Nur 7% Marge trotz 3 Millionen Umsatz: Was zuerst reparieren?

0:00Unternehmer/Gast I sell a niche range of baby health products mainly in Australia and New Zealand. We are wholesale to pharmacy and baby stores, also on Amazon Australia and D2C. Last year we did just over 3 million and I'd like to be at 5 million in the next year or two. This is what's stopping me. We are growing our small team to get me out of the weeds and our profit margin is squeezing to you know, 7%.

0:25>> Okay. >> Help. Which one of the Mosey 6 goes first? >> Well, it's it sounds like um it's likely a money issue of some kind, right? >> Being product based. Yeah. >> so how are you currently getting customers? >> Well, depending on the channel, right? So the wholesale is the majority. So so that's recurring revenue. Those those big chain stores, those pharmacies are just ordering every month. That's great.

0:52>> up your margin? >> With them? >> Well, if that's the majority, so what's eating up your margin there? >> Yeah, that's a lot of advertising costs. So obviously you've when you >> them? >> Yeah, to stay in store and and things like that. Yeah, it's probably just uh having to re- really look at our pricing model and saying what what's going to need to squeeze potentially to try and get that bottom line profit up across all the layers of the cake.

1:20>> Mhm. So your So when you get the wholesalers, have they heard of your brand already? >> Yes, very much so. Yeah. So we've worked really hard in the last couple of years to to build a brand in Australia and and put our case forward to these big pharmacy chains and baby chains and say >> content? >> Uh yes, I'd like to think so. Um word of mouth and and demand and people asking for the product in store. And so we finally got in, which is great. So we're about a thousand stockists

1:48>> Uh-huh. >> in Australia and New Zealand. So that part's good and it gives us really good brand leverage because immediately it builds trust if we're in said store, then we must be peddling some really good widgets, which we are. >> So, what are you spending So, where are your advertising dollars going? >> To To across meta mainly, a little bit of TikTok. >> like awareness campaigns or what are you doing? >> A small amount, but conversion campaigns to try and get that D2C direct customer who's paying full tilt retail. Cuz obviously when you sell wholesale, you've halved your price to sell at a wholesale price.

2:22Alex >> what I'm trying to get into. So, if we So, let's just let's separate it. So, we have wholesale and then we have D2C. >> Yeah. >> I said, what is driving down the profitability here? And you said advertising, but that's D2C. >> Yeah, fair enough. >> So, what's driving down the profitability here if that's the primary revenue driver in the business? >> Uh then obviously the layers of the cake, the way we've structured our pricing >> Okay. >> in that yeah. Yeah. >> Okay. So, you have a >> do? Prices up or costs down? >> Yeah.

2:48>> Or a combination of both. >> Love it. Uh >> [laughter] >> solved. >> Come and talk to my factory. >> No, so let's let's walk through this though. So, um you have a waterfall it sounds like, right? In terms of your pricing model, right? So, you say, you know, I'm just making up numbers here, right? But let's say, you know, you order 10 of these and it's, you know, X. If you order, you know, 100 of these, it's X times you know,.9.

3:12Uh you know, you order 1,000 of these and it's X times.8. I'm just making it up. But it is it something like this? >> Yeah, something like that. >> Okay. So, where are are the majority of your customers ordering at one of the tiers versus another? Or is it all over the place? >> Uh this is for our wholesale customers, right? >> that's the majority of the revenue, let's focus in there. >> Yeah, sorry. I misunderstood you there. I thought that was more at our factory level if we order a certain amount of stock. >> Raw materials. >> Yeah, sorry. >> Okay.

3:38>> Um so, we pretty much have a a set price for our wholesalers, actually. So, it's not re- not essentially based on volume. Uh they just want, you know, if we sell a million dollars if they sell a million dollars, they want 10% of that in advertising, you know, back into their pot. >> Okay. >> So, it's a revenue-based model. The more we sell to them, the more they want us to advertise. >> Yeah. >> So, I I guess I've just got to look at my my core costs and along every layer.

4:05>> for how many years? >> Uh 12 years. >> 12 years, okay. In those 12 years >> Starting as a side hustle, right? So, the first >> go pro? >> Pardon? >> When did you get When did you get serious about it? >> Uh 2019. >> Okay, so it's been 7 years. >> Sure. >> Realistically. In that time period, how many times did you raise your prices? >> Of the RRP, uh a number of times, actually. We've gone from 79 and we're now at 109. So, it's just it's It's gone up.

4:33>> So, um Well, you are right, which is uh we need to raise price and we need to decrease costs. So, it is likely a pricing thing. >> Yeah. >> Um I'm trying to like solve the next issue, which is like, "Okay, let's say you have this conversation with them." >> Yeah. >> Are they going to stop wanting to like let's say you raise prices by 10%, right? Which would more than double your profit. >> Okay.

4:59Alex >> What happens? >> Yeah, those little tweaks just they they make such a difference. I get it. Yeah. >> No, but I'm asking. So, what would happen? So, cuz I want I want you to feel good about it. So, like what would happen? >> Yeah. Uh but honestly, the trouble with wholesalers is that we put it into a distributor and they sell it to, you know, thousands of different pharmacies and we can't control the RRP. And so, we've got we have a a base price of what we want them to sell it at and we've got lots of pharmacies undercutting us on our own product Yeah. and selling it at $79 in their store just to make the sale and making 2% profit and then we're trying to ask our other stores to respect the $110 price point and that's what we're selling on the website.

5:41>> MSRP? >> Uh 110. >> Now, how do you enforce it? Like cuz in the US like >> Oh, you can't in Australia. >> Huh. >> You can't. It's recommended retail only and you have Yeah, good times. Yeah, you haven't got a leg to stand on. If As soon as you do a deal with the devil in that Yes, you you're putting You're getting your product into the hand of a distributor and suddenly you've got a thousand stockists. Excellent. But that completely removes my control over my brand. >> Yeah.

6:07>> And yeah. >> that then does make sense that you would raise prices because it'll just force them to raise price. Now, again, they might like they won't cut thin out their margin to losing money. >> Yeah. >> Now, there's [snorts] the alternative of maybe they won't stock you. >> Yeah, yeah. >> Um if you had to direct >> fine. I wish they'd actually stop shredding my my price integrity. >> then this is then this is much easier. Then just raise the price. >> Yeah. >> And then the people who stop selling because they don't want to undercut anymore, you kill two birds with one stone.

6:34>> Yeah. Okay. I >> Cuz think about it like let's let's go worst case scenario cuz like Armageddon. >> Yeah. >> So, let's say that you raise the price by 10% >> Yeah. >> and you lose half your business. I don't think that's likely. >> Yeah. >> But let's say that it happened. You'd still make more money. >> Mhm. >> Because it's more than twice the profitability. >> Sure. >> So like and then you probably have more control on the DTC side and then you recapture some margin there as well.

7:00>> Sure, sure. >> So you'd actually make more than what you're making now. >> Yeah. We've actually made plans but when I was talking to one of the guys on the phone in January, I said between now and when I get there in March, things might have changed and we've actually in the last 3 weeks, we've wrangled control back of these rogue distributors and we've actually taken our product out of the main pharmacy distributor in Australia, which is walking away from, you know, thousands of units of sale, but we've had to look at our model and say if we don't do this, then we no longer control our product and our pricing. And so, I'm kind of in that limbo land right now where I'm going, "Geez, I hope that was the right decision." But if we get control of that pricing model on the wholesale side, then we can put our prices up, D2C, and

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