713: (Solo) The Black Friday Profit Trap and How to Avoid It This Year

Nathan Chan (0:01)

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Nathan here. Welcome back to another episode of the Foundr to Foundr solo series where I share everything that I've learned from building Foundr for over, geez, 13 years now. It is absolutely crazy. So today I want to talk about the BFCM profit trap and how to avoid it this year.

SPEAKER_2 (1:22)

Here are the stories, learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the Foundr Podcast with Nathan Chan.

Nathan Chan (1:35)

Here's the thing, right? We're all gearing up for Black Friday Cyber Monday. I hope you are. If you haven't started planning yet, you need to. If you haven't started increasing ad spend right now, you need to because costs are going to be way higher, right? Costs are going to be way higher, especially coming into November, December.

Last year, a lot of e-comm founders, they had their biggest revenue month ever, November, December, record numbers, and we had an Operators event. Foundr Operators is our membership where DTC founders learn to scale through Facebook ads, AOV optimization, creative, all that good stuff and we really help you. It's an incredible membership. It's led by my good buddy, Nick Shackleford, and it's really cool. We had our first in-person event in LA, and I heard a story from one of the members that said, this was a few years ago, they did a million dollars for their Black Friday Cyber Monday and they barely broke even. I am not exaggerating. That is crazy.

You might be thinking, how is that possible?

I want to talk you through what actually happened last year, some real data and also give you a framework that we shared with our members at our in-person event last month and really make sure that you can absolutely crush this year. If you are looking for help to scale, make sure you check out Foundr Operators. Here's the trap. You have a massive sales month. It looks awesome. But what did that revenue actually cost you?

If you think about it, your Meta ad spend, which in November is the absolute peak, then you discount and you want to give the deepest offer of all year, and you got cogs, you got shipping, you got returns and refunds, and you got platform fees. This is the thing that no one talks about. Most founders don't actually model this before their sale starts. They just go, all right, I want to do the craziest offer.

Let's do 30 percent off site wide and spend as much as possible on ads. They don't really think so much about November CPMs, which is an all-time high, and then you speak to your accountant, and once you've done month-end, mid-December or in Jan, and it's just like, oh my God, we've planned this massive thing, but we haven't planned our profit and it hurts. Trust me, I've been there. I remember one time I spent a million bucks on ads. We did, this is for Foundr, we spent a million bucks on ads. We did like two million in revenue, and we weren't even profitable. Crazy, right? Crazy, crazy, crazy time.

So obviously I've learned a lot and I want to share this stuff with you guys. So there's three clocks running right now before Black Friday. And by November, the biggest decisions have already been made for you. Like they're already been made for you. Clock number one is attention. And that's the cost to reach your customer, which moves dramatically between September and November. So if you wait until November to buy that attention, you're paying peak pricing, really to reach the same people as you could have reached two months earlier, right? So this is what I'm saying. You need to start now. The second clock is inventory. So if you're reordering for Q4, those lead times mean you can commit in July or August. So by October, you're working with whatever you got. And this is where you're at right now. And then clock number three is shipping. So these are carrier cutoff dates. So every year, brands get caught by promising delivery windows that they just can't keep. So really, the question isn't, what's my Black Friday offer? It's what decisions do I need to make? So November actually works. And I want to share some data with you guys. So the auction repriced against you. So CPMs went from $11.21 in September to $21.96 in November. So that's almost 100% increase. Cost per click up 90%, cost per add to cart 40%.