Ordering too much inventory was one of the biggest mistakes that I ever made. In fact, I owe over 350, 000 on that mistake, and I'm still paying it off. Here's what happened. I made a series of mistakes all in a row, and they all compounded. First was I was naive, and I thought that I'd be able to sell through everything. Second, I didn't do good product research. I didn't talk to my customers.
I didn't make sure that these new products were things that were actually desirable and were actually wanted. Second, I didn't prove out the concept and the design and do testing. I just went with my gut and purchased. Fourth, I just bought way too much. I just bought way too much. I should have been buying in amounts of like 500 units, but I bought in amounts of 5, 000 units, so my mistakes were compounded. And lastly, I didn't have a good plan. I tried to take on too much.
You see, I was riding the high from 2020, like everything was going really well. And, in 2021, things were still going great in e commerce. And towards the end of that year, I was like, okay, we're at about 2 million in revenue. The next step for us is to release more products. Right. More products to our existing customer base and grow. So I had come up with five different, pre weeded, pre cut stencils, sanding kits, wood slices, different variations of our marker.
and I even had, a bunch of like heat guns and, all kinds of stuff. I thought I was doing my research properly and I was planning out how much inventory we needed to order. I talked to four different people about it, showed them the spreadsheets. We went through it. How much do I need to order? What am I going to need? What's it going to cost to move all the inventory, et cetera. But it just didn't sell and it didn't sell because it wasn't good products. And that's probably the biggest factor.
They just weren't good products. I didn't put the time and energy and effort that I needed to put in to make them great. I half assed it. You know, and at the time I didn't think I was half assing it, but looking back in hindsight, I'm like, Oh, the amount of effort that it takes to make a great product is so much more than what I put in. I'm learning this having, you know, worked on the same formula for six years now. That's the Scorchmarker formula.
Not to mention, the economy started to turn, the money dried up, it got, more expensive, and there was less cash out there. Less people were buying stuff. People were starting to tighten up. And so now I'm sitting here with, you know, 350, 000 worth of inventory that I can't convert back into cash. I can't reinvest into other products. I can't sell because it costs money to move it and sell it. And like, I just stuck, stuck.
And that was the beginning of when everything started to turn and get really hard. And it's entirely my fault. So, I think about what I've done with, uh, ordering too much inventory, and there, I'm looking at it like a very expensive lesson, right? Like that 350, 000 that I wasted, that I owed, that I still have to pay back, that's like my version of a student loan.
I know doctors and other people who have gone to school, they haven't used their degrees, whatever, you know, they've got, you know, one to two to three hundred thousand dollars in debt. They got the knowledge, though. And that's what I got. I got the knowledge. I learned some very valuable lessons about inventory, products, planning, supply chain, and customer behavior.
So let's talk about those a little bit more in detail real quick so you can get the full scope of what I learned and hopefully won't have to make the same mistakes because ordering too much inventory is like that was the second time that I did that and now it's like really finally sank in and you know and I get to work with people that sell products too like there's people in our membership community the accelerator and we had a guy the other day that was talking about
how he was going to order 10, 000 units. Um, for his first order, because he gets a slight price break and I was just like, that's a lot of units. first of all, how much is it going to cost you to move that much inventory? Because there's a marketing cost. People aren't just going to buy from you just because you have the inventory. It doesn't work that way. There's a cost to acquire a customer.
And if you don't have the cash to acquire that customer and move that inventory, whoo, it's going to be real tough. And so, I'm, I'm thinking about this guy and how he wants to order 10, 000 units of an unproven product. And there's no sales. There's been no testing, really. Like, sure, testing amongst people and friends and family and, a random handful of people. But there hasn't been extensive testing. There hasn't, it hasn't sold out.
There isn't a machine that's working that we're going to add more inventory into. And that's like the first big thing.
If your machine isn't up and running, if you don't have a cash conversion cycle, if you don't have an inventory turnover ratio, which is the amount of time that it takes you to get your money back after you've paid, or the amount of time that it takes you to get the money back or sell through all the inventory that after you've received it, those are your, um, cash conversion and inventory turnover ratios. If you don't have those, then ordering more than 250 to 500 units is a bad idea.
It's a bad idea because you don't have a method of moving the inventory. So that's got to be the first thing that's got to be in place. You have to have a machine that's up and running customers that are ready to buy and a way to sell the products, whether it's an Amazon store or Shopify store or relationship with a retailer or, at a craft fair, Or a farmer's market, you need a way to sell the products. So if you have a way to sell the products, then you can get inventory.
But if you don't, like we need to walk this back and start with a real small amount and do some testing. We're talking like 10, 20, 30, maybe 50 or 100 units max. We just need to validate the concept. We need to prove it out before we order too much. And that leads me to my next point is the price breaks when you know, it's, it's very alluring to get a price break by ordering more. But if you can't sell through the inventory, the price break doesn't matter.
It doesn't matter because you're just going to be sitting on that inventory anyway. Your profits don't matter if you can't sell through the product. Plus. When you order a hundred units versus 10, 000, you're able to iterate more quickly. You're able to take feedback from customers, the one star reviews, the two stars, the five stars, and you're able to adapt and change your product more rapidly. You can get more iterations in and you can improve more quickly. Think about it.
You sell through a hundred units, go to the manufacturer. Hey, that was great. I need another 200. I need 250 units this time, but please change this little thing, you know, round this corner or, you know, like a change this on the packaging. You can do that every single manufacturing run with smaller units. But if you're stuck with 10, 000 and there's a defect, you're fucked. You're fucked. There's nothing you can do. I have made this mistake, mind you. Many times.
Not just with that 350, 000, uh, boo boo, but there's been times where I've had to put 30, scorch markers in a landfill. Just evaporated. Just money's gone. Because I made manufacturing mistakes. And because I ordered so many units, I didn't catch it in time, and I'm stuck with all this broken, bad inventory. so Iteration and making changes to the products to make them better is one of the huge pros of not ordering too much.
Next, it's always better to sell out than it is to have to run sales and discounts. And let me explain. When you sell out of a product that you've launched, you build hype. You can leverage that. It's, it's clout. We sold out in two days! Dude, that's telling people something. You know, even if it was just a hundred units, you still sold out. There's still, people bought all of them. Which is better than people buying some of them. I think you know what I'm talking about.
You know, people leverage the whole sold out thing all the time, as do I. I think it's important. And if you really think about it, like, what's the con of selling out? Like, Oh, you, you don't make as much money because you don't have as much to sell through. But if you order appropriately at the right time and you properly plan out your inventory orders, you could only be sold out for like a week and it'd be fine. It'd be fine. Now I get it.
In some cases, it's not a good idea to sell out, especially on things like Amazon, because the amount of time that it takes to get back in stock and all these stuff. Yes, I get that. But, you know, that really only is a factor when we're doing high six to low seven figures. Otherwise, it just doesn't matter that much. I mean, when we sell out, I post about on social media. I send emails about it. I put it on our website. I talk about it. It becomes legitimately a selling point.
If you look at scorchmarker. com right now, you'll see that scorch paint is most likely sold out and we have it displayed there. And that's because it sold out in like maybe five days, but we only made about a thousand units. It all sold out. And now people are chomping at the bit waiting to get more. And so the next time I send an email, about it. Hey, we're back in stock. Customers will buy because of the clout, the hype and the scarcity. I don't have to pay to acquire those customers.
I don't have to advertise to get them. Customer acquisition cost is a big deal for us. It's like 20, 25%. And that's a lot of money. And if I don't have to spend that my, it adds directly to the bottom line. Okay. So . It's more work, but it's so much more efficient to order less inventory. Also, if you order less inventory, you'll have more regular communication with your manufacturer, which is a good thing, and they'll be able to learn and adapt and grow with you. And then, uh, lastly.
When you don't order too much, you don't have to pay to store anything. I don't know if you know this, but Amazon charges insane fees for storage. They charge you if you have too little product in their warehouses. They charge you if you have too much product in your warehouse. If you're going to take 10, 000 units and put them in a warehouse somewhere, you've got to pay for it. You've got to pay someone to store it for you.
And that's too many units to keep at your house, you won't even be able to keep all that in your garage. So you think about the cost associated with storing that much inventory and the pros definitely don't outweigh the cons. That price break is not going to offset your storage fees. It's not.
And it's just going to hamstring you, and you're going to be sitting with a bunch of dead inventory, and as you get one star reviews and complaints, and you're like, oh shit, I gotta fix this product, but you can't because you have 10, 000 of them, you're fucked. Yeah, it sucks. Ask me how I know. I've got like 10, 000 vape cases sitting under my house that I just haven't had the heart to take to the dump yet. I did the exact same thing. Really excited about a new business. Didn't validate it.
Didn't test it. Didn't even know I wasn't allowed to sell like vaping accessories on, on the internet easily or advertise about it. But I ordered 10, 000 and I packed them all and I got them all put in boxes and I, I kitted everything and I got it all done and I spent thousands of dollars on this and I can't sell them. And it was all because I was trying to get a price break. It sucks, man. It sucks. Made zero dollars. Just lost a ton of money.
Not to mention all the mistakes I've made with Scorch. You see, Scorch has launched probably like 20 products now and only 3 or 4 of them are good sellers. The rest have been total failures. Well, not total, but just mostly failures. and it's taken all of those reps and all of those failures to learn these expensive lessons that I'm talking about now. I wouldn't have known. I didn't know, obviously.
Otherwise, I wouldn't have made these mistakes, but I just didn't know until I had gone through it, experienced it, and learned the painful lesson. So, yeah, I've got to figure out how to continue to turn profits and put money away to pay this back. Uh, luckily it's private money. And the people that I borrowed it from are really nice and they're very kind and patient with me. But if this was a bridge loan or a short term loan or short term debt, I'd be fucked.
There was a point where there was so much debt. In Scorch, so much short term debt, meaning credit cards, bridge loans, that the interest on the credit cards was outpacing the profit on the business. I mean, the business wasn't making more than 10, 000 a month in profit, even though we had a top line of like two, 300, And it's because of our debt service and along with, extremely high overhead, which I've since corrected. We'll talk about that.
Another podcast, but the credit card debt was growing at an astronomical rate. Remember it compounds every month and it's about 20 to 25%. And so when you have a hundred thousand dollars in credit card debt, your debt grows by like. 20 grand a month. That's a lot to be stacking on each month onto your debt load and the business didn't have enough profit to pay it back in time. So very quickly the debt was outpacing the profits of the business and I was going to be underwater.
Like I was only going more deeper and deeper underwater with every month that went by. And so I remember that it was a very stressful time. And it was all because of the mistakes that I had made and mainly because I ordered too much inventory, which is just crazy to think. We have very clear budgets now because I don't want to make that mistake again. I don't want to overspend. now, before we go further, just know Scorch is profitable.
We pay down all of the short term debt and I am slowly stacking money and putting it away to pay back this inventory. So what I ended up doing is liquidating personal assets. I sold Bitcoin. crypto and, extra stocks that I had in my brokerage account. and I liquidated that and then I paid off the credit card debt. I had to, I had to own it. It was my mistake. It was my fault. And that's why I had savings and assets put together, uh, for times like this.
And then I refinanced the rest of our debt by getting an SBA loan. Uh, because it's based on top line and not profits, I was able to get a loan for, uh, what was it, 75, SBA at 10 percent interest over 10 years. So I wiped out all of the short term debt, refinanced everything into a long term debt with the SBA. and I was able to stop the bleeding. Then we needed to figure out how to get rid of all this dead inventory.
And so we've been bundling it together with other things, um, other products that we have and creating new offers. And we've been giving it away as mystery gifts. to get emails and customer information and, you know, get them to make a buying decision. I've come to realize that I'm not going to make a profit on this inventory. I'd be lucky if I even broke even. And so that's, now that we have that mindset, I'm like, okay, cool. I I just need to get rid of it. I need to stop paying to store it.
I need to stop dealing with it, thinking about it. And that's how we're solving it. Now, don't get me wrong. I am not out of the woods here yet. I still have have 750, 000 worth of dead inventory in Scorch that I got to get rid of somehow. And we're slowly but surely chunking away at it. But why? Why not just like throw in the towel? Why not just give it all up? Why not just put all the attention and effort somewhere else?
Well, I need the inventory converted back into cash so I can spend it on the products that are actually doing well. The Maker's Magic, the Scorch Markers, the Scorch Paint, the new developments, the new stuff that we've come out with that customers actually really truly like and want. Plus, what am I going to do with all of it? Like, it's sitting in a warehouse. I can at least give it away to customers and sweeten the deal.
and maybe I can bundle it in with some things and, and make the offers a little bit better or put together, you know, a kit, which is what we've been doing and what we've been focusing on. It just has taken a while. It's, it's slow moving because we ordered too much. So if I go back in time, I would literally grab myself and be like, Listen, motherfucker, don't order too much inventory. You're not that big of a business. You don't know what you're doing yet. Like, frickin don't do it.
Pay attention. Like, dude, just go with your gut. Like, this is not a good idea. I would literally be shaking myself, telling me not to do it, because it caused a lot of problems. Granted, I needed to learn these lessons. This is part of business. This is part of the education that happens when you are growing a business, especially in e commerce. And so. I really am looking at it as like an expensive education, like a degree. I had to pay for this. One of the other big lessons was with people.
Over hiring. Not managing properly. Not hiring the right people. Spending too much on operating expenses. Having my budget all out of whack. Ugh. It was awful. We're going to talk about that in another podcast, the budgets and how we break things down. But let me just give you a quick example of what I mean by that.
Out of all the dollars that we make with Scorch, we set a budget and we monitor that budget every month so we can see how much we're spending to see where we've made mistakes or where we've been successful. For example, 15 percent of our budget goes towards shipping and packaging. 20 percent goes towards people, 25 percent goes towards marketing.
You have 5 percent that goes towards profit, you have another 7 percent or I'd say around 10 percent that is miscellaneous, you know, like the legal and the projects and research and development and all that stuff. So I'll break down the budget more in detail in another podcast when I have it all pulled up in front of me so I can be accurate and I can show you data and information, but that was another thing that needed to happen. I needed to get good with money and managing money.
I really believe that if you can't manage a hundred dollars, you can't manage a thousand. And if you can't manage a thousand, you can't manage a million. And I needed to learn the different levels of money management at each step to get good, to be able to do this. And the price that I had to pay was a bunch of hard conversations. Seriously, when you think about it, I was having this conversation with someone yesterday or a couple of days ago.
When one door closes, a larger door can open in its place. But the key that opens the lock is a hard conversation. You know you've got to fire Susie, because she's just not a good fit. And you know that as soon as she's gone, morale will improve and you'll be able to replace them with a better person or save them money, and the business will be even better. But that hard conversation is what most people aren't willing to have most of the time.
We're not going to get the experience if we don't try things, if we don't get out there, if we don't do. And it's the experience that allows us to have more leverage. If we play it safe and conservative all the time, we'll never learn the lessons and we'll never be able to really get good. And I'm sure you've seen it, too. I'm sure you know people whose businesses have been exactly the same for five years. They just do, you know, five grand a month, like, that's it.
And, um, there's lessons that need to be learned and chances that need to be taken and things that need to be experimented with for me, some of the biggest, most painful lessons have to do with people, money, and inventory management. and you know, I can't fault myself too much, you know, I'm not beating myself up about it. It just is what it is. I just got to deal with it. I'm not going to die. It's just money. No one's going to kill me. I still get to come home to my family.
I still get to wake up in the morning and feed my kids breakfast and put them to bed at night. And my wife still loves me. And I still get to hang out with my dog. It's almost like life is going to be okay. It's just money. People have lost way more than me. This is peanuts compared to some people out there. So I say all this because I'm still dealing with the mistakes that I've made. And I will continue to deal with them. And I will eventually fix them.
And the more painful the mistake and the lesson, the more permanent the learning is. Plus it makes for great content, right? Would you care about anything that I had to say if I didn't fuck all this up and made the mistakes and have gone through it? Probably not. If I was just talking about theory by reading out of a textbook, or if I had been someone who has never done this stuff before, you probably wouldn't care. You probably wouldn't listen. I wouldn't.
I take advice from people who have what I want or have done what I want to do. Not the people that haven't. In fact, I steer clear of people that are giving me advice that haven't achieved what I want to achieve or done what I want to do. Cause they don't know. They haven't been through it. They haven't suffered through these mistakes. You know, you ask someone on the street who's never run a business. Like how does it work? Oh yeah.
You would just buy like 10, 000 units and you'd sell through them and it would work and it'd be like. Naive. Naive. So, hopefully, you can learn from Naive Evan, and not have to make the same mistakes. Hopefully, there's something in here that gave you some glimpse of information, knowledge, and or wisdom that will prevent you from making as severe as a mistake that I've made.
Hopefully, it caught you at the right time before you placed your next inventory order so that you can be conservative with it and leverage selling out versus having way too much. Cash is king. It's the lifeblood of our business. And if it's all tied up in inventory, , we don't have any oxygen. The business can't make any decisions, can't do anything. We can't even advertise just know that it's fixable.
When I get home, I will pull up our KPIs and let you know how much money we've made over the last 30 days from retailers, DTC and Amazon. While we're on the subject of money, you've heard me talk about relay before. There are a business banking platform that I actually use. And the reason they are sponsors of the podcast and a lot of my YouTube videos is because I reached out to them. I said, guys, I love using your service. I love your software.
Is there any way that we can collaborate and I can help you spread the word in return? They sponsor my content and I share what I've learned about their service, which is this. It is hands down the best online business banking platform I've used and I've used more than 10. I've used the big ones, the private ones, the credit unions, the weird ones, and out of everything relay does it all. Plus it does extra like profit first accounting and multiple checking accounts for free.
There's all kinds of great stuff that they do that, you know, one or two of the other banks out there will do, but none of them have it all in one place. That's why they're so special. That's why I'm putting my name behind them. That's why I'm allowing them to sponsor our content. That's why I keep talking about them because I struggled with this stuff. So if you don't have a business bank account yet, open one up with relay. It's free and it will only make life easier.
If you already have a business bank account, that's okay. Open up another one. I have multiple business bank accounts. You never know when you're going to get de platformed, shut down. Things aren't going to work or you're going to have issues . By having redundancy, you're building in fail safes and you're going to give yourself more peace of mind. There's an affiliate link in the description. Like I said, it's totally free to get signed up.
All you have to do is fill out the application and within a couple of days you'll be approved and you'll be able to log into their system from anywhere in the world and manage your money. That's right, you don't have to go into any physical location. There's a lot of other perks that you'll learn more about as you start using the software. Just know that it's the banking platform that I use and it's the one that I think everybody should use because they're just the best.
So thanks Relay for sponsoring this content and giving me the opportunity to get the word out. Now that I'm back at my desk, let's talk about money, because at the end of every episode, I want to share with you our numbers. how much we're making from our different sales channels. It's going to be our Amazon sales, our Shopify sales, and our retail sales. And I'm only counting the money once it hits our bank account.
I'll also share the conversion rates with you too, so you can have an idea of where we're at. Now, full transparency, ramping things up again. And so the income is going to be a lot higher than it was during the summertime, our slow season. Let me show you what I mean. In October of 2024, we brought in $43,464 on Amazon. Our conversion rate or unit session percentage was 12.18%.
On Shopify, we brought in $25,690 with a conversion rate of 1.64% . As far as retail goes, None of the checks hit the bank account in October. So we only had $76 in income, which brings our total monthly income for October to $69,230. The next video that I record, I'll record the last 30 days of sales numbers for you. And hopefully they're higher. I'll see you in the next episode.