**10 Years Of Ecommerce Advice In 40 Minutes — Transcript & Summary | SozAI**
Source: https://sozai.app/transcript/10-years-ecommerce-advice-40-minutes/

Davie Fogarty shares 10 years of ecommerce lessons, focusing on legal and structural mistakes to avoid for long-term business success.

## Key Takeaways

- Register trademarks early to protect your brand from copycats and impersonators.
- Set up an appropriate corporate structure to manage risk and tax efficiently.
- Hire specialized lawyers for specific legal needs rather than a generalist firm.
- Always use formal employment or consulting contracts to secure IP ownership.
- Conduct thorough patent checks early to avoid expensive legal issues.

## What the video covers

- Davie Fogarty shares lessons from scaling ecommerce brands to over $850 million in sales, emphasizing common mistakes made.
- Legal and structural mistakes are often overlooked by beginners due to lack of legal knowledge and budget for lawyers.
- Not registering trademarks early caused issues with copycats bidding on brand keywords and impersonating the business.
- Choosing the wrong corporate structure can expose businesses to unnecessary risks; a recommended structure involves a family trust, holding company, and multiple trading companies.
- Using specialized lawyers for different legal areas and regions is crucial rather than relying on a single firm for all matters.
- Employment and consulting contracts are essential to secure intellectual property rights and avoid future disputes.
- Failing to check patents early can lead to costly legal problems; thorough regional patent searches by specialized lawyers are recommended.
- Early implementation of legal protections saves significant pain and financial loss in the long run.
- Davie offers mentorship and connections for ecommerce founders needing legal guidance.
- The video provides practical advice for ecommerce entrepreneurs to protect their businesses legally and structurally.

Answers

## Questions about this video

Why is it important to register trademarks early in ecommerce?

Registering trademarks early helps protect your brand from copycats and impersonators who may bid on your brand keywords and scam customers.

What corporate structure does Davie recommend for ecommerce businesses?

Davie recommends a structure with a family trust at the top, a holding company in the middle, and multiple trading companies underneath to manage risk and tax efficiently.

Why should ecommerce founders use specialized lawyers?

Because lawyers are highly specialized, using region-specific IP lawyers and commercial lawyers ensures you get expert advice tailored to your needs rather than relying on a generalist firm.

## Full Transcript — Download SRT & Markdown

00:01

Speaker A

The government came in, seized all the products. We were all going to lose millions and millions of dollars. We were making so much money. It just all came on to me so quickly. It was like my dream. People are like, "Oh, I can't afford to hire people." It's like, because your business. After scaling my e-commerce brands over $850 million in sales, it's safe to say that I have made every single mistake under the sun. And today, I'm going to cover all of them for free. So, I put these into sections. The first section is legal and structural mistakes. These are often ones that are really overlooked when you're a beginner because you're not a lawyer, right? You didn't go to law school, but at the same time, you have no money to go pay a lawyer as well. So, learning these as quickly as possible and implementing them early is going to save you a world of pain. The truth is, if you have any decent amount of success in business, you're going to be sued in your lifetime. And these are some common e-commerce things. Not saying that I've been sued with them, but common e-commerce mistakes that I've seen other people make and have caused me issues. The first one is no trademarks or takedown protection. Now, I remember very early on I was like, is there any point getting a trademark? It's going to cost me $5,000, $6,000. People can still kind of skirt around it. Is there actually any point? You also have copyright law. So even if I didn't have the UI trademark, you couldn't just go and name yourself the UI because whereas in a lot of UK, Australia, the US, you can't just rip people's names even without trademarks. So I didn't do it. I didn't register the trademarks. Then what happened, which in hindsight, all of these mistakes are going to be really, really stupid. So don't judge me. This is why I'm trying to teach them to you. Maybe you're far ahead of me and you were just like, "This is obvious." But they weren't obvious to me. But I didn't register the trademark and it only became a huge issue when a lot of Chinese copycats started launching the brands through paid advertising channels. So Google, I've got this little screenshot of the trademark complaint on Google Ads, but people were bidding on the UI keywords and actually launching the Udy ads going to their website. And I went to Google. I was like, "Hey, can you take these down?" And because it was obvious that they were impersonating us, scamming customers, not even shipping the product, but I didn't have the trademark for it. And that is the number one thing that they do on all of these forms. It's the same as Amazon. It's the same as Facebook ads. It's the same as Google. So, it is really important that you get a trademark as quickly as possible. The only leniency is like, am I testing this region? So like if I've just launched in Australia, I'm like, I'm going to see how it goes. Maybe it's not necessary there, but as soon as you get traction, you should get that set up. So the next on legal is wrong corporate structure. So this is going to depend on what country you're in. But in Australia, I've included a really good simple structure that, again, I'm not an attorney, but my attorney has told me that this is a good structure. You should get your own legal advice, but it's using a family trust at the top, this triangle. Then you've got a holding company underneath in the middle section and then you've got operating or trading companies underneath. And you can have multiple trading companies underneath that holding company. Let me explain why. The trading companies, let's say you've got the UDI and then you've got another business that maybe is completely different. Maybe it has lots of risk in it. Maybe you're doing something in the health space or the baby space. You don't want to add risk to your other business with things like liabilities, certain costs, all of that kind of stuff. So, we can have these two trading companies paying their own tax at the company level from a tax perspective. Then, if we wanted to, we've got this holding company at the top. Let's say we don't want to distribute all of the profits from those trading companies and pay the full amount of tax coming to you personally. We can actually just pay up dividends to your holding company and use that holding company maybe as an investment vehicle or we can just actually stockpile a lot of cash in there without paying the full rate of tax on there. So the trading companies might start getting a little bit of exposure. We can pay up some dividends up to the holding company or we can distribute it out through the family trust. And this brings me to my next section, which is using the wrong lawyer. I have had a lot of issues using a single firm that doesn't specialize in something like IP. It doesn't specialize in commercial law and using them for everything. Lawyers are very, very specialized, unlike Harvey Specter on Suits. It just doesn't work that way. You want your IP lawyers to be region-specific, very good in the region. So if I want Australia IP law, I'm going to go to my IP Australian lawyer. And if I want US commercial law, I'm going to go to my US commercial lawyer. There have been some firms that cover one or two really, really well. And there are benefits in that you can actually get them to communicate amongst themselves and there's economies of scale and building the relationship and whatnot. But as an early-stage e-commerce founder, let's say you're doing, you know, $200,000 a year, maybe a million dollars a year, up to $10 million a year, your need for lawyers is going to be one-offs. They're going to be highly specialized and you probably just want to find the best lawyer possible for that. If anyone's in Daily Mentor, they can message me and I've got a ton of connections here because, again, I've had some massive issues there. The next one is no employment or consulting contracts. So, this is the main way that people start. They go, "Hey, I'm going to hire a friend. Just come in on Monday." And then they start doing a little bit of work for you. Then it's just like, "Hey, I'm going to hire someone on, let's say, Fiverr or like I saw someone post on a job board. I'm like, I reached out to them. I don't even know this person. They're not even a friend anymore. I'm just going to transfer them because they've got an invoice, they've got a company, they're a freelancer, all of that kind of stuff. I'm going to just start paying them directly." Maybe they're doing some graphic design for you or something like that. Maybe they design your logo. Then in eight months' time, you're like, "Oh crap, I don't actually own any of that IP that they've created. They own it all." This is videographers, logo creators, website creators. They actually own that. Therefore, you can, let's say you try to sell the business. They're going to withhold that sale because you actually don't own the IP, the main thing that you're actually selling. They can actually sue you. They can hold you for ransom. So many things, even things like Upwork, there is a policy that says all IP gets transferred. But a much better practice is getting a commercial consulting agreement and an employment agreement if you're technically employing them versus consulting very early on. Have that set up. Get them to sign it before they do anything for you. Have the standard agreement such as IP assignment, such as anything like confidential, such as terms of, you know, how to terminate those kinds of things and just get in a really big habit of doing that early. Now moving on in a similar way, I didn't check patents early. Now I know, guys, this is boring, this is legal, but these are the things that can cost you tens of millions of dollars. To do a really extensive check with patents because it's a huge field of law, you need to actually pay a lawyer and they'll do deep dives. They'll find adjacent patents. Again, it's hugely regional. So, they can have a really strong p...

00:12

Speaker A

people." It's like cuz your business. After scaling my e-commerce brands over $850 million in sales, it's safe to say that I have made every single mistake under the sun. And today, I'm going to cover all of them for free. So, I put

00:26

Speaker A

these into sections. The first section is legal and structural mistakes. These are often ones that are really overlooked when you're a beginner because you're not a lawyer, right? You didn't go to law school, but at the same time, you have no money to go pay a

00:41

Speaker A

lawyer as well. So, learning these as quickly as possible and implementing them early is going to save you a world of pain. The truth is, if you have any decent amount of success in business you're going to be sued in your

00:55

Speaker A

lifetime. And these are some common e-commerce things. Not saying that I've been sued with them, but common e-commerce mistakes that I've seen other people make and have caused me issues.

01:04

Speaker A

The first one is no trademarks or take down protection. Now, I remember very early on I was like, is there any point getting, a, trademark?, It's, going to, cost me $5,000, $6,000. People can still kind of skirt around it. Is there actually

01:20

Speaker A

any point? You also have copyright law. So even if I didn't have the UI trademark, you couldn't just go and name yourself the UI because whereas in a lot of UK, Australia, the US, you can't just rip people's names even without

01:34

Speaker A

trademarks. So I didn't do it. I didn't register the trademarks. Then what happened, which in hindsight, all of these mistakes are going to be really really stupid. So don't judge me. Uh this is why I'm trying to teach them to

01:46

Speaker A

you. Maybe you're far ahead of me and you were just like, "This is obvious." But they weren't obvious to me. But I didn't register the trademark and it only became a huge issue when a lot of Chinese copycats

02:00

Speaker A

started launching the brands through paid advertising channels. So Google I've got this little screenshot of the trademark complaint on Google Ads, but people were bidding on the UI keywords and actually launching the Udy ads going to their website. And I went to Google.

02:19

Speaker A

I was like "Hey, can you take these down?" And because it was obvious that they were impersonating us, scamming customers, not even shipping the product, but I didn't have the trademark for it. And that is the number one thing

02:31

Speaker A

that they do on all of these forms. It's the same as Amazon. It's the same as Facebook ads. It's the same as Google.

02:36

Speaker A

So, it is really important that you get a trademark as quickly as possible. The only lenency is like, am I testing this region? So like if I've just launched in Australia, I'm like I'm going to see how it goes. Maybe it's not necessary there

02:50

Speaker A

but as soon as you get traction, you should get that set up. So the next on legal is wrong corporate structure. So this is going to depend on what country you're in. But in Australia, I've included a really good simple structure

03:03

Speaker A

that uh again I'm not an attorney, but my an attorney has told me that this is a good structure. You should get your own legal advice, but it's using a family trust at the top, this triangle.

03:14

Speaker A

Then you've got a holding company underneath in the in the middle section and then you've got operating or trading companies underneath. And you can have multiple trading companies underneath that holding code. Let me explain why.

03:26

Speaker A

The trading companies, let's say you've got the UDI and then you've got another business that maybe is completely different. Maybe it has lots of risk in it. Maybe you're doing something in the health space or the baby space. You

03:38

Speaker A

don't want to add risk to your other business with things like liabilities certain costs, all of that kind of stuff. So, we can have these two trading companies paying their own tax in the company level from a tax perspective.

03:51

Speaker A

Then, if we wanted to, we've got this holding company at the top. Let's say we don't want to distribute all of the profits from those trading companies and pay the full amount of tax coming to you personally. we can actually just pay up

04:04

Speaker A

dividends to your holding company and use that holding company maybe as an investment vehicle or we can just actually stockpile a lot of cash in there without paying the full rate of tax on there. So the the trading

04:16

Speaker A

companies might get start getting a little bit of exposure. We can pay up some dividends up to the holding co or we can distribute it out through the family trust. And this brings me to my next section which is using the wrong

04:26

Speaker A

lawyer. I have had a lot of issues using a single firm that doesn't specialize in something like IP. It doesn't specialize in commercial law and using them for everything. Lawyers are very very specialized unlike Harvey Spectre on suits. It just doesn't work that way.

04:46

Speaker A

You want your uh IP lawyers to be regional specific, very good in the region. So if I want Australia IP law I'm, going to, go, to, my, IP, Australian lawyer. And if I want US commercial law I'm going to go to my US commercial

04:59

Speaker A

lawyer. There have been some firms that cover one or two really, really well. And there is benefits in that you can actually get them to communicate amongst themselves and there's economies of scale and building the relationship and whatnot. But as an early stage

05:13

Speaker A

e-commerce founder, let's say you're doing, you know, $200,000 or a year maybe a million dollars a year up to $10 million a year, your need for lawyers is going to be oneoffs. They're going to be highly specialized and you probably just

05:27

Speaker A

want to find the best lawyer possible for that. If anyone's in Daily Mentor they can message me and I've got a ton of connections here because again, I've had some massive issues there. The next one is no employment or consulting

05:39

Speaker A

contracts. So, this is the main way that people start. They go, "Hey, I'm going to hire a friend. Just come in on Monday." And then they start doing a little bit of work for you. Then it's just like, "Hey, I'm going to hire

05:50

Speaker A

someone on, let's say, Fiverr or like I saw someone post on a job board. I'm like, I reached out to them. I don't even know this person. They're not even a friend anymore. I'm just going to transfer them uh because they've got

06:00

Speaker A

they invoice, they've got a company they they're a freelancer, all of that kind of stuff. I'm going to just start paying them directly." Maybe they're doing some graphic design for you or something like that. Maybe they design your logo. Then in 8 months time, you're

06:13

Speaker A

like, "Oh crap, I don't actually own any of that IP that they've created. They own it all. This is videographers, logo creators, website creators. They actually own that. Therefore, you can let's say you try to sell the business.

06:28

Speaker A

They're going to withhold that sale cuz you actually don't own the IP, the main thing that you're actually selling. They can actually sue you. they can do hold you for ransom. So many things, even things like Upwork, there is a policy

06:40

Speaker A

that says all IP gets transferred. But a much better practice is getting a commercial uh consulting agreement and an employment agreement if you're technically employing them versus consulting very early on. Have that set up. Get them to sign it before they do

06:55

Speaker A

anything for you. have the standard agreement such as IP assignment such as anything like confidential such as terms of you know how to terminate those kind of things and just get in a really big habit of doing that early. Now moving on

07:08

Speaker A

in a similar way I didn't check patents early. Now I know guys this is boring this is legal but these are the things that can cost you tens of millions of dollars. to do a really extensive check with patents because it's a huge field

07:21

Speaker A

of law. You need to actually pay a lawyer and they'll do he of deep dives.

07:27

Speaker A

They'll find adjacent patents. Again it's hugely regional. So, they can have a really strong payment in Australia but they don't have one in the US. That kind of stuff that costs tens of thousands of dollars sometimes, maybe a

07:40

Speaker A

little bit less if it's a simple product. And again, it can it's like how long's a piece of string? How extensive do you want to get? What I like to teach beginners or people that maybe have got a little bit of traction, they're doing

07:49

Speaker A

a million bucks or so a year, preferably earlier, is you need to go and research how to repaint. First, you go onto Import Yeti, which is basically a site that lets you see every single container that a company is importing, what

08:05

Speaker A

supplier they're importing it, all of that kind of stuff. This will help you get the company name that is actually probably selling the product. Of course we can go say the Udy Patents. We can search that. That's obvious. But we also

08:20

Speaker A

want to get what my company name is which is Dave Clothing, and search Davy Clothing Patents as well, cuz there sometimes this is the company name. Once we have the company name and the also the just the brand name, we can search

08:33

Speaker A

that on Google. And Google patents is a really really good source. It'll pop up.

08:38

Speaker A

You need to learn how to find on Google patents where the patent is issued and what the status of the patent is because you might see, oh my god, they got five patents. This is way too scary. I'm not

08:51

Speaker A

going to sell this product. But their patents all might have gotten rejected because they would still be on Google patents, but there's just a little rejected like a status of it. Maybe they're pending. Maybe they they've lapsed. Then you also want to see where

09:05

Speaker A

they actually are issued. It could be worldwide. It could be Australia. It could be the US. So just looking at those two things might just instantly be like, okay, this product is just not covered by any IP at this stage. Again

09:18

Speaker A

you need to do what is ethically morally correct, and also legally correct. And if you can check with a lawyer if you're really concerned about that. And the one thing I will say as well is that sometimes the paintings

09:30

Speaker A

don't come up. So if you do that whole process, you're not always in the clear.

09:34

Speaker A

The next is supplier agreements. So recently we uh I was launching a private label brand under a brand that was struggling for me and I was like this thing will allow us to control demand.

09:45

Speaker A

It's going to be really really good and this is my I don't know thousands and thousands of containers I've imported and I've launched hundreds and hundreds of products. We got a really reputable factory and a a really good agent

09:57

Speaker A

because kayaks are technical. There's a lot of safety. So we wanted to use that and more importantly I used this really ironclad manufacturing supplier agreement that stated if they came and they had certain issues they would issue a refund and these were the terms of the

10:11

Speaker A

refund that they needed to abide by. A lot of people have this false belief that people in China don't listen to the law or they don't listen to contracts.

10:19

Speaker A

That's not true. They are enforcable and you can use a Chinese lawyer to help with a contract in China. You can also use one in the US as well and it will really help you. So, long story short

10:31

Speaker A

the kayak dropped up. They were all moldy. It was about $100,000 container. They couldn't be sold. It was just basically going to ruin the brand. It was going to ruin the brand that I plan to sell it through as well. So, I went

10:41

Speaker A

to the supplier. They apologized profusely. Pretty basic mistakes. Usually, they put like moisture packing stuff in there. Something went wrong.

10:49

Speaker A

they went probably on the packing side with the the supplier and they ended up taking all the kayaks back and refunding me. So, it was a good solve there. But in previous times, especially in the calming blankets years, I would have no

11:03

Speaker A

tech pack, which is like a technical specification pack of the exact panone color I want, a fabric swatch as an example, the exact dimensions, the exact weight, the exact fabric composition like the GSM. I had none of that. So

11:16

Speaker A

what they would do is every single container they would just ship whatever was in their factory. If someone ordered three types of gray blankets, they'd have three different colors of gray which was a big no no. But there was no

11:26

Speaker A

supply contract. So I was basically arguing against myself. The next is no Amazon brand registry, which is similar to our first one, which is Amazon actually has its own form of brand registry that you should sign up to as

11:39

Speaker A

soon as possible, as soon as you get a trademark. even if you're not going to sell on Amazon because that helps you with takedowns. And we actually couldn't for a long time get our brand registry cuz someone else registered it. Someone

11:51

Speaker A

in Brazil or something like that and they thought we're a scammer and it took us 2 years to get on Amazon because the support was crazy. So the next section we have is financial mistakes. I had a brand. It was my third or fourth brand

12:04

Speaker A

that I was launching. All of them had been doing like $10 million in the first year. I thought I was invincible. I thought I knew everything. And I scaled this to a million dollars in its seventh month. And then I brought on a new CFO

12:17

Speaker A

cuz I thought all my finances were good. And they're like, "You're actually unprofitable once you consider sales tax." Very stupid. Again, trust me, I made every single stupid mistake under the sun. That made me realize that we need to have a daily tracking for not

12:30

Speaker A

just any I should have written this, but we need contribution margin and to be tracking profit on a daily basis and very accurately as well. You need to set up all of your cost of goods in Shopify to have all the costs except the

12:44

Speaker A

variable costs and then track all of your marketing channels to make sure that you're actually profitable. And this is actually why in Daily Mentor we have something called this report card which tracks also your fixed costs as well because sometimes you actually just

12:58

Speaker A

need to spend more on advertising and therefore you'll get over that fixed cost hurdle and you'll be profitable on a daily basis as well. And this brings me to my next one which is the brand I was talking about Pupnaps which is not

13:08

Speaker A

understanding sales tax and duties. Sales tax and duties are very very complicated. Some regions like the UK for children's clothing won't actually have duties but for everything else it has duties and obviously at this time of shooting it's crazy with the tariffs in

13:24

Speaker A

in the United States. the actual HS codes that you determine your product with, the category, all of that kind of stuff is so complicated. And it's to the point where I at a a million dollar a year business, you need a coach like

13:37

Speaker A

someone that actually has walked that path before that's doing 10, $50 hundred million and has learned the lesson the hard way to help teach you what to look for. But then you need to become a master at using Cha GPT or any

13:49

Speaker A

AI tool. And you put in the products you be like, what are the potential HS codes that this could be? what are the duty expectations? I'm selling them this way and just really get to the bottom of it because I don't think that a general

14:01

Speaker A

tax expert really understands it especially when you're selling into other regions. And yeah, you just want to take that responsibility on yourself.

14:09

Speaker A

And this brings us to incorrect COGS in Shopify. When we were scaling the Udy really, really well, we eventually got a change in price because we changed the supply. I think we increased the quality of it and we failed to change the cost

14:23

Speaker A

of goods in Shopify. So all of our reporting that was tracking our daily contribution margin, our report cards those kind of things were slightly off.

14:32

Speaker A

Well, they aren't slightly off. They're off by like 5 to 10%. And then we got the month end results back, which took you know, a month after the the thing happened, and we realized, hey, we're actually unprofitable this month, even

14:44

Speaker A

though we've had a pretty good month. and it just shows that all of these changes within your business, you need to make sure that they're represented in your dashboards every single time. Then we've got revenue financing without using a calculator. This is kind of

14:59

Speaker A

obvious, but the way that a lot of the revenue based financing models work their coupon rate, their actual interest on an annualized basis can be extraordinary. It's not just the 5% or something that they're quoting you. You need to go on to Google and write

15:16

Speaker A

revenuebased financing calculator true interest and just go to those and put those numbers in so you can see the annual rate because you're paying it back so quickly. It generally makes the annual rate really high. And this is

15:29

Speaker A

what you're comparing to with traditional lenders or maybe getting an investor or something like that that's actually just gives you straight debt will actually be competing with. So make sure you understand the true revenue financing and then also build

15:42

Speaker A

out a model to make sure that your cash flow isn't just going to keep getting drained and you're going to become indebted to these people forever. If you've got high gross margin, if you've got high contribution margin, and the

15:55

Speaker A

business is going relatively well growing really quickly, then chances are you'll be able to absorb these costs and use those providers and the quickest option is the best option. But again it's a nuance topic. Then we've got not

16:07

Speaker A

optimizing MX points. Now this is actual screenshot for me. I think I got up to 98 million AMX points which is too many.

16:15

Speaker A

I didn't understand switch to cash back. I didn't understand that I could optimize that just way way better. So you need to understand things like in the the Quantis card is really really good for flights in Australia. But

16:28

Speaker A

there's also now the MX Gold that's available for the 4x of the ad spend which is also good. You need to look at that. But you also need to look at cashback options. and decide whether that's better because if you have enough

16:38

Speaker A

for business class flights then maybe you don't need them. Next we've got not structuring your profit and loss properly. Now there's I could just talk about this the whole time but realistically if you're selling in multiple regions you want a regional P&L

16:52

Speaker A

to make sure that because again like duties in one region not in the other make sure all of these things are considered. How you factor in your uh your fixed costs and separate them across those regions is a story for

17:05

Speaker A

another time. But we also want percentage breakdowns underneath certain things such as our variable costs, our advertising costs which is will be our me. We also want things under like our labor costs, our employment costs. We want percentages under then. And then we

17:22

Speaker A

want tracked on a monthly basis and we can see these numbers trending upwards and downwards. One of the best things about an early stage company is how simple it actually is. And if you are really struggling to get your e-commerce

17:36

Speaker A

business profitable, what you should do is get them to present a profit and loss with all of the columns is just going to be the month. So, it's January February, March, April. Then on the left, you're going to have things like

17:47

Speaker A

you know, your standard topics, which is advertising, contractors, cost of goods. But you want to break these down into a far more detailed granular level. So under contractors, you'd have every single contractor's name. Under advertising, you'd have every single

18:02

Speaker A

channel's name. By doing that, even under SAS subscription is such a big costline for a lot of e-commerce brands.

18:08

Speaker A

They'll have something like a project management tool, then five other AI tools like chat GBD, fast perplexity plus quad like me. And what you can then do is you can see the last three months how much this contractor has been

18:22

Speaker A

charging you and then how much each single supplier has been charging you. And it's really easy to then go in and just click highlight delete line and see what that does to your profit and loss because suddenly you can just delete

18:35

Speaker A

five lines and you're like okay if I can run the business without these providers suddenly I'm in the green. And then that you can just get a finance person to just keep producing this report every single month. And you can even exclude

18:47

Speaker A

things like uh things under $200 so you don't have over 500 lines. But I much prefer having 300 lines where I can go through and then I build that out as a forecast. The next is not having one

18:59

Speaker A

person in charge of inventory forecasting. So in the early years of UDI, we sold out. We pretty much had six month pre-sale, which mean people are buying and waiting for 6 months for our product. and we're still doing, you

19:11

Speaker A

know, 200 million that year, which was great for financing growth, but realistically, we probably could have done 300 million if we actually had stock that year. Inventory forecasting is very difficult. There isn't one tool that is just like, hey, AI is going to

19:24

Speaker A

figure this out because there's so many nodes of complexity such as the inputs what marketing creative works, maybe it's there's a seasonality element, all of this kind of stuff. And the main advice that I can give someone that's a

19:36

Speaker A

early stage founder is just at least have one person responsible for it that isn't chaos like me running six brands running all of the marketing doing all of the finance all of that kind of stuff because just having them at a weekly

19:49

Speaker A

cadence sit down explain their logic have a clear spreadsheet or a simple tool and have that inventory meeting that's just going to stop things from breaking. It is also just again I really want to reemphasize this display of your

20:05

Speaker A

inventory forecast such as the spreadsheet and how clear it is will generally really highlight when you're making a stupid decision. If there's graphs everywhere, there's no conditional formatting, there's no color highlighting, there's no, you know simple inputs that we can change, you're

20:24

Speaker A

just destined to fail. And this is why learning Excel as an early stage founder is actually a really good idea. Then we've got not preserving gross margin to fund talent. So if you are running a drop shipping brand and you're running

20:36

Speaker A

at 5 10% net margin and you're scaling as much as you can, you don't have this huge amount of profit to take a risk on an employee such as ahead of growth or ahead of operations because suddenly their leverage their ability to create

20:53

Speaker A

lots of profit is less. I just find that having a far more healthy unit economic for the product that I'm selling will allow me to hire really really good people early on and therefore they can be higher leveraged and the business

21:06

Speaker A

will scale much quicker. I know that's really obvious but you'll be surprised that people are like oh I can't afford to hire people. It's like cuz your business is So the next section is people. The more I do business the more

21:17

Speaker A

I realize that people is just the whole secret of business. This is how Elon Musk has billions of dollars. This is why people can run multiple successful companies. It all comes down to people management. The first main mistake in

21:30

Speaker A

the early stages when I had 10 brands and they were all running. I was sharing people across the entire company and people would come to me and go like "What is my name priority? Is it Udy? Is it this smaller brand that's just

21:44

Speaker A

getting launched or we've invested tons of money in?" And I had no answer for them. This is when I came on to the book measure up matters which talks about the OKR system that was used at Google to

21:57

Speaker A

actually track what tasks are being done, who's working on them and the progress of those tasks. It's a little bit different to KPIs which KPIs are a great system. Smart goals are a great system. OKRs also just a great system.

22:11

Speaker A

They're all similar and they all if you have none of those and implement them you're going to see great results from it from a people perspective. But I really liked OKRs because it has an objective on the top which you can see

22:23

Speaker A

here. There's sell a certain amount of fur beds at Y% gross margin. So this was our um objective. There's some arguments where the objective should be measurable. I like it like that. Then we had all of the key results that were

22:37

Speaker A

underneath that that we actually needed to um implement such as reducing the cost of goods. We would assign that to someone like the brand manager or the operations manager, someone involved with product. Then we've got implement winning CRO product page in AU and UK

22:50

Speaker A

that would go to the marketing team and we could assign people lots of roles.

22:54

Speaker A

And interestingly what I found was that there was like certain people that just have like 100 OKRs. It's like no wonder these people aren't performing. They don't know what the priorities are.

23:02

Speaker A

They're responsible for everything. And you can start structuring that clearly. Now you can roll out this system either on a 3-month cadence, but I prefer to do it on a six-month cadence. So every 6 months you catch up with your leaders.

23:13

Speaker A

You go, "Hey, these are what I think the objectives should be. what are the key results that can help us get us there?

23:18

Speaker A

Maybe if you're a very very proficient founder and you have like maybe a B-grade, C-grade team and you're just getting started like freelancers, maybe you're just telling them what the key results are. And then make sure that you

23:28

Speaker A

set up reminders. It can be daily reminders or weekly reminders, but at least a weekly meeting to touch on all of the OKRs with your team. And you basically go into Excel or whatever filter, put the person's name in, you'll

23:41

Speaker A

see the whole list, and be like, is this on track or off track? If you're interested in learning more about that there's a ton of resources out there that you can go check out. The next is I didn't know my archetypes. It's really

23:51

Speaker A

important as a founder to know what archetype you are. I put a few examples here. I I created this, but we've got the viral creator, for example. This is the person that maybe had a little bit of a social following before or just

24:05

Speaker A

understands how to make reals and they basically hit a winner. their products aren't scaling because they get a few reals and then their business ends up imploding because they are unable to actually scale the organic social media because they're maybe posting one a day.

24:21

Speaker A

So their business is the size of a business that posts once a day and realistically they need to scale that to 10 posts a day or 100 posts a day to get considerable growth and often these people also fail at finding a second

24:35

Speaker A

product. You just need to understand what found archetype am I? Like do I like marketing a lot? Do I like operations a lot? Am I good at product?

24:44

Speaker A

And then not just hire people to replace your lack of skill set. But more importantly, dive deep into how you can improve your own skill set, but also how to find people that can actually do that skill set. The main thing here is just

24:59

Speaker A

really recognizing what you are good at and what you aren't good at and put them into sections. So, I'm really good at creating creative. I'm really good at marketing. I'm really good at the technical side of marketing. Am I really

25:12

Speaker A

good at creating and finding new products? If not, that's a huge red flag. Am I really good at doing Excel spreadsheets that are boring such as finance and operations, inventory management? Then what you need to do is you either need to hire someone that is

25:28

Speaker A

in the adjacent skill set to support you, but more importantly, you need to carve out time to improve yourself in that skill set using things like AI or using something like a mentor, getting just more support in that area rather

25:42

Speaker A

than being like, "Oh, I'm not good at this." because chances are even if you become a hund00 million business, you need to get so good at it that you need to be able to manage these people and see who's bullshitting you because

25:53

Speaker A

there'll be lots of bullshitters in your life. The next is I didn't learn how to hire properly. So, very good segue there. I would post a job post and I would get a ton of applicants. I was like, "Wow, how easy is this to hire?"

26:05

Speaker A

You know, I was hiring something like an operations manager role. I was like "Wow, all of these people have lots of experience. They are talking language that I don't understand. They're talking about RFPs, requests for pricing. I was

26:15

Speaker A

like, wow, that's fancy lingo and they must have know exactly what they need to do. Then I realized, oh, all of the people that are applying on these job posts that are applying as soon as I post it, they didn't know my company at

26:27

Speaker A

all. They've just been fired from their previous company. They are the actual B or C-grade people. And then I realized I need to hire people that don't want to leave that existing company because they're getting treated very very well

26:40

Speaker A

because they're a players and they're not actually looking for work at the moment. They're also loyal to their existing company which is such an important thing. So I learned how to use LinkedIn recruiter. You would go on to

26:51

Speaker A

LinkedIn recruiter. You'd get a whole list of everyone there. You would go to say an e-commerce brand that's slightly above you. Let's say you're doing a million. You want to find someone that's doing 10 50 million and you just want to

27:02

Speaker A

hire someone that's done exactly what you need to do. You want to interview them. Ask them questions such as what was your, you know, main achievements at these companies? Um, how many people were you managing? How long were you

27:12

Speaker A

there for? Just to make sure that they didn't just jump on the back of the success and then you outreach to them and say, "Hey, can I buy your coffee?" And you can discuss the role with them there and pay them more and get them on

27:24

Speaker A

board. Then I've got hired non-ambitious people. Now, it's really important. We want to hire people with high integrity high intelligence, and high ambition. We don't want to hire someone that has really low integrity, but high ambition and high intelligence cuz they're going

27:39

Speaker A

to use that ambition and that intelligence to destroy your company and take all your money. But you want someone that has the full trifecta.

27:45

Speaker A

Integrity and ambition is the two things that I look for. I recently hired someone in my YouTube team. They have you know, no YouTube experience whatsoever. They're great at their designated field. And I'm just like this person, we can train them to do

28:02

Speaker A

anything because they're just they're working. They're replying to me at ridiculous hours. Like 4:00 a.m. they'll reply. They'll reply at 6 p.m. as well.

28:10

Speaker A

This is like this person's so hungry to learn. And that's what I like to look for. But also, don't forget about integrity. Next, we've got gave up equity too easily. my businesses were already successful and then I was like I

28:20

Speaker A

need a partner to help me understand how to say you know go public or something like that or sell the business and realistically there was nothing that I couldn't have learned from those people that I couldn't learn from a really good

28:34

Speaker A

mentor a really good community of friends like I now go onto trips with nine figure founders we hang out all weekend and they basically teach me everything that I need to know in that regard rather than having to give

28:47

Speaker A

someone, you know, $10 million worth of equity. Remember to calculate what that equity is actually worth because chances are you can actually pay someone and once you get someone in on your cap table, it's really hard to get rid of

28:59

Speaker A

them. So there is some stages where it's good to have them on. Generally, it's a way earlier, but you need to make sure that you really understand the the value that they want to bring. I think I've got yeah the next section which wasn't

29:11

Speaker A

clear with co-founders. You want to make sure you discuss things like what happens if you want to exit and I don't.

29:18

Speaker A

What happens if I start doing lots of the work? How is that determined? What happens if one wants to take the company in one direction and I don't want to do that? Go on to chat tpt write in what is

29:27

Speaker A

a post-mortem that we can do around two co-founders? What are the main questions that we need to answer about each other so that you get all of these questions and all of these outcomes that predict that could go bad and then you just put

29:40

Speaker A

that in an email together. Don't just have a meeting because people forget over 3 years. Put that in a meeting together. Say it's non-binding but at the same time you want to just say this is our expectations at this point. Do

29:51

Speaker A

that every single year and if you want put it into your contracts and uh that will just cause uh that that communication. It's kind of funny like 99% of TV shows all of them could be avoided the whole story just by proper

30:06

Speaker A

communication. It's like the conflict arises because someone just doesn't communicate how they're feeling. And that's the same with founders. Just go and just talk about it and put it into an agreement or an email. Then didn't do town halls. Again, back in the days

30:18

Speaker A

we're just so scattered. Nobody knew what they were working on. That's why we implemented OKRs. But the it didn't help with the siloed communication across departments. So marketing would be like product would suddenly just send across all of his products to marketing and

30:34

Speaker A

they'll go, "Hey, hang on a second. Like we need a lot more time to launch this." And one thing that and then customer service was just taken by surprise like the product would go onto the website.

30:43

Speaker A

Now this can be solved by things called critical pass but we actually found that it was just much much better for morale and stuff like that to just discuss what the main exciting things that each department was doing in a weekly or

30:55

Speaker A

monthly meeting talking about the results of the company as well. Everyone feels aligned and then there's it actually makes people very excited to work at the company as well. So the next section we've got operational mistakes.

31:07

Speaker A

I've kind of touched on these first two expanding too fast and didn't focus. They both are in the same vein. The UDI we expanded globally. We also added so many new products that nobody knew what the core focus was and things like

31:22

Speaker A

operations started to break. It was just absolute chaos. So just really focus on the core thing that needs to go up. The core region, the core product and the core channel. So just really focus on one core region, one core product and

31:37

Speaker A

one core channel until you at least have some level of stability where you're doing more, you're doing different you're innovating in those areas for that existing product and then expand out there and it might be regional expansion or it might be channel

31:53

Speaker A

expansion. Then we've got didn't understand China operations. So we just had so many problems with our products.

31:59

Speaker A

So I was like look I'm going to go over to China. Luckily, my dad had been to China before, so I wasn't just going over there because it is just a crazy different place. I went over there and I

32:10

Speaker A

got a translator and I went to all of my factories. Little did I know that there was one person that owned both of these factories and they were just like making me negotiate against myself and it was just it was just so confusing what was

32:21

Speaker A

going on. There was one factory that said that I was scanning all of our products for like uh imperfections, but the scanner had like cobwebs all over it. So, I was like, you're clearly not scanning anything. Then I saw like the

32:35

Speaker A

main factory cuz like when you walk in everyone's product is there. I saw the main factory that all of my main competitors were using as well. So, I just changed all to this person and all of my issues stopped. So understanding

32:48

Speaker A

China and how they do business and getting over there and talking to them is key. And things like Chinese New Years as well, like they shut down for good. Like you you will not get responses from these people at that time

33:00

Speaker A

that you won't get any work done. Everything shuts down. So making sure that's in your forecast and just becoming really really good at that side of the business. If you're still lost there, go into Chad GPD and just be like

33:10

Speaker A

what are the main things that you need to understand about importing from China and understand the cultural differences.

33:15

Speaker A

Then we've got website broke during peak. I think we're gearing up. I think we lost a lot more than $100,000 in one day. Someone messaged me and they were like, "Oh, sales are really low. It's like 50% down or no, sorry, it was 20%

33:30

Speaker A

down." I was like, "Not sure." Um, and then check the day before and that was down as well. And I was like "Oh something's going on here. We just broken a code and people couldn't check out for a certain product category and

33:40

Speaker A

customer service was so backlogged that they couldn't do it." This is why we often do code freezes. So you don't want to do major changes for your website the in the month of October and November.

33:49

Speaker A

Just lock it all out. Keep it consistent and make sure you're checking sales daily. But it was kind of got to a point where it was just doing so much money that I kind of stopped checking sales.

33:58

Speaker A

It was just uh it was just actually turned into work and I just got obsessed with it. So I stopped. The next is working with the cheapest 3PLs or the cheapest providers. We were at a teamer then and we got a message from a

34:09

Speaker A

government and they basically said we've seized all of your goods. And we're like why? That makes no sense. So, we went to the the 4PL that we were using and they basically said that the 3PL, I think this is where we got to the 3PL failed

34:24

Speaker A

to fill out one piece of paperwork to say that they were working with international providers. A 4PL, you're paying the 4PL, but you don't actually talk to the 3PL. So, we couldn't have avoided this unless we didn't use a 4PL

34:36

Speaker A

because they didn't allow us to vet the 3PLs or go through any of that paperwork. The government came in seized all the products, and this was just before peak. So, we were going to lose millions and millions of dollars

34:46

Speaker A

and it was probably like we're staying up till midnight, 2:00 a.m., our team trying to get all of these products released. And it was chaos. And it goes to show that you just really want to make sure you have all of your paperwork

34:59

Speaker A

sorted, have the right providers when you're doing international expansion which, you know, we didn't. We weren't completely organized. And that's our mistake. So the next one is didn't analyze supply quotes for first principles. A lot of people ask me how

35:11

Speaker A

do I get better margin for my product. The quickest way to go into negotiations with someone in China is say hey I've got someone else that can make this product. They've quoted me this now sometimes they'll quote you very very

35:22

Speaker A

cheap just to get your business initially but you can lock in that price for like a year and like I'm need to move. Then suddenly your supplier will drop the price. They're not going to just drop the price without

35:31

Speaker A

understanding that you actually have somewhere else to go. Now, if you don't want to do that, let's say they've helped you develop the product, maybe they, you know, there's a lot of risk in that, you can actually just break it

35:43

Speaker A

down. So, like let's take the Udie for example. We have two forms of fabric the outer fabric and the under fabric.

35:49

Speaker A

It's printed by this method. It an average has this much size. Then it will take on average you could go over there and film someone making it or you can just you know ask someone that's really an expert in that side of things maybe

36:04

Speaker A

another supplier or something like that how much time it takes then you can actually break this down on a spreadsheet you've got every single material then you've got every single cost of how to make it and if it's

36:15

Speaker A

suddenly still so much more like let's say it's three times the price of all of that stuff they have clearly ripping you off so this is what I mean by first principles You might need a little bit of an expert

36:26

Speaker A

to help you with that that's in China but it's a really really good way to break things down. And finally, we I didn't check my 3PL invoices. I think with Australia Post, I remember this is early early days with Udy. I think I was

36:39

Speaker A

spending a million dollars a month with our courier like Australia Post and we were negotiating rates with them. I basically said, "Look, we've scaled to this size in this amount of time and we're still getting charged the initial

36:50

Speaker A

rates." That's how you go about negotiation. Then they did some, you know, cool spreadsheets and whatnot.

36:56

Speaker A

Showed me that this is going to be the new rates. And I just assumed that I was going to get far better rates. Turns out that they're actually more expensive.

37:04

Speaker A

And I signed that for a year because I didn't know. It was super super complex.

37:08

Speaker A

Different regions, different like metro areas versus rural areas. And the business was changing as well. I didn't have someone on board that could actually calculate all of this stuff and more importantly hold them to account.

37:20

Speaker A

You know, recently we had a a region I'm not going to say what it is. We had a provider. They said, "Yes, we can provide this quote. It's going to cost you, let's just say $1." And then it

37:31

Speaker A

turned out that it was $3 an UI or something like that. I'm just making up numbers. Then we went to them and say "Hey, these are the emails. You said that you could do this." And we caught it on the invoicing stage by putting it

37:42

Speaker A

through a spreadsheet saying, "This is how many products we sent. This is the rate that we're going to get." and having that internal tool to catch that.

37:50

Speaker A

But in the earlier days, we never would have caught it. So if you're just blindly paying your courier or 3PL invoices, they're probably ripping you off. So the next section is product and marketing mistakes. So the first main

38:02

Speaker A

mistake that I made here is I didn't understand my product flywheel. The best flywheel example that is always used is Amazon, which you can see here. they the more traffic that they send to their website, the more sellers they get

38:16

Speaker A

which therefore increases the selection that they actually have on their site. What does that then do? It increases the customer experience so that they get more traffic to their website and those things compound. This then allows them to have lower cost structures and lower

38:32

Speaker A

prices which again reinforces the customer experience which creates more growth. When I was early on, especially with the smaller brands that it no longer exists anymore, I didn't have a clear brand definition about what value I'm trying to provide to create a

38:49

Speaker A

product flywheel to reinforce that brand. Let me explain. So, calming blankets, we kind of started selling random mattresses. We were selling lots of different types of cooling weighted blankets, woven weighted blankets. We're selling all of this kind of stuff. We

39:02

Speaker A

even started selling certain clothing. There was no core brand pillar which in hindsight it should have been we want to be an innovative company to improve sleep and we want to take customers on a journey and solve all of those solutions

39:15

Speaker A

but I was so scattered and bringing certain things that didn't help and accelerate that flywheel because as soon as you bring out a bad product let's say it's your second product you're like I'm going to extract a bit of customer value

39:28

Speaker A

from people I'm just going to sell this random thing that doesn't really work that aligns with your brand suddenly you have just taught watch your most important customers, the people that were going to go along for the brand's

39:39

Speaker A

journey. So, this is why your second product, and you can sell complimentary products and make sure that they're quite good for the price, but your second feature product needs to be a winner, and it needs to reinforce the

39:52

Speaker A

customer experience so it allows you to send more traffic because they tell their friends. And this is what Udy is.

39:59

Speaker A

We create the most incredible comfortable clothing so that when customers get it, they're like, "Oh my god, this is amazing." They share it online and then that attracts more customers and it just accelerates that flywheel. Next, we've got didn't learn

40:12

Speaker A

creative positioning early. Now, you need to understand different types of advertising angles that you can do for your existing product. Understanding the avatar, but also understanding their pain points. And to do this, you want to use Reddit. You want to use uh surveys

40:29

Speaker A

for people that have actually purchased. You just want to use chat TPT. Do deep research and be like, what are the main pain points and advertising angles that I could have for a product like this?

40:38

Speaker A

And just really learn that it's not about just making 100 UGC ads. They need to be five UGC ads for each angle, each product as well. And that will really help you scale on Facebook. Next, we've got Trust Pilot. really important that

40:53

Speaker A

you are managing your reviews as a northstar metric for all your company to determine whether your product is delivering how you want to deliver it because if you get some really really good reviews one that becomes a marketing angle but two importantly it

41:08

Speaker A

just shows that people are going to come back and purchase and go on the brand journey as I talked about before then we've got I didn't balance the core 8020 of the business in terms of innovation I spent way too much money on like what is

41:22

Speaker A

the next big product cuz I got addicted to it. I was like how do I get that next $10 million incremental when I just completely ignored a product that was doing $200 million a year. So you need to leave at least 80% of focus on the

41:34

Speaker A

main things that are the bread winner and then 20% of the focus on the the innovation and that can differ depending on where you are in terms of the business like Udy now at the moment because it's subtracting on the UI

41:46

Speaker A

product category we need innovation to actually outpace that growth of the other side of the business. So therefore we might do 30% innovation rather than the 20%. Then simple one, no two factors on login. The amount of people in Daily

42:01

Speaker A

Mentor that are like, uh, uh, my Facebook has been hacked, my Google has been hacked, just set up two factor authentication. It's really, really important. Then we've got no naming conventions on Facebook ads. You need a really good naming convention because

42:14

Speaker A

one day you're going to feed all of those campaigns, the ads and the adsets through a business intelligence tool to get clear things, pay commissions to creators, to understand what content formats are doing well, what to allocate budgets for certain product categories.

42:31

Speaker A

So, make sure you have a great naming format there. And then we've got personal and mental mistakes. So, I didn't push the team to forecast risk properly. So we just come out of co and we were just buying so much stock

42:43

Speaker A

because every single year because we were pretty much sold out all the time. It was just like we as soon as the products would come in we would sell out but then lockdowns finished the stimulus checks finished and the January that a

42:55

Speaker A

lot of ecom brands went belly up under was, one, of the, worst, months, and, we misforcast by 50%. So we didn't actually forecast that that could even be possible when we didn't think about it but we didn't understand how much

43:07

Speaker A

repercussion that was going to create. meaning that we just ran out of money straight away. In two weeks, we just lost all the money and I had to restructure the organization. It was the biggest stressful thing ever. How is

43:17

Speaker A

that practical to you? Obviously, if there's a big macro one once in a lifetime event like CO, you've got to consider when is that actually going to end? But more importantly, just at least, you know, if you're forecasting

43:28

Speaker A

you know, 20% down, what does that actually look like in terms of cash and profitability of the business? You're way ahead of a lot of people. Then we've got took too many substances. We were doing so much money. It was just all

43:41

Speaker A

came on to me so quickly. It was like my dream. But to keep up with that, I was so scared that everything was going to get taken away. So I was having 10 shots of coffee. I started to actually vape or

43:51

Speaker A

have nicotine gum every single day because it would just allow me to work non-stop. Then on the weekends, I would just drink myself just so I could actually for once just stop my brain going over and over. I didn't develop

44:04

Speaker A

healthy habits. And yes, I was young. you know I was 26 27 is you know fun years of your life with the healthy habits that I have now my business would have been way more successful and I would have been happy and I wouldn't

44:16

Speaker A

have developed so much anxiety then we've got thought others were doing better than me now this is still like the a lot of the root of anxiety that I have people see me and they're like wow you're super super successful and then

44:27

Speaker A

I'll go hang out with someone that's even more successful than me and they're doing some really cool stuff and then suddenly that will be my main focus is achieving what they have compar Comparison is the theft of joy and it's

44:38

Speaker A

really important that you just kind of go on your own journey. Know that if you just commit yourself to learning, be a good person, and don't burn out, you'll achieve as much success as that you actually want or need in this world. If

44:50

Speaker A

you liked these 38 mistakes, I know some of them are stupid. We've got this free video that goes through the four steps to really diagnose the problems of your e-commerce business. Go check it out.

Topics: ecommerce legal advice trademarks corporate structure employment contracts patent checks business mistakes Davie Fogarty ecommerce scaling business law


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