritize, hone in on the things that were important.
Kind of a big part of what I do now with my CFO clients, you know, help them see through the shiny objects, help them prioritize which things they should be focusing on and what is the mountain of stuff that they should, you know, probably, probably be ignoring. So yeah, it was a, it was a great experience. I’m not gonna lie, you know, I did okay out of it, but it wasn’t a life changing experience. I, wasn’t able to, you know, retire and sit on a beach drinking ⁓ mojitos or anything. So yeah, I’m really bringing all of that firsthand experience and knowledge from being in the trenches and ⁓ doubling down on the part of that, that I intuitively knew all along I was best at, right? There’s a lot of parts of being a founder that frankly, truthfully, if I was to be honest with myself, I wasn’t that great at.
Stephen Brown (06:19)
Yes.
Nate Littlewood (06:24)
you know, particularly being an ecom founder, you need to care about customer acquisition and marketing and value propositions and all these digital channels and creative quality and creative flow. it’s just, it was just never really my jam. I never really got that into that side of the business too much, but the stuff I did enjoy and I really over indexed on was everything finance operations, data, logistics, know, number crunching related. Like we had an insanefinance and operations stack for the type and
Stephen Brown (06:57)
Yeah.
Yeah, that’s awesome. We had a similar journey. My partner here at LedgerGurus, we went in with third partner and bought a brand four years ago. We wanted a sandbox and yeah, it’s gnarly. There is a lot of complexity to running an ecommerce brand. And I would argue the most important legs are, you know, it’s product and marketing, right? Those two things, if you can’t do both of those well, it’s hard to scale at the same time, and this is what we’re going to talk about, if eventually if you don’t do the finance and operations well, it doesn’t matter how good your marketing and product development or selection, you will tip over. So let’s go there. You know, there’s a ton of data. People have a ton of data. From a finance standpoint, one of the things we’ve seen here is sometimes the financial data isn’t good, but even if it is good, even if you’re working with a good accountant or outsourced accountant and you have the most beautiful reports. People don’t always know what to do with it. They’re drowning in data from maybe their financial reports and all the operational systems just have loads of data. But what do do with it?
So I mean, I guess my question is, when you see sellers and they have all this data, where do you think the biggest issue is with them knowing what to do with it? Or what are the biggest mistakes they’re making when they have good data?
Nate Littlewood (08:28)
Yeah, great question. And that’s, I think, where a lot of founders relationships with finances and data and frankly, you know, they get unstuck at square one, right? It’s in 2026. None of us have a problem with the shortage of data, right? And you’re really not doing any founder a favor by overwhelming them with more data than they already have and saying, here you go, like figure it out, right? That’s freaking useless. So I think some of the biggest thematic issues that I see are described by or summarized by what I refer to as the context vacuum.
And what I mean by the context vacuum is that a lot of founders are really operating their business and ⁓ hustling and grinding away, but they often don’t have a great handle on what’s good or bad with all of these metrics, right? ⁓ They might in their ad account, you put two founders next to each other and ⁓ they might be willing to share access to their Meta account or their Google account and show each other what their CPCs are, or the marketing efficiency ratio even, but you ask them to, okay, now share your profit and loss with each other, right? It’s a very different type of conversation. People don’t want to do that. It’s much more personal and private sort of information. And so where I’m going with this is that I see a lot of founders who just do not have a good sense of what the important numbers are or ratios and what those ratios should actually look like.
And the way that I kind of experienced that or see this from where I sit is I’m commonly doing reviews and audits to kick off a relationship before we get to quoting and so forth. And so I’ll do a review of a brand’s account. We’ll get on the phone. The founder will tell me what they’re up to, what’s keeping them busy. And they’ll start going on about this new product launch or marketing campaign or this, that or whatever. And I’m like, whoa, hang on a sec. Like your gross operating profit is only 40%. Like that’s not enough to have a profitable business here. If you can’t fix that number and get more profitable than none of this marketing nonsense you’re talking about makes sense. It’s a complete waste of time. And so what happens as a result of this because we don’t understand what metrics matter and what they should actually look like, what does healthy actually look like.
We end up with this huge problem with, scattering of time and attention, right? There’s no point in focusing on your new marketing campaign or product if you cannot fix that cost problem that’s driving a gross profit margin of 40%. And so, a huge part of what I help founders do is just understand the context of their data. Like, this is good. this is bad, you you’re doing fine here, but these two or three things are really where we need to pay attention to, right? And this is super, super important, especially when you’re talking about early stage brands. Like most of my clients, you know, we’re talking about businesses with say two to 10 people.
This is not amazon.com in terms of the talent pool. We don’t have millions of people here. We have a small, hopefully very dedicated group of people behind you, but it’s not like we have, an infinite amount of manpower or lady power to put on any given problem. So it’s absolutely critical if we are going to be investing our time and attention in things, it’s it’d be directed towards the problems and issues and opportunities that are actually going to move the needle forwards. Because if you’re not focusing on, these most critical parts of the business, then I’m sorry, you’re probably wasting a lot of your time. And yeah.
Stephen Brown (12:30)
And I don’t know about you, but I feel like a lot of ecommerce founders, come with one or two backgrounds. I see a lot that are like the product idea people. They’ve got a great idea. They will it into existence, they figure out how to create a product, or maybe they have a product background and they’re able to design and source that. they’ll have and or they’ll have a marketing background. Sometimes they’re very marketing savvy. And I think that’s a great combination. rarely see, I mean, let me ask you, how often do you see that actually understand basic financial, business financials?
Nate Littlewood (13:11)
Very rare. ⁓
Stephen Brown (13:12)
Same. Yeah, just, just doesn’t, it’s just not a skill set that most people have.
Nate Littlewood (13:17)
Yeah, yeah, I mean. Unless you have elected to do it in university, mean, most people won’t have encountered this stuff at school, right? ⁓ I absolutely agree with those two kind of archetypes and profiles that you just described. ⁓ And let me kind of elaborate because I see actually one other, ⁓ which happens to be my most common client. But the first one is the product person, they’re the subject matter expert, they understand the product and the problem that I most commonly see them is they’ve usually over invested in product. And so they usually have huge catalogs because they love products and they love designing and they love bringing things to market. And you can almost always give them a reality check by talking about metrics like revenue per SKU. How much of each of these widgets and things that you’ve got sitting on the factory floor, like how much revenue is each one of these things generated? Because every SKU is an investment in time, sourcing, procurement, design, packaging, inventory, know, space in the warehouse. And it needs to be paying rent. It needs to be generating profit to your bottom line. And if it’s not generating enough revenue to do that, then we have to question like, what was actually the point of investing all of those resources in bringing this widget to life? We’re not getting a payback on that time and effort invested. So that’s usually the problem I see there. ⁓ The marketing gurus, they might’ve come from an agency background or one way or another, they’ve picked up, CACs and ⁓ they understand LTVs and the ratios between them and so forth. And these guys, long as they understand that CAC to LTV or CAC to lifetime gross profit ratio, and they understand the unit economics of acquiring customers, they’re often happy to just keep doing that. And in my experience, they’re often difficult to engage in CFO type conversations because they usually know exactly where their next dollar of capital is going to come from. It’s coming from a sale and they know that that sale is going to be profitable. And they also know what they’re going to do with that capital. Once they get it, they’re to buy more ads and more inventory. So their decision framework is fairly simple in terms of what they thought, how they think about sourcing and allocating capital. And in my experience, at least I’m not sure about yours, but I found that those people are usually happy to have an accountant or bookkeeper following them around and basically, cleaning up their mess ⁓ or keeping the books in order.
The third archetype that you didn’t mention, And this is, would say where most of my clients reside is what I call the business owner. And these are usually people who have been around the block a couple of times. ⁓ When I look at my client base, they tend to be, you know, at least in their late thirties, forties, I think my oldest client is actually 65. ⁓ So they’ve been around the block a couple of times. They have grown frustrated with the amount of time and effort that they’re investing in the business and the lack of financial results and outcomes that they’re getting from it. And they’re like, man, why am I doing this? What’s the point? Why am I working so hard, bustin’ ass on this business if I can’t pay myself reliably or the business is not consistently profitable? And these people are usually, they’re not necessarily ⁓ deep in any one domain, but they’re quite comfortable sitting across, multiple parts of the business. And they’re usually a bit more willing to think about things pragmatically and you can have conversations with them about topics like ROI and like is this a good use of your time and so forth. ⁓ And from my perspective at least, they usually make the best CFO clients because they’re ⁓ most willing and ready to engage. I’m curious what your perspective on all of that is, Stephen. How do your clients sit across those three categories?
Stephen Brown (17:09)
Yeah, I love the archetypes. ⁓ We’ve ended up getting a lot of that first, a lot of really product-minded people. And what I see is, sometimes the issue there is they don’t, their marketing’s not very great. So sometimes I wish they were more like archetype two. But to your point, each one can have its flaws. So with one I see oftentimes there’s not enough sales velocity or they’ll stall out or they’re really dependent on an agency and they don’t know how to talk to them about marketing efficiency. I think the problem with the marketers, the archetype two, when I run into those they can be, and I’d even say there’s a lot of ecommerce podcasts that are run by agency types. They have a lot of data and they can be really good with data, with marketing data, which has a huge swing on the profitability of a business. But sometimes they’re not thinking about cost of goods sold or they might, but they’re not thinking about the, to me there’s a couple of key things to success. It’s marketing efficiency, cost of goods sold, know, is it low enough, fulfillment costs. And then I think the, you know, if people are good in those three areas and they’re still not profitable, it’s usually they have too much overhead. And most of time I see that as too much payroll. And you and I know like you kind of have to watch all the things like there’s some key areas you got to monitor. But these archetypes, I think sometimes they get too focused on one area. And you and I were talking about this earlier, and I love this concept of archetypes is it’s really easy to gravitate to what you’re good at. And then you’re like, what’s my business struggling? It’s like, well, you’re not paying attention to the things you’re not good at. And those might be the things that are dragging you down.
And to your point, mean, it’s like, it doesn’t matter where your strength is. I mean, I guess we could take the fourth archetype, like you and me, like we may have really great financial backgrounds. But if you can’t get good marketing efficiencies, doesn’t matter, right? You can have everything tidied up and maybe we’re watching the fulfillment costs and we’ve got that dialed in and we keep payroll in order. But if our marketing costs aren’t down, doesn’t matter. So it doesn’t really matter what background of strength you come from.
You kind of got to be watching all areas of the business to have success.
Nate Littlewood (19:51)
Yep. Yep. Absolutely. Absolutely.
Stephen Brown (19:56)
So let’s keep pulling on this thread. you’re working with, you’ve worked a lot with that third archetype, the business owner type. And let me ask you a little bit more. is this somebody who’s had previous businesses and they’ve decided to go into ecommerce? Is that a better way to describe that archetype?
Nate Littlewood (20:13)
⁓ let me think.
In some cases, yes. I guess what is common about my founders and clients is that most, not all of them, are first time founders. So they might have been in this role for a while or at least long enough to get frustrated by the lack of financial outcomes that they’re achieving. I ⁓ mean, have founders and clients that have come from all sorts of backgrounds like management, construction, ⁓ one is a branding and marketing guy, ⁓ others are more ⁓ engineering sort of focused. yeah, they come from all walks, but I guess what is common about them is that they’ve been around long enough to know what they don’t know and recognize that they’re willing to admit that they need help in this area.
Stephen Brown (21:07)
Gotcha. OK. Yeah.
I think up until a few years ago, ecommerce is one of those industries where there was a sense of gold, of a gold rush. Like, hey, you can make money in this. It’s, it was kind of seen as easy money. And I don’t know about you. I don’t know that it’s easy money anymore. I think it’s hard money now. You got to, you got to work hard. And even, even when it was easy money, there was a lot of complexities. But if you could, if you’re good with navigating complexities.
You could put a brand together and get some sales velocity and make some money, but I don’t feel like it’s that way anymore. feel like you have to really, there’s been so much margin compression through ad inefficiencies, tariffs, inflation, squeezing on all areas of the business that think you’ve got to be a more sophisticated business owner for these businesses. They’re no longer easy.
Nate Littlewood (21:58)
Yep. Yep. Absolutely. No, you’ve hit the nail on the head there to, to elaborate on that point a little bit. I like to use an analogy of thinking about running an ecommerce business as a type of gambling or placing a bet. Right? So what you’re doing as an ecom business owner is you’re placing a bet by purchasing inventory and say you spend $30 for it.
The bet that you’re making is that you can then sell that $30 worth of inventory for at least say $60 or $70. And in doing so, make a profit and have enough left over in order to pay all of your overhead costs. Now, to your point about the industry changing, ⁓ there’s been two really, really important changes to the drivers and how the risk return profile looks for that bet that we’re placing, you know, since 2021 2022. The first is about cost and accessibility of capital. So through COVID capital is basically free, all of these alternative lenders were basically throwing money away, they got very, very loose with their criteria. It was unbelievably easy to get money, which meant the cost of financing your inventory or financing your bet was very low. Okay, so it was cheap to place the bet.
And then on the flip side, everyone’s sitting around working from home, they’re all scrolling and sitting on social media. So there was an oversupply of attention and eyeballs on screens. And so the cost of buying that attention got very low. so cost per click and CPAs, know, all of the marketing metrics came right down, which means that it’s cheap. So, you know, it’s cheap to place the bet and you’ve got much better odds of monetizing it.
Now since then, both of those things have moved against us. It’s now harder to get capital, more expensive to get capital. So the cost of placing the bet is higher and there are significant repercussions for having too much inventory on the table at a time. That can come back and bite you. Plus the costs and economics of moving the inventory, realizing your bet has gotten a lot harder as well and more expensive. on both sides, operators are kind of getting squeezed and that’s why we’ve seen margins for this whole industry kind of trend down ⁓ ever since that period.
Stephen Brown (24:49)
Gotcha. So let’s, I love kind of the framework we built here. Let’s talk a little bit about how, what are some of the key things that you do with your clients or you see that are successful to help them bridge that gap? They have financial data. What are some of the key things that you like to point out to get them from data to action?
Nate Littlewood (25:13)
Yeah, absolutely. So I think a good way to set the foundation here is to just talk quickly about the four different phases that I see founders go through when it comes to their relationship with finances. So the first phase is what I call denial. And this is often quite common with your product or the maker creator type people. They’re like, I don’t understand this finance stuff. I don’t want to understand this finance stuff. Going to ignore it and kind of pretend it doesn’t exist.
The problem with that is that, the finances and numbers are going to continue to go on in the background, whether you’re paying attention to them or not. And, if you’re running a business, there has to be a goal here of generating a profit. Otherwise it’s probably not Faire to call it a business. It’s actually, a hobby or a nonprofit, right? So denial is the starting point. What I often see happen after that is a phase that I call overwhelm. And this is where people have developed some openness or curiosity, they’ve had a go at looking at the finances, but it’s just gotten overwhelming. It’s confusing, there’s too much information, they don’t understand it, like what am I meant to do with all this? And that usually flips them back to step one, unfortunately, and we get back to a stage where, okay, I’m just not gonna engage with it. The third phase is what I call, I guess, the curiosity phase, and this is when we start to become a little bit more interested.
in the finances and we’re kind of starting to look over the fence and saying, huh, I don’t really understand everything that’s going on there yet, but it seems like there’s probably some interesting stuff there that I probably need to learn more about. the risk of stating the obvious, this is often a time when founders will reach out to someone like me, and I’m guessing, you know, maybe you as well, ⁓ and they want some help deciphering and understanding these messages that are written on the wall on the other side of the fence.
phase, which is where I’m trying to get people to, I call the enlightenment phase. And at the enlightenment phase is when you know, the penny drops, it’s like, ⁓ now I get it. And once you reach the enlightenment phase, you can start to see and understand how all of these financial numbers can actually make your life easier.
They can help make better decisions. They can help you experience less stress, fatigue, burnout. You can see how to use these numbers to inform your strategy and your growth and make the path forward a lot clearer. So that’s ultimately where I’m trying to get people to, ⁓ in terms of the process that I go through to get there, ⁓ almost unanimously when, ⁓ I start working with a founder, they’re overwhelmed, confused, and they got too many shiny objects, right? So we’ll do the orientation call and they’ll tell me, 10, 20, 30 different projects, ideas, opportunities, right? Right now people are looking at, influencers figuring out how to get their site indexed AI. ⁓ People are looking at,
Stephen Brown (28:22)
TikTok shop.
Nate Littlewood (28:25)
you know, the latest TikTok Shop plugin or marketing widget or whatever, like they’ve got, dozens and dozens of stuff that they’re exploring. So we, I will take a note of all that. We’ll record all of these ideas. And then essentially what I do is help them pass all of these ideas through a number of different filters. The first filter is looking at ⁓ basically the return on investment. So we’ll look at what is this idea if it plays out and if it works, what does it mean?
In terms of return, i.e. profitability, and what is the investment that we have to make here in either time, cost, or both? How much capital are we putting on the line and what is the cost of this failing? And so once we have all these numbers, we can calculate ROI, or return on investment.
The next thing I’ll look at is a bottleneck analysis and I’ll try to do this through a number of different angles. So I’m sure everyone’s familiar with the concept of a bottleneck, but ⁓ in the context of an ecom business, ⁓ we can think about this bottleneck model in terms, a number of different ways. One would be looking at how traffic goes through the website. So you start with traffic, then you’ve got a conversion rate, then you’ve got an AOV that equals revenue, then you’ve got a repeat purchase rate that drives your lifetime value. And you can kind of look at all of these steps, compare them to peers and industry averages and think, figure out, okay, where is the weak point in this chain? If we’re talking about a brand with, a 0.9 % conversion rate, ⁓ where their peers have two and a half, I’m going to say conversion rates are problem. We need to allocate resources here. Because if you can fix that conversion rate problem, we’re going to, double or triple the amount of revenue that we can flow through this pipeline by removing that as a bottleneck. We could also think about it in terms of with people. So if we determine that we’ve got a problem with marketing efficiency and we hone in on the cost per click, for example, we might determine that there’s a creative problem. There’s not enough creative quality or creative content. So, okay, we need more creative assets or we need better creative assets. We don’t have the people to create them right now, how do we fix that? Do we get an agency? Do we get influencers? Do we have someone on our team do it? But we need to remove that bottleneck in terms of creative quality. So there’s a number of ways that we can apply a bottleneck analysis to our business and look at the different parts of it. mean, operations is another good one. One of my clients right now is basically capped out because they own and operate their own warehouse and they’ve just run out of shelf space. Like they don’t have any more room to put stuff. ⁓
Stephen Brown (31:05)
Hmm, yeah.
Nate Littlewood (31:09)
they don’t have enough space for all the boxes. And so we’re figuring out what to do about that. So that’s the second framework. The third framework is, I guess, a little bit more in the realm of HR or people, but it’s basically a skills alignment exercise. So I have this framework I use that looks at how ⁓ good you are at certain skills or functions and how much energy it gives you. Trying to do is help founders identify the projects and tasks and opportunities that they’re good at and energize them. Therefore, they’re probably going to do well at and they have the human capital to be able to at them.
I like to kind of explain this one by saying that part of my job is to put the right balls in front of you. And I want to put a ball in front of you that you can kick into the goal. There’s no use putting a bowling ball in front of you and us being, 200 yards from the goal, because if you try to kick that bowling ball, you’re going to break your toe and it’s not going to go in the goal. That’s just a waste of everyone’s time. So I want to line up balls in front of you that you can smash into the goal. So I need to understand what sort of player are you and how do you like the ball to be placed. So that’s the third framework I do. ⁓ Anyway, once you’ve been through this, we’ve looked at the numbers, we understand what the bottleneck are, we understand what the team is good at, then we’re in a pretty good place to take that list of 20 or 30 ideas and whittle it down to two or three.
And then what we do is basically come up a plan with a plan around that. ⁓ I personally like the OKR or objective and key result framework. And so I help founders set that up. I help them determine KPIs with each of these goals and then essentially help them make progress at whatever their highest priority tasks are.
Stephen Brown (32:53)
Awesome, that’s a great methodology you’ve developed to work with. And what are the outcomes that you’ve seen as you’ve gone through that with different customers?
Nate Littlewood (33:20)
Yeah, so some of the wins and case studies I’ve been involved with over the last year or so. My fastest growing client right now is growing at nearly 100 % year on year. They’re currently looking for their first ever full-time marketing hire, like a head of growth marketing to come on the team. They’re going really, really well. We’re looking at expanding into some new channels there.
Stephen Brown (33:33)
Mmm, wow.
Nate Littlewood (33:50)
We are looking at expanding the product catalog a little bit. There’s another brand, was kind of an Amazon centric brand in the food space that I started working with maybe a bit over a year ago now. Amazon brands are usually pretty low margin. ⁓ Bezos and team take a pretty big chunk of that pie. And this guy, sorry.
Stephen Brown (34:10)
Yeah, yes they do. Yeah, Amazon definitely takes a lot of margin when you’re on there.
Nate Littlewood (34:18)
They do. They do. But anyway, this founder was not paying himself consistently, you know, generating one or 2 % profit margin month to month. And we’ve done a lot of work on two things. One is pricing. So we’ve done a lot of work on pricing optimization. The net result is that he’s actually ended up increasing his prices pretty significantly. And there’s some kind of AI powered tools we use to do that. We’ve also done some work on inventory financing. figuring out about how to basically getting the working capital that he needs to facilitate all the growth that he’s now experiencing. And he’s gone from making like a few thousand dollars a month profit. I think one of his recent months he made like $90,000. That’s bottom line profit in a single month. So that was huge.
⁓ One of my other founders is actually the folks with the warehouse I mentioned earlier. ⁓ That’s an interesting business because they are buying a lot of their raw materials off Faire. So they actually resell other people’s products.
And one of the nice things about Faire is that they’ll give you 60 day terms and they’re interest free terms. And what we’ve found is a credit provider, a capital provider who also offers 60 day interest free. So by stacking 60 days on Faire with 60 days from a financing partner, we’ve basically delayed the payments that this company needs to make for its inventory by 120 days, four months.
Now considering that this business really only needs to hold ⁓ three or four months inventory at a time and they’re selling it all on ⁓ basically DTC, Shopify, what we have here is a business that is pretty close to getting a negative cash conversion cycle, which basically means that they can get paid for product before they have to pay for it. And that’s a phenomenal situation to be in.
Stephen Brown (36:11)
That’s amazing. If you understand cash conversion cycle, which you really should in ecommerce, that is a really amazing thing to achieve. A zero to negative cash conversion cycle as a small business. Really hard to accomplish. That’s awesome.
Nate Littlewood (36:32)
Yeah. And the nice, the nice thing about that, especially for a bootstrap brand is, is, know, you would know, Stephen
Rapid growth can sometimes send a business broke, right? If you’re growing too fast and you’ve got a long cash conversion cycle, you have to put so much cash into inventory as you’re scaling that you can actually run out of cash before the profits come in from selling the product. So what will theoretically, I mean, we’re not there yet, but what will theoretically happen with this business, it will actually generate more and more cash the faster it grows because it’s gonna continue to get paid from customers before it has to pay for their own inventory, which is pretty cool.
Stephen Brown (37:16)
Those are some amazing, I love that last one. ⁓ I’m a big fan of cash conversion cycle. It’s something I try and educate all of my customers that I’m working with personally on. It’s an opaque concept and there’s a lot of opaque concepts in finance and accounting that if you haven’t gone through like a formal training, it’s easy to get overwhelmed and to go back to that, the phases you just.
Nate Littlewood (37:27)
Hmm.
Stephen Brown (37:43)
You get in that overwhelmed phase and you shut down and say, just don’t care. But these are things that make a big difference. And I would argue you’re not going to win because you are a great financial operator in ecommerce, but you’ll definitely fail if you don’t have a certain level of financial sophistication. And I think the bigger you get, the longer it goes, the more important that is that you have that skill set in making decisions. And I think that’s where when you get into your framework, how do we make the best financial decisions? And not just like, I love this product, we need to ship this product. And then all of sudden you’ve got, only 10%, 20 % of your products are actually moving the needle and the rest are just costing you money on the shelf. So I love that focus so much of what you’ve described here. So let’s bring this to a focal point. If there were like a top three recommendations you could give to any seller using the frameworks we put out here, the decision approach. What would you say the top three recommendations you would give to any seller, new or old, about what they should be doing differently?
Nate Littlewood (38:53)
Hmm well two come to mind immediately I’m struggling with the third, but let me get started on the first two and I’ll see if it comes to me
Stephen Brown (38:57)
Okay. Maybe I’ll bring a third if you can’t come up with one.
Nate Littlewood (39:05)
Okay, cool. I appreciate that teamwork. So…
Stephen Brown (39:07)
Yeah.
Nate Littlewood (39:10)
Number one thing is addressing the context vacuum that we talked about earlier. ⁓ I think it’s critically important to resist the temptation of getting drawn into the parts of the business that give you warm fuzzies or that you’re good at and you enjoy. ⁓ I think it is, ⁓ not enough founders do it, but it’s so important to just understand where your business is weak and healthy. It’s like going to the doctor.
Right? Get your, get your whatever your blood pressure, your cholesterol, your whatever it is you need to get tested and know what are the drivers and know, KPIs that you need to focus on. ⁓ some of them you’re to be great. Some of them, no problems at all. You don’t need to worry about it. Right. But there’s going to be a few where you have big problems and those ones with big problems need to be getting a disproportionate amount of time and attention. And unless you’ve been through the process of like benchmarking and understanding these ratios and you know knowing what’s good or bad you’re not going to be able to do that. second ⁓ the second thing I would recommend and this really stems from a very very common mistake that I see founders making is to develop the ability to think about your business and its financials, not just from a profit and loss perspective, but also from a ⁓ cashflow perspective. And we were just talking about cash conversion cycle, but the problem that I see come up time and time again is that founders have usually got a decent handle on their unit economics, right? And they usually understand things reasonably well down to at least the gross profit level, hopefully even the EBITDA level of their financials. But here’s the problem that founders make. They know what it feels like to be understocked with inventory. When you’re understocked with inventory, you have customers complaining, you have people rocking up at the store going, where’s this product? Why can’t I buy it? When’s it going to be back? They’re submitting tickets to your support desk, whatever. And it’s painful because every day that goes by, you’re sitting there looking at the lost sales opportunity and lost profit opportunity. And that is a type of pain that slaps you in the face. And you’re to be very, very acutely aware of it the time it happens.
The flip side, of having too much inventory, which is how most founders will compensate to avoid that. The problem with having too much inventory is that the costs of that are very, very subtle. They do not slap you in the face, but they are there. And those costs come in the form of a very long cash conversion cycle, which basically tends to mean that you’ve got too much inventory. And that means that you’re paying a lot for warehousing fees. You have product obsolescence issues. If you need to make a change to your product, it’s going to take you a long time to run through the inventory to deploy that change. ⁓ And you probably got a lot of debt to finance all that inventory as well. So you’re paying for it further down. Now, when you look at all of those implications, none of them slap you in the face like a stock outage does. And so there’s this this kind of bias that founders have to wanting to always avoid the stock outage and having not enough and therefore they overcompensate.
The problem with all that is all of these hidden costs that exist and the way that it impacts the financial strength of the business. And those costs are there. They’re often hard to see and hard to detect, but they very, very predictably chip away at your bottom line and the cash you’re going to be able to take home at the end of the month or year, whatever.
This too, Stephen. Do you have a third? Do you want to chime in on?
Stephen Brown (43:13)
I’m going to give you a third from your own maturity framework because I think that’s a really great framework. And I would say based on my experience and I love the way you laid that out, know, from denial to overwhelm to curiosity to enlightenment, I would say stay on the path to enlightenment because I see that and I love that framework.
Nate Littlewood (43:19)
Okay.
Stephen Brown (43:42)
Just because you hired an accountant or CFO doesn’t mean that you shouldn’t keep pushing forward. I see sometimes they’ll come to us and they’ll be like, I don’t have to worry about it now. I was overwhelmed. Now I’m just going to go back to denial. And so I would say the third thing is stay on the path to enlightenment. It’s this stuff can be learned. You, especially, especially if you’re working with, with professionals like us, we will help you understand things. will take some time.
There’s a million videos on YouTube that can explain concepts. can, but, but stay on the path to enlightenment because when you get to that place, you are a better operator. You are a better seller and you’re to make better decisions and have better outcomes. So that’s my third that that’s coming from that really beautiful framework that you put out there. I think that’s a good, stopping point, Nate. This is you, you put some for some great frameworks and mental models, ⁓ really appreciate your insights. If somebody wanted to connect with you, what’s the best way to do that?
Nate Littlewood (44:46)
Yeah, two places I would recommend. Firstly, I’m pretty active on LinkedIn. ⁓ Nate Littlewood is the name. I’m fairly easy to find and I’m posting there pretty much every day. So you can hit me up there. The website is futurereadycfo.com. Pretty easy to get hold of me through there or book a meeting or whatever you want to do. And yeah, they’re the best two spots.
Stephen Brown (45:13)
And you also have a podcast, is that true?
Nate Littlewood (45:16)
I do. I run a show called Profits on Purpose and I’m actually hoping I might be able to convince you to come on it at some point, Stephen.
Stephen Brown (45:23)
I would love to. This has been an incredible conversation and like you, better financial education, the world needs it. We want founders to succeed, love connecting with people like you that are trying to do the similar things. Thanks for joining us.
Nate Littlewood (45:34)
Yeah. It’s a pleasure.