Well, hello and welcome to the e-Commerce podcast with me, your host, Matt Edmundson. The E-Commerce podcast is all about helping you deliver e-commerce. Wow. And to help us do just that today I'm chatting with my very special guest, Eric Youngststrom from On Ramp Funds about why e-commerce is challenging and what you can do to make it work for you. Uh, this is gonna be a real fascinating conversation.
I'm looking forward to this one, but before Eric and I jump into that, let me suggest a few other episodes that I think you'll enjoy, especially if you've not been with us for that long. Uh, we've got a massive archive of episodes. And so, uh, check out what does e-commerce marketing look like in 2022, even though we are like practically at the end of it.
Uh, it's still a good podcast to listen to, Check out the one with Kenny Gray, and also check out my conversation with my good friend Ian Finch about why technology is not the issue, but you are, I, so it's one of my favorite episodes actually. Uh, you can find these and our entire archive of episodes on our website for free at ecommercepodcast.net. Now this episode is brought to you by the fabulous e-commerce cohort. Yes, it is. Uh, e-commerce cohort is, is live and it is going strong.
Uh, Eric, I'm sure you've been around e-commerce a little bit. Uh, and for those maybe who are starting out in e-commerce business as well as that has been established, but starting out, I mean, it's a hard road. We're gonna be talking about that today, Uh, and. If you're starting out, what do you do? What do you do? Uh, who can help you? Who can guide you? That's where cohort comes in.
Not only do you get guided sprints, so some great teaching, some good workshops, some good stuff you can learn, but you're involved in a community that you can also draw on. So if you would like to know more, checkout ecommercecohort.com. Uh, or you can email me, matt@ecommercepodcast.net with your questions. I I'll try and answer them. Uh, but if you've been around an eCommerce, whether you're starting out or whether you are brand new, uh, do check it out.
It's gonna be really, really good for you. Of that I have no doubt Now. Let's talk to Eric. Eric is the founder and CEO of On-Ramp Funds, a purpose-built financing platform for e-commerce brands. And in less than two years, since its founding, Eric and the On-Ramp team have raised over $40 million in seed funding and have helped dozens of e-commerce SMBs get off the ground. Uh, Eric, welcome to the show. Great to have you here despite it being allergy season for you. Uh, a warm welcome.
Thank you so much for having me. I'm excited to be here today.
Well, it's great that it's great that you are here. So, uh, behind you, uh, dear listener, if you're listening to the audio version of the podcast, which I know like 98% of people who consume this show, listen to it rather than view it. Uh, you will not notice that there is a big Texan flag, uh, behind your, uh, uh, your beautiful face there. Uh, so I take it you live in Texas and you hail from that part of the world.
That's right. We're here in Austin, Texas. Um, been in Texas for 30 years now, and, and on Ramp was born and raised here, if you will.
Oh, okay. Okay. Austin is one of those beautiful cities, isn't it? It's just a, it is just a lovely part of the world and a good place to go to if you ever get the chance, uh, and great food too.
fantastic food. Rolling hills, beautiful trees. It's, it is a, it's a beautiful place to be, um, and great people. So you can't go wrong on coming to Austin that's for certain,
Yeah. Yeah. Very idyllic. So, Eric, tell me about, uh, on-RAMP funds and what it does and why?
Sure. We're, we're a working capital financing solution for small e-commerce business. We work with businesses, uh, with less than 10 million in revenue. Um, you can literally be at about your first kind of 90,000 in revenue and start working with us, Uh, even smaller. Um, our goal is to help the e-commerce merchant, the, the business owner, really keep their very, very valuable capital and cash and, and credit cards, if you will. Mm-hmm. out of, um, sales and inventory turnover. Right.
That, that feels like a very low risk kind of almost sure thing on a 30 to 90 to 150 day basis. And so what we do is fund that turnover.
We give you the capital necessary to turn over your next 90 days worth of inventory to drive the advertising on that, and then make sure that you always have the shipping and fulfillment budget ready to go to, to fulfill that next order as it comes through, so that you can generate the sale and actually get those deposits in and, and reduce the chance of, you know, refunds and charge backs and whatnot.
Mm-hmm. , It's interesting, isn't it? Cuz I, I remember. Our first business, uh, or first real successful online business, um, we, uh, we predicted that we would do maybe 10, 15 grand in revenue the first four months we launched in August. Uh, and so we figured by the end of the year if we did 10, 15 grand in sales, we'll dance a jig, we'll be all kinds of happy. Well, the business actually did 400,000, uh, in sales. Those first four months. It went, it went totally crazy.
And it went crazy very quickly, and it was a wonderful thing. But one of the things that we experienced then as a result of that is how do you finance that growth, right? Because you, you've gotta go buy the stock. To sell to the consumer. And so, um, we needed bigger warehouses. We needed to everything that we thought was gonna happen needed to be rethought in a, in an instant. And, and don't get me wrong, this was a beautiful problem to have, right? I, I'm not, Yeah, yeah, yeah.
Totally beautiful. But I, I get how, um, an e-commerce, actually, it's one of those things, it's not traditional bricks and mortar business. It becomes a lot harder to quantify. But actually the need for help, certainly when scaling, I think is, is, is, is apparent and, and is obvious. I dunno if you found that.
Uh, well, I, yes, that's, that's why we're here. Right. Um. We've seen the, the challenge that the small business merchant has with just having the necessary capital, right, to order that next round of inventory or their credit cards maxed out. And so guess what? They can't run an ad on Google to drive that next sale to their Shopify store.
Um, and now they're struggling to figure out which card do they pay down and you know, which one are they gonna be late with a payment on and that sort of thing. So they can keep the wheels turning. And that feels like a very, um, it's, it's I won't say it's necessarily easy, but there's a, there's a collateral stream there, a sales stream there that you can then go offer capital on, um, that is very tightly aligned with just the kind of cost to gets sold to the business. Mm-hmm.
. And then the other thing that happens is this, right? Is that the e-commerce industry, you know, has a kind of 60 to 120 day cash conversion cycle. Mm-hmm. , right? When you think about purchasing inventory that you're gonna have to use your own funds up for, call that 20, 25% of your 90 day revenue stream, and then spending another 15 to 25% of that 90 day revenue stream on marketing to drive the sales, and then shipping and fulfillment to honor the sales.
Um, and then by the time you get to day 60, you're not quite yet to getting the profit dollars out. But now you're buying next quarter's inventory. Mm-hmm.. And so now you're actually tying up capital again. And at least under US accounting standards, which this often means is while a merchant with a million dollar revenue business who should be generating $150,000 in profit, that profit is always captured in that turnover cycle.
Yeah. And so, Um, if, if you kinda look at the world of the, the e-commerce aggregators, right? Buying up these small kind of $1 million to $2 million companies, they offer very, very low valuations because they understand that a lot of these business merchants are just kind of exhausted of being on a treadmill that they can't get off and they don't feel like they're paying themselves, you know, they don't feel like they're saving for college or things like that yet.
And so they see an opportunity. Um, our mission is just to give them the capital they need to keep growing so that if that offer comes along and it's one year's, you know, profit, they could look at that and say, Well, why would I take that? I can, you know, I've got on ramp now. Mm-hmm, um, I can simply pay, I, I'm now paying my salary.
Why would I trade one year's worth of salary, you know, for a sale today when if I spend another year or two at this while I'm still paying myself a salary, maybe doing a little saving, um, I could grow that business to two or three times the size it is. Um, and. And take an exit, and hopefully they can get a real multiple on that exit.
So our mission is just to see more and more small business owners thriving, um, because we just think it's a, it's a, a better thing for the world, um, if we have more small business owners and fewer large businesses.
Well, I, I couldn't agree with you more. Uh, the power of the small business to change the world, um, I think is, is, is one of the things that we should be having more conversations about. And I'm, I'm always amazed, actually, here in the UK there's a lot of political turmoil, Let's just put it that way, at the moment. Everywhere. Yeah. Everywhere. Uh, especially here in the UK.
And, um, I'm always amazed as a small business how much the small business is not really thought about from a political standpoint, but I, I think actually it really should be, you know, so. So you've been doing this for two years. You started this two years ago. How did you get into it? Did you just wake up one day and thought this is what I'm now gonna do, or was there a bit more of a story to it?
Oh, there's more of a story to it. So, um, Uh, I helped launch a company called Shipping Easy back in 2012. Um, we provided an order management and multi-carrier shipping solution to these same small business owners. Mm-hmm.. Um, so you, you would plug in your Amazon, your Shopify, big commerce, eBay, Walmart, wherever you sold online, and all those orders would be downloaded into, um, a SAS space web application, Right. So you had one screen to see every order, regardless of where you sold.
Um, and then that application would run a machine learning algorithm, um, and tell you how to then ship the next package to optimize for it. Was it the free shipping service the customer asked for? So how do you get it as fast as possible, but as the lowest cost? Um, was it overnight? Well, how do we make sure it gets there overnight and not two days where you're gonna have an unhappy customer? Um, was this one of your best customers who maybe asked for free shipping?
It'd be worth it to just go ahead and give them the two day product so that they feel like really taken care of, that kind of thing. Mm-hmm.. Um, and during that process we saw that, um, a lot of these small business owners were struggling with working capital. Um, They would get orders into our system and they didn't have the money to pay for the next shipment.
Um, and all of a sudden then like, hold on, that, that's actually worse than, it's worse to get an order that you won't fulfill than it is just to turn the site off and not take the order mm-hmm. so that you're not paying, you're not having to go pay the, the credit card processing fees to go give the money back. Mm-hmm.. So, um, after doing that, we, we built that business and were acquired in about four years.
Uh, I worked for the parent company for a number of years after that, running a global business development forum. And then, um, just kept seeing this problem and decided I wanted to go do another startup, and, um, saw the opportunity to go really focus on this and, and build a product around e-commerce. Looked at the industry and really saw that most of the competitive products felt like kind of off the shelf Wall Street tools. Mm-hmm.
that weren't really purpose built for e-commerce and that there was a way to really look at the e-commerce data streams from, you know, the most granular level and then build an underwriting algorithm from the bottom up that was intentionally designed around how e-commerce businesses run. Mm-hmm..
Um, that would provide a disciplined set of capital tools specific to this working capital challenge, um, and really let the merchant extract their own personal capital from this part of the business so that they could redeploy that into higher growth activities.
So you'd, uh, so, so this business stemmed out of, uh, something else that you were doing. You saw the need, and you're like, Well, okay, we can get involved with that. And, and so that's, you kind of put two and two together and, and, and, and created all of this. So, so you've been around eCommerce then for more than the two years you've been involved with on ramp.
Yes. So I've been, I've been in e-commerce now for a decade, um, and I've been building, you know, let's call it SAS based software companies now for about 20, 25 years.
Okay. So that's your, that's your background. So some of the things that you've noticed in the e-commerce based then over the last 10 years. Where, where do you, where do you think as an industry its currently sitting E-commerce?
Well, you know, I think. And there's a lot of regional differentiation, right? Like the, the e-commerce adoption in the UK, I think is what, two or three times that of in the US right? In the United States, I think we're at kind of 16, 17%. Mm-hmm. of retail being the e-commerce. I think the last I checked, I thought you guys were maybe north of 30. Um, yeah. Yeah, we are. So at least 2X, um, now you're, you're a, you're. You're a tighter geography, right? With a digital
Yeah. That's the key difference, isn't it? Yeah. Yep. I can ships stuff anywhere in the UK usually next day and it's not a problem. Uh, whereas for you it's not that straight forward. Yeah.
Yeah. I can do it in Austin, but if it's gotta get to Salt Lake City or Seattle or New York, right. It takes longer. Um, so I. I see just a tremendous amount of runway left for, for e-commerce to continue to grow, continue to be, you know, to evolve, um, and really specialize and, and just take over more and more of that retail. Now I do think, you know, the omnichannel stuff we're seeing really become more prevalent today is an important part of that process.
Mm-hmm. Um, but I don't think it's, I, I don't think it's a requirement to be omnichannel. I think there's still a huge opportunity for the, the digital only retailer, if you will, um, to grow, build brands, um, and, and build businesses that are long term sustainable.
Yeah. Yeah. I, I agree because, you know, everyone talks don't, they, a lot about Omni and it's an omnichannel is fine if you're Nordstrom, you know, or if you are, whatever you doing, you've, you've got the ability to do it. Makes a lot of sense to integrate all your stores with your online, and I can, I can click and collect, I can return to the store, I can do all those kind of things.
But it, like you're saying at the start, you know, most of us is small enough not to even think about, uh, Right that type of thing.
Well, what's, what's really interesting I think or funny is if you look at the big, um, mall owners, right? Simon Malls, Westfield. Mm-hmm, right? Those guys, you know, Amazon said 20 years ago they were gonna have a, a shipping facility within 20 miles to 95% of the US population. That was gonna be one of their key differentiators. And what's crazy is that that already existed. In all the US shopping malls mm-hmm, and yet none of those big mall guys could, could see the e-commerce opportunity.
They were so focused on their real estate play mm-hmm, but they actually could have listed essentially a, a product catalog that was the same size of Amazon and then said, Hey, you can drive to the mall and pick it up, or we can just ship it from the mall to you, but it'll be their same day next day. And you know? What a missed opportunity, I won't say would've been easy, right? There's, there's a whole lot that goes into that. Um, but it is interesting to see, right?
You know, the mall might just convert into a giant warehouse, right? Mm-hmm. with maybe a few showrooms in it, um, and become then your distribution point that the interesting thing about that becomes how much easier will it become, you know, 10 years from now for the small business. D to C retail or e-commerce only brand to all of a sudden then start to use those facilities to become an omnichannel provider as well. Um, yeah.
Without having to go become, you know, you don't have to be, you don't have to go find rent and deal landlords and stuff like that. You know, could you just go into, you know, somebody else's store. Right. That's looking for all of these really unique niche brands.
Yeah. Yeah. It's an interesting idea and you're right about the mall thing and, and, and Amazon came along and did something that they should have done 20 years ago, but never did. And I'm, it reminds me of the, the blockbuster story. You know, Netflix came along and did something that Blockbuster should have done, but then never did. It's quite fascinating, isn't it?
And you, you, you hear about these, uh, Sort of bigger company, and I think this is part of the benefit I think of being a small business is you can pivot and you can change direction very, very quickly. It's a bit like driving a speed boat versus driving a massive, you know, ocean liner that takes years to turn that thing around. And maybe that's right. Maybe that's why maybe they saw it but couldn't do anything about it. I don't know.
I'd be really intrigued, you know, to hear some of those conversations if they were ever recorded in the boardroom and the decisions that were made.
Yeah. No, I mean, it's, it's, you certainly can't blame them, but you have to look at them and say, Man, there's a, there was a missed opportunity there. Um, and honestly, I think that opportunity probably still exists, but it might just seem so overwhelming that it's, it's just something they can't even begin to figure out. Mm-hmm. , we'll see. Right. I mean, time's gonna tell on that one.
Well, one of the interesting things for me, I mean, I, I'm a Brit, I live in the UK, and so I see what's going on here and I see what's going on in the states. Um, and I see what's going on in Canada and Australia and you know, the markets that sort of interest me. And a few years ago it's, it felt to me like, and, and maybe Eric, you can talk to this, it felt to me like everybody was talking about Amazon online and Walmart offline, Right? They, they were the two key stores.
Now, the conversations I'm having, people are talking about Walmart, both online and offline. It's like it's become another marketplace, another Amazon type esque place where people can sell. And so it seems to me like Walmart have done a pretty good job of catching up with that, kind of catching up, maybe the wrong phrase, but sort of, uh, jumping on this bandwagon for want of a better expression. Because again, Walmarts are everywhere in the states, right?
That's right. They, they have that same footprint, um, and. You know, they, what, about three or four months ago they stopped curating the merchant, right? Um, so prior to then you had to apply to be a merchant on Walmart and it, it was a process, right? Took three or four months to get approval. Um, and then, you know, sometime kind of early summer, they just said, Look, we're gonna, we're gonna make it far easier now to, to be a merchant, to get onto the Walmart platform and sell here.
Um, which I think, you know, probably is a testament to four or five years of maybe more than that six years. Building out that marketplace, getting the technology in place, learning how to work with the merchants, right? Learning how to make sure that when an order's processed, it's getting delivered right. That the, the right tools are in place, the APIs are working, um, all the technology is there and you know, now they can go expand that.
And I think, I think I read that, um, either Q2 or q3, Walmart added as many new merchants in that quarter as Amazon. Um, and so, you know, it's a, it's a fantastic opportunity, right? To continue to diversify the number of sales channels you have. Um, to, to get in front of more customers. And I think in a recessionary environment, um, probably even more important because Walmart is, you know, a Lowcost provider. Mm-hmm.
and, um, has, you know, I think their, their sales are probably gonna increase during, you know, the next kind of three to six months. Um, as you see some of the higher end retailers, um, taking on the chin just because of, um, you know, inflation and, and a recessionary environment.
Mm, that's really interesting. They're really interesting on the sort of the state of where it's at. And I, and I, like I say, I'm an outsider watching what's going on in the US and thinking that's really interesting. I wonder how that's gonna play out here in the uUKk. And, um, and what that's gonna mean for places like Australia. Cuz you know, a few years ago, Amazon went to Australia and you kind of think, well, well what's gonna happen now is that's gonna tidy up all the delivery systems.
And so over the next few years, e-commerce will become a little bit, you know, bit more interesting. I mean, Australia is massive, isn't it? As a, as a, as a sort of a place. So, you know, um, but you, you, you can kind of look at it from an outsider and you can follow the trends a little bit, can't you? And just go, Oh, that's interesting. I'll just keep, ask people to write on that.
It, it, yeah. I mean, Australia has, has a huge, well had, it was a very difficult market to do your fulfillment in, right? Mm-hmm.. Cause the, the way the carriers worked down there were different, um, you know, and the Canadian market's. Very interesting, right? Because it's really dependent upon the US and the Maritimes. You know, there's, there's one highway and rail line that connects the Maritimes into, you know, Montreal, Toronto. Mm-hmm..
And then there's only one highway and railroad that takes you from Toronto all the way through to Vancouver, which means all those cities are, you know, less than 90 miles from, you know, wa the, excuse me, the states. And so I think they're, they're actually more pre, more, more, um, linked to the US um, as different regions than they are to Canada as a single entity. Um, although I'm sure there's some Canadians who would be upset with me saying that.
You know, just from a, a geography perspective Right. It's, it's not an easy thing to overcome. Yeah. Things you sort of, And Australia Yeah. Australia having a similar problem, right? Just, it's a massive geography where, you know, you've got your, your kind of east coast, right? Cities that are closer together, but then you go to Perth and all that sort of stuff, right? Like that's a long flight. That's not, it's not an easy transport for shipping product.
Yeah, it's not a, it's not a quick transport and in some respects, our testing has been, it's almost quicker to ship from the UK to one side of Australia and to the other side of Australia than it is to get a parcel from one side of Australia to the other side of Australia, if that makes sense.. Uh, and you're just like, I, I'm not even quite sure how that works, but, um, I think it'll change, I think it would evolve and, and sort of, uh, develop.
So you've been working alongside, um, e-commerce businesses, uh, more hands on, I guess for the last couple years with the, with the financing. What's a typical size business that you work with?
Our, our average customer probably ranges somewhere from 500,000 to about two 2 million in revenue. Um, running a kind of 10 to 20%, um, profit margin.
Mm-hmm. and so, and is this, uh, sort of that size business, are they pretty much all online or are they trying to do the omnichannel thing?
You know, we, we have a number of, um, I'd say we're dominant on online only. Mm-hmm. . But we do have a lot of customers who might have a boutique, right. Where mm-hmm. , um, in their local community, right? They're on Main Street, whatnot, and they're selling there. But that, um, You know, maybe Covid or maybe even before Covid, they saw the opportunity to also be online and, and that boutique has become almost, you know, a, a retail shipping point, right?
Um, so if you're, if you're a true online only, right? You probably have a small warehouse on the outskirts of town, uh, in the suburbs, right in, in here, Austin, for instance, where, you know, space is cheap and you can put up some shelves and, and you. Five or 10,000 square feet, um, not have much in the way of rent. And that's where you're gonna process all the orders that coming online until you're ready to go, you know, hand it off to an outsourced provider. Mm-hmm.
. But if you're a retail boutique, right? It has customers coming in and out off the street, Right. Who are buying there, well then you're still gonna have inventory there. That's an opportunity then to take orders from customers from around the world. Right. Um, and certainly the covid experience here in the States drove a whole lot more adoption to that, right?
Yeah. There were a lot of Main Street retailers who, because people weren't leaving the house, put up a quick website and said, Great, if you know you want, whatever it is I sell, here it is, and we can still deliver it to you. Um, and so that drove, you know, more of that adoption.
Yeah, I remember, um, I, I can't remember what the site I, the, the site's totally gone outta my head, but I remember I, a friend's advisor in Dallas, I wanted to buy them a present, and I came across a website. I genuinely, no idea how I came across this website called, I think it was the three Nanas, the three Nans, the three Nanas, the three grandmas, something like that. And they just literally baked cakes, right? That's what they did.
They baked cakes and they would deliver these beautiful, uh, cakes, which started getting some extraordinary reviews online. And um, and when they realized I was ordering from a friend, but I was ordering from the UK, it sparked a whole chain of emails with these beautiful nanas who were just distributing cakes. And I thought, isn't this wonderful that actually I can, I can get an old fashioned pound cake from homemade by Nan herself, you know, and shipped to my friend.
Uh, and I'm having conversations with her, uh, from halfway around the world. I thought it was, I thought it was lovely actually.
It, it is. It's, it's amazing the hobbies that people have and the passions they have that, that, with the internet, right? You have this opportunity to see if you can make that a business, right? Mm-hmm. , look, a lot of them don't work, but the cost of trying is so low that it's, you know, the opportunities are just enormous and you know, a lot of them do. Our lightning in a bottle, right?
And all of a sudden you're like, Hold on, I got a real business here and it's something I love to do and I'm passionate about, and I get share my passion with the world. And, and you know, that what's makes, that makes me super excited about on Ramp, right? How we help people with that passion and we get to help more and more of those business owners, um, you know, continue to pursue the growth that's available to them, um, and, and help them through that process.
So the clients that you've had, the sort of the half millions, 2 million typically, uh, in turnover, what are some of the things that you've noticed in those businesses? Some of the common successful traits? If, if I can put it that way,
I think, uh, I won't put these in any order. Uh, one, they're really good at using technology, right? Mm-hmm. , So there, there, there are tools at their disposal that they're taking advantage of. So if they're, if they do their own fulfillment right, they're gonna use a product like a Shipping Easy or a ship station, um, to make sure that, Right. That they're just processing things quickly and efficiently. Yeah. Um, and they're letting those tools guide them in how they do things.
So they're not spending time making decisions. They're, they're using the rules and setting the rules up ahead of time so that decisions are made quickly and you can spend as little time as possible in each of those tasks. Yeah. Um, because the most, most important use of their time right, is really, I'd say merchandising. Pricing, um, you know, and, and marketing, right? Driving the next sale. Mm-hmm. , um, and then followed quickly behind that would be really owning their supply chain, right?
Knowing, you know, how do they ring every cost out of that so that running efficiently so they can maximize margin, um, and that they're then maximizing demand, um, at the same time. Um, And then I think the other thing that really makes for a, a strong, small business is an, is sufficient financial acumen. Um, which by the way, financial acumen changes as your business gets bigger, right? There are different demands, um, where you can really leverage the different capital sources out there.
On RAMP is, is but one small piece in the overall capital stack. And so there are a lot of different financial tools and, and using them correctly, um, is an incredibly powerful thing. It provides massive leverage using them incorrectly, um, can actually really, you know, bottle up your business. Yeah. Um, and, and you talked earlier right about. You expected kind of 10 to $15,000 a month in sales and all of a sudden you're hitting 400,000.
Um, rapid growth, um, is actually some one of those things that actually puts a lot of people outta business. Mm-hmm. , um, because they don't know how to scale for it, and they. The capital allocation gets a little outta whack. Um, and all of a sudden that causes problems and bottlenecks that then stop sales. And now you've allocated a whole bunch of money for inventory, but you're not pushing it through. And, and now you're oversupplied on inventory, right? Mm-hmm.
. So, um, It, it's, it's not an easy thing to grow, right? It's a better problem to have than not having growth Right? It's, it's better solve Right. , but, um, it, it's, it's, it doesn't come without a cost. Right? And that cost is, you know, you have to be very, very focused and diligent on, on owning every step of that process. Or you'll get in trouble.
Um, and so we spend a lot of time trying to help merchants with that and, and trying to be thought leaders with them and, and, you know, we talk to our customers. We, we learned over the last 10 years that, um, what's really kind of unfortunate about the e-commerce industry for the SMB is so many of the software products, um, are built and deployed for SMBs, but they don't treat the SMB business owner as if they're a CEO. They treat them as if they're more of a consumer on steroids, if you will.
Yeah. And what we try to do is teach our, is treat our clients as if, if they were the CEO of a hundred million dollar business, um, Because we found a way to do that very, very efficiently. Um, but that engenders an incredible amount of loyalty. It teaches us a lot, and it lets us be far more helpful than just saying, Here's some money. Um, and, and that's our goal, right? We wanna see these business owners, you know, become more sustainable. Uh, we wanna help with their growth.
Um, and it's not our concern if. If they decide, Hey, half a million dollars a year is all I need, that's all I want. I don't wanna do more than this. I don't, I don't live to work. I'm working to live. Mm-hmm. . Other people might say, No, it's 2 million or 10. And there's also a point where our clients graduate from us, where they've reached enough scale that there's actually more cost effective, um, solutions from banks and whatnot.
And they're big enough, they have enough financial history that the banks can work with them. Um, yeah. And then what we do is we help them transition there, right? We help them package up all the, the information that we have about them in a way that then is very easy to hand over, uh, so that they can take that next step in their evolutionary journey.
And, and, um, you know, we're, we're excited to see that they've, they've reached that kind of next stage of, of business success where they don't need this anymore.
It's interesting you talk about how you deal with your customers and how you treat them like CEOs rather than consumers on steroids. I like that phrase, by the way. I'm, I may, well, I may well steal that, Eric, Uh, please. But, but it's, um, it's one of those where actually that, that's just a golden rule of business, isn't it? Treat the customer how you would want to be treated in that same situation.
And, and this is where I see a lot of e-commerce businesses fail, uh, is they treat their customers in a, just like, they're another number, you know, like in a database mm-hmm. , um, rather than actual a, a real person at the end of the, at the end of the line there. And I mean, you talked about how the, how you have done that is, has created loyalty from your customers. Um, it works the same way in e-commerce as well. I dunno if you've seen that. Mm-hmm. , But I just wanted to draw that out.
. Eric Youngstrom: Yeah. That I gave that example earlier, right? Of the shipping software, helping you determine how to ship the next product. But then, you know, you can set up rules to say, Hey, if I spot a top 10 customer, always do overnight shipping. Mm-hmm. , right? Because that's going, it spoils them. Right. Um, in a positive way. Right. You're, you're showing them that you really have, um, that you recognize who they are in your business.
And even though they didn't pay for shipping, you made sure they got it really quick. Pardon me? Um, so. You know, they're gonna come back again, right? Mm-hmm. and they're gonna actually come in and say, Man, these guys, you know, they take care of me. Best customer service ever. The reviews then start to flow that word of mouth, right? Which is so important to building your brand. Mm-hmm.
. Um, and, and we just believe the same thing here, that the more we can talk to the customers and really help them, you know, help understand what their needs are, um, the better a partner we can be to them. Yeah, absolutely. Absolutely. So you've talked about, um, how leveraging, um, technology is an important aspect of being successful online.
You talked about financial acumen and the constant development of that actually being, uh, a, a good reason for being well, a, a reason for being successful online and understanding the finances, which I totally agree. You know, Cash is King at the end of the day, isn't it? Yep. Um, what else have you seen, uh, with your clients over the last few years? The ones that are making it, the ones that are pushing through? What are, what are some of the other ideas?
That you sort of gleaned from them, uh, about successful e-commerce?
One of the things that we've seen, and this will be very specific to the current economic environment, right? With with inflation here in the States. I'm assuming that I actually haven't tracked kinda what inflation's doing in the UK, but I'm assuming it probably Right, Right.
Yeah. Um, so one of the things we've seen our business clients doing is, um, In leveraging promotions, coupons, and discounts, um, to increase the price of the product, to reflect what inflation's doing to their cost to get sold right and to their cost of inventory and whatnot. Um, and then using a coupon to allow the kind of finish price to be what they would've paid, say a year ago before inflation really kicked off.
Um, especially coming the holiday season, you don't wanna go too crazy raising prices, right? Cuz you're still trying to get volume through and you have inventory you need to move. Um, and your, some of your inventory costs, right? Might be a little bit older because it's, it's been sitting in that warehouse since, you know, before prices got maybe pushed up on you. But what that's allowing them to do forward looking is next year then start reducing the discounts.
But now I'm, instead of that product being $20, I've become psychologically used to that product being 25 mm-hmm. And while I was getting a coupon that was $5 off and I was still paying 20 when that kind of goes away. Okay, great. What's, you know, it'll feel like it's always been 25. So it lessens the, the shock, the sticker shock. Right. When the price goes up very, very quickly. Um, so I think that's been a, a very clever thing that we've seen.
Some of our more sophisticated users doing, they're leveraging, you know, pricing software to do that Right. And coupon software to do that within Amazon, within their own sites. Yeah. Um, because sooner or later they're, they're not gonna have a choice but to raise those prices. Yeah. And sometimes, yeah. You know, how you do that is really critical right now. You, you can't also wait and then say, Hey look, we, we got to inform you.
And there's other ways to do that in kind of just one fell swoop. , but I think it's a really interesting playwright to bring the retail buyer on that price increased journey while still rewarding them with discounts and coupons and promotions, um, and letting them keep that old price for a while before they then have to move into the new price. Um, and so I think that's a, a really clever thing that we're seeing people do. Um, that makes just a ton of sense, right.
It, it acknowledges human psychology, um, and behavioral patterns. Um, it's rewarding customers for continuing to work with you, um, but giving them a chance to get ready for, you know, the unfortunate reality of things are just gonna cost more. Um, that's, that's what inflation does, unfortunately.
Yeah, that's a really, that's a really clever idea and it's a good way I like it. Of, um, because let's face it, we're all gonna have to put our prices up over the next few months, uh, because inflation is affecting everybody. We, uh, we were having a conversation yesterday, one of our online businesses, the raw material costs for one of our best selling products has gone up by 40%. 40%. Ouch. And you're like, that is gonna sting everybody. Uh, yep. And so, um, will it go up anymore?
I don't know. We've bought enough stock, like we're eight. We, the way it works is we always place orders like 18 months in advance. And so I know for the next 18 months what my price is gonna be, but I know in 18 months time it's gone up. Uh, Right. It's never gonna come down. Right. So you have to mitigate that and think about that.
And I think that's something that we're all gonna experience, uh, in e-commerce and, and dealing with that and bringing those price increases to customers, I think is gonna become a bigger and bigger issue. So, uh, I, I like your idea.
Yeah. No, it's interesting, right? If, if, I guess there's kind of two follow on points. One, you know, lumber for building mm-hmm. , which doesn't really have anything to do with my e-commerce world, but it's just one of those things I was kind of paying attention to. Um, you know, I, I can't remember the, the unit of measure, I don't know, a hundred board feet or whatever it was, $400 before covid. It spiked to $1,600. It's now backed down to 500. So it's increased over 400. Right.
But it's not how it just went so crazy. Right? It's come back down to something else and I don't know if it'll continue to fall or if that's just, its inflation adjusted new price. Mm-hmm. . Um, and so, you know, there are periods like that where you're gonna see just wild swings, but things will stay, you know, kind of settle into a new normal. And then the other thing of this, I think is. You know, inflation's got a little while left to run yet. Um mm-hmm.
, I was at a conference the other day where, um, an economist Don Luskin was talking about, um, you know, his kind of forecast is, it's probably got 13 months left in the, you know, the, the what? A core adjusted at kind of 6%. Mm-hmm. , um, And then, you know, 13 months from now, because we've stopped injecting all this money in the money supply, we should see inflation back down to the sub 2% level, which is where the world wants it to be.
Yeah. Um, and so I think if, you know, it gives me hope, right? I hope he's right cuz I can power through most anything for 13 months. Um, so, um, it would be great if, if that's where things end up, um, you know, sooner it'd be better too. Right. But,
But you have to be realistic, don't you? And you, you know, this, this inflation wasn't created overnight. It was right. You know, the supply chain issues that we're facing now weren't created overnight. I mean, the, the result of, you know, several years of lockdown and pandemic, it's gonna take a little while to figure it all back out and, and get the balance again, isn't it? And so, . Um, you're right.
I think, I mean, I don't, I'm not an economist, but I, I would say probably 12 to 18 months feels about right. And you, you, you see these sort of things come in cycles, don't you? And so the next big thing, um, I know you've had it in the states already, but the, the interest rates going up and affecting mortgage buyers.
Um, which will affect property prices, which will affect, you know, amount of money I have left in my pocket, disposable income because I'm, my mortgage is now, you know, 40% more than what it was. All of these things are starting to sort of come our way, which we have to think about. Um, do the interest rate changes affect you and your business in terms of how you finance with your clients?
They do. They do. Um, you know, we have to borrow to then loan to our clients and, you know, the Fed fund rate right as it's gone up, um, increases our borrowing costs. Um, we've been fortunate that we've had a little bit of room to kind of cushion some of that blow. Mm-hmm. , um, But we still do have to, to adjust to reflect that. Um, and, you know, we have to pass that on to the customer. But this is where one of the try to do is help them work with us in a very, very disciplined way.
Um, because if you take capital, let's say for just driving demand, right? Mm-hmm. putting it into Google Ads, If you pay that back over four to six weeks, the cost is far lower because four to six weeks later you can come get more. Versus you come to me and say, Hey, I want, I want four months worth of advertising capital. Well that's gonna take four months to pay back. And so that cost has to be higher. Mm-hmm. , Um, just the time value of interest. Right. How that turns over in compounds.
Um, and so one of the things we try to help our merchants do is recommend because we're on demand capital and they can pick up the phone and call and get more, Don't take four months worth of, of dollars. Mm-hmm. that you're not ready to spend quickly. Right. Come back in a month or two months and get the next batch of it. Um, and then pay that very, very quickly. And then we can drastically reduce the fee because now we don't have, um, as much time value. Tied up in that capital.
And so the discipline of how you use money is, is just such a critical piece, right? And, and it's, you know, a dollar is a dollar, but it actually is different based on who you get it from, right? That same dollar, like, you know, if I was Toyota giving you a dollar to go buy a truck, to run your business for that on a five year lease, right? Or five year loan.
I have a different set of expectations around how that's used and utilized in the collateral that backs it versus, you know, Hey, I'm, I'm paying for this advertising. The collateral is the inventory, the advertising itself, right? Once it's been spent, it doesn't, you don't get another go at it, right? Unless you have another dollar for it. But then that dollar's expected back in a, at a different pace.
Um, but then we can optimize the pricing around that so that it's much fairer for the merchant and, and works for them. That kinda gets back to that financial acumen piece I, I spoke about earlier, right. That mm-hmm. , you know, leveraging different, you know, where you get the dollar from for how it's optimized is actually gonna give you the most leverage possible versus misallocate funds.
So if someone's listening to the show and they, um, Uh, wanna work with you guys or wanna at least have a conversation or sort of think about what, this sounds interesting, you know, the sort of the capitalization and the, the, the funding of that. What are some of the things that they should think about? What are some of the things that they should have in place, um, for this to work for them?
One, really critical to have your accounting in place. Um, not that you should be spending a ton of time in accounting, but you should invest some early time in just setting up your chart of accounts and your books. Um, you know, We use QuickBooks online. I found out to be very, very powerful. I know it's not quite yet optimized for product sales people. Mm-hmm. versus, you know, people, services businesses, if you will.
Um, but I know they made a ton of investment there to, to really streamline that. Um, But really getting that dialed in because when you do that and then you use a bank, right, that can connect and so that transactional details can flow in and your credit cards can flow in the rules that that has, right? Just like I talked about the shipping engine rules, right around how to ship the next order.
The accounting platforms do that, where if you invest the time early, You can then quickly just go in, approve transactions. They're already allocated to the, the right buckets. Um, and then that lets you really understand the financial position of your business. Um, reduces the cost of accounting because now you're not paying an accountant to go through a box of receipts. Right.
Um, and really just gives you the insight rent then to think about, you know, how much capital do I need to drive demand for the next 30 days? Mm-hmm. . and how much capital did I use last year and, and how much did I use in August, say, versus November, right, with the Christmas season.
Um, and then that lets me then think about, okay, great, I'm gonna need, you know, that extra 40% lift over August in November, but this August was twice last August, which means that 40% is a bigger number now. Mm-hmm.
. Um, and so it that allows you to, you know, gives you a little bit of a crystal ball into the next kind of 30 to 90 days, if you will, um, to really, um, You know, smart about the capital needs of the business, about the demand of the business you can experience, um, you know, to make some hedges on that as well. Mm-hmm. , um, helps you then understand your supply chain, right? And, and how efficient that is. Um, and so,you know, e-commerce is a game that.
Rewards or a business rather that rewards, um, discipline. Mm-hmm. and, um, ringing costs out and efficiency. And so when you, when you can dial that in, right? I think you've got a, a huge lever up versus the competition.
That's really in, I, I love that statement that e-commerce is a business that rewards discipline and. And I, and you are not the first guest to ever be on the e-commerce podcast to go. You really need to make sure your accounting is in order. Um, we've had a couple of guests on the show talking about, you know, if you want to sell the business, if you want to exit, the first thing they talk about is the accounts. Right?
You've gotta, And so this discipline of doing accounting and doing it well from day one, seems like a bit of a no-brainer to me. Um, and, and getting that right. It, and like you say, it doesn't have to be difficult. It doesn't have to be involved, but it, the, the, you can make it right. And there is software out there like QuickBooks, you mentioned like zero, like Sage and you know, all these different platforms that you can use.
Um, and just keeping on top of that I think is, is absolutely critical and I, I'm always amazed how many sort of smaller businesses just don't know, you know, the fundamentals of their finances.
It, it's a, it's a massive risk that, you know. Too many small business owners take, right? Not spending the time. And by the way, your first few months, you will spend in an inordinate amount of time with it. But if you actually make that early investment longer term, you should be able to do your accounting in kind of three hours a month. Mm-hmm. , Um, you'll probably log into your QuickBooks or your Sage, right? Um, once a week to just approve the transactions.
And if you've set the rules upright, it's really easy to see, hey, this a rule has been applied, approve those, the ones that don't have rules. Look at each, create the rule, get it done. Um, and then at the end of the month, right, you're gonna spend, you know, kinda that two, two or three hours time with it, just reviewing everything, understanding how the, how the month ended, um, but it becomes a much easier task, right? It's, I mean, it's so true of almost anything, right?
If you invest the time up front to set the tools up correctly and the automation's up, then long term, you're gonna spend a lot less time with it and have a lot more knowledge from it. But there's no doubt in that early stage, right? It's also nobody likes accounting. Right. Um, nobody, nobody likes accounting. I don't blame 'em. Right. I don't like accounting and I'm in the finance world..
Yeah. Um, I'm with you. I did, um, uh, not many people know this, but my degree at university was in accounting, finance, and law, and I did, uh, three years at uni in accounting and I, at the end of three years, I went, I never want to be an accountant. That was the, that was the sum total of what I learned at University ladies and gentlemen.
Uh, but no, I mean, you know, what it did was it gave me an appreciation for figures and balance sheets and to understand how the finances work and super, super valuable, right? So yeah, I totally agree. Invest the time early to get the accounting done right. People don't do it cause it's just not sexy, you know? Whereas figuring out marketing, you kind of go, Well that's sexy, isn't it? But accounting, yeah. It's not really that sexy,
But. But I will say if you invest that time in the accounting early, right, and then your supply chain early, you'll have a lot more time to spend on the marketing and the promotions and you know, how do you tweak pricing to, you know, mm-hmm. Optimize, right? And hey, if I did find a way to reduce my cost to get sold, do I want to? Capture that margin, or can I get more dollars through the business by reducing the price and, and, you know, leveraging the elasticity of demand on that price.
Right. Um, and you know, my degree was in economics and an undergrad, by the way, so it's actually applicable to what I'm doing here. um, yeah, that was a long time ago, but, um, but yeah, no, I mean, The best thing that a business owner can do, right, is, is minimize the time on all that back office stuff. Mm-hmm. , but that, you know, that takes an early investment.
But once that investment has been laid down, right, you have that foundation laid and now you can go spend the time on the most value added activities there are, which are driving demand, Um, yeah, marketing, promotions, pricing, right? All those different things that are going to allow that business to grow. And it's just a lot more fun to spend time on that.
Yeah, absolutely. Well, Eric, thank you so much for all of this. Um, as you know, right, this show is sponsored by the e-commerce cohort. I mentioned this at the top of the show, which is all about coaching and peer mentoring and developing and e-commerce, so you can deliver e-commerce wow. So I want you to imagine, right, Eric. You're stood in, in a room full of, uh, the guys and gals who are cohort members. You've just delivered your keynote speech.
Uh, from the stage, the audience is going wild. Cheers. Wow. Wow. Um, you come on, you take a bow and, um, after, you know, after this sort of this conversation, uh, you get a minute to sort of thank those folks that have had a big impact on your life. You know, family, mentors, authors, software, podcasts, whatever it is. I'm really curious, who do you thank and why?
Um, well certainly my parents for just in instilling in me a, you know, a desire to be an entrepreneur.
Were they entrepreneurs themselves?
Uh, no. They, well, My dad was a doctor in the old school vein of you ran your own practice. Okay. Which has kind of gone away with, you know, insurance and whatnot. Um, but he, that's what he, he that's the part of being a doctor that you like the most. Um, I. Then, um, you know, I, I thank my wife right, for just, you know, always being there for me and such a, such a supporter of the, of everything we're doing right. And, you know, she's a trooper cuz startups aren't easy.
And this is my fourth, um. So, she keeps tolerating it. Um, and then, you know, from a, from a business perspective, um, you know, the CEOs I've worked with in the past, right? You know, taught me so much and mm. You know, I, I've kind of viewed my experience in, in, you know, I never founded a business before this.
I was, I was kind of an very early employee, but I viewed that as a kind of an apprenticeship path to go learn how to one day really be the founder and, and start a business and, and whatnot. And it's a different experience when you are the founder versus the guy sitting next to the founder. Mm-hmm. . Um, but I, I couldn't thank all those people enough for all they've done. Most especially Katie May, who is our CEO at Shipping Easy.
And, um, she sits on the board of On Ramp and has been a fantastic mentor to me and the team. And, um, yeah. So yeah, Katie, Erica, my wife, and, and my parents.
Fantastic. I'm, I'm with you. I kind of, when I started out my career, I, I knew I wanted to be an entrepreneur, but I also knew I didn't have a clue. Right. And I probably still don't to be fairo, but, um, I, I sat under the expert tutelage. I, I, I went and found, I say went and found, there was a guy who offered me a job from my church who was really nice guy, and I thought, You know what, he's an, he's an, he's an entrepreneur.
I want to be an entrepreneur to go sit under him for a few years and just watch how he does things. I'm in my early twenties. I didn't have kids, I just got married. It made all the sense in the world to me, you know, And, um, still some of my favorite years, still some of my favorite times. And so, um, I, I'm a big fan of this sort of going and sitting. Uh, sitting under people like that. Eric listen, uh, thank you so much. Um, brilliant conversation about creating value in e-commerce.
How do people reach you? Um, how do people get hold of you if they want to, if they wanna reach out?
Sure. We're, uh, onrampfunds.com. Um, you can find us in the web and then all your favorite social channels. Twitter, on, um, LinkedIn, Instagram, TikTok, look up, look up on ramp funds. You'll fight us on all those places. And then if you have questions, um, our phone number is on every page of our, our website and app. Um, you're, you can schedule time with us. We're happy to talk to you and, and just help, help you run your business.
Fantastic. And we will of course link to Eric and all the on-ramp stuff in the transcript and show notes, which you can get for free at ecommercepodcast.net. Eric, listen, huge, huge thanks. Great to meet you. Great to talk to you from the other side of the world in, uh, Austin, Texas there, and to shoot the breeze a little bit about e-commerce. I really enjoyed it. I, I appreciate you being here.
Thank you so much for having me. It was a great, great conversation. I really enjoyed it too.
Ah, you're a legend. Thank you, sir. Thank you. So there you have it. Another great conversation with, uh, my now good friend Eric, uh, about e-commerce. Thank you so much for joining us today. Uh, don't forget, big shout out to the show sponsor, e-commerce cohort. Do head over to ecommercecohort.com for more information about this new type of e-commerce community that you can join.
Now, be sure to follow the e-commerce podcast wherever you get your podcast from because as always, we have some more great conversations lined up, and I don't want you to miss any of them. And in case no one's told you yet today, you dear listener, dear viewer, are absolutely awesome. Yes you are. It's just a burden you've gotta bear. I've got bear it, Eric definitely has to bear it. We've all gotta bear this burden of being awesome just the way we've been made. Really.
Uh, the eCommerce podcast is produced by Aurion Media. You can find our entire archive of episodes on your favorite podcast app. The team that makes this show possible is Sadaf Beynon, Josh Catchpole, Estella Robin and Tim Johnson. Our theme song has been written by Josh Edmundson. And my good self. And as mentioned, if you'd like to read the transcript or show notes, head over to ecommercepodcast.net where you can also coincidentally sign up to the newsletter. So that's it for me.
That's it from Eric. Thank you for joining us. It's been an absolute blast. Have a fantastic week. I will see you, uh, next time. So bye for now.