Revenue can hide a broken business 📉 Nate Littlewood

This is where the penny drops. This is where we have the aha moments, and this is where we start to recognize that some of the lessons and the signals that these financial statements are giving us are actually there to make our lives easier as a business owner and founder. They can make it clearer what we should or should not be doing. They can make it clearer and give us transparency on the things that we're doing that are adding value to the company and the things that are destroying value from the company. And so what we really need to achieve and aspire to is understanding that these financial statements are actually your strategic ally. They're waiting there to help you and make your life easier as a business owner and operator. I think it's important to recognize that if you're building a bootstrapped business, then the number one investment that you're making into that company is probably not financial. It's actually your time and the opportunity cost of your time. If you are smart enough—

Sweat equity, is it?

Yeah, that's another way to put it, yeah. So if you're smart enough and capable enough to start a business, you're educated, you're motivated, you're a go-getter, I'm willing to bet that you could probably quite easily get a job working for someone else making comfortable six figures of salary, right? There's also a good chance that you're not gonna be making that when you first start working on your own bootstrap business.

This week's Millennial Master is Nate Littlewood, founder of FutureReady and a former Wall Street analyst who later went on to bootstrap his own 7-figure consumer brand. That combo gives him a very different view of growth because he's seen both the spreadsheet version of a business and the messy reality of actually trying to run one. Nate's point is that revenue can make a messy business look healthier than it is. In this episode, we talk about why revenue can hide deeper business problems, what founders stop seeing once the company grows, and how weak hiring decisions create operational chaos. Nate, welcome to Millennial Masters. Where are you joining us from today?

Thank you, Daniel. Great to be here. I'm joining, joining you from Brooklyn, New York today.

Well, the city that never sleeps. But that wasn't really my experience when I visited in September last year. Quite sleepy after 10 PM and a lot of shops closed, but let's just say London seems a bit livelier at night. But that's not what we're going to talk about today because I know, Nate, you started in Wall Street finance, then you moved into building and operating, and now you're helping founders see what's really going on in the numbers.

Correct.

So I'm wondering, what point did the old path stop making sense to you?

Yeah, it's an interesting question, Daniel. So I guess there's a couple of important pivots and evolutions in the career journey here. The first one is going from Wall Street into the world of entrepreneurship. And to understand that, a quick summary of the backstory. Candidly, I kind of fell into the Wall Street thing. I had no idea what I was getting into at the time. I remember, you know, having a conversation with a recruiter at one point and they said, hey, we've got this job that we're recruiting for doing equity research at Credit Suisse. And I was like, equity what? Credit who? Like, I have no idea what you just said, but it sounded interesting. And so I just went for it and dove in. Anyway, long story short, it was almost like I blinked and a decade had gone by. And by that point, you know, I'd become fairly senior in the organization.

It was like the Wolf of Wall Street in your time.

No, no, not really. I mean, my involvement in the industry was in an era, you know, a decade or two after the Wolf of Wall Street days, and a lot had changed by then. You know, regulations were much firmer, expenditure budgets were much tighter, and it was far less glamorous than was portrayed in that movie. But, you know, I learned a hell of a lot from it, and I got to travel the world, probably, you know, visited 20 or 30 countries through that job. But I had this kind of, you know, nagging voice in the back of my head for probably the second half of my time on Wall Street, you know, 5 years or so, that I just didn't belong, like that this was just not me and wasn't really where I wanted to be longer term. You know, partway through this, I'd gotten into quite a serious relationship and I was thinking about, you know, the next chapter of my life and kids and that sort of stuff. And I thought to myself, you know, what are some of the stories I'm going to tell my kids about my life and what I've done? And I came to realize that I wasn't really comfortable with the stories that I was going to be able to tell, and I wanted to do something a bit different with my life and something that I was ultimately, you know, a bit more proud of. So that was part of the motivation for me looking outside of Wall Street. I'll be honest, the process of initially jumping out of there was freaking terrifying. I mean, I was getting paid really well, been sent all over the world to do it, and I was basically launching off into the unknown world of entrepreneurship where, you know, everyone's basically fending for themselves. So at first it was pretty freaking terrifying. I liken it to jumping off a—

Did you have a backup coming from finance? Did you have a backup or let's call it in the world of startups, a runway where you gave yourself a particular amount of time, 6 months, a year? 2 years to start generating enough revenue to support you, the lifestyle that you were looking for?

I did. After having worked on Wall Street for a week, I had enough saved up to have, be able to pay for an MBA, to cover my living expenses for a couple years, and to provide the seed capital for the venture that I went on to found. So very fortunate from that, you know, that perspective. But the initial jump was still freaking terrifying. Gotten used to very substantial sums of money being dropped into my bank account every month. And suddenly they came to an abrupt end. And, you know, initially launching off, it's like jumping off a cliff without a parachute and not really knowing when or how you're going to land. But what happened after a little while is the parachute opened and the fall, you know, slowed down, and it went from being terrifying to suddenly very exhilarating because I could see all these things on the horizon that I'd never noticed before. And, you know, for me, this happened in New York, and this kind of coincided with me really opening my eyes and mind to the world of entrepreneurship. And New York really is responsible for introducing me to the entrepreneurship and startups. But as I peeled back the layers of the onion, I learned, okay, there's this job where you get to basically do what you want. You get to solve interesting problems. You get to learn all the time. I was like, damn, sign me up. Like I should have been doing this all along. So then I, you know, while I was at business school, I, you know, formulated my ideas a bit. And ended up launching my own e-commerce business, which we bootstrapped from a fairly small Kickstarter campaign into a 7-figure business. Learned a heck of a lot.

Why were you selling online?

We were selling gardening products, specifically urban, you know, urban edible gardening products. So like mushrooms, microgreens, hydroponics gear, that sort of stuff. But yeah, I think like a lot of people who get the entrepreneurial bug and become interested in startups, I did, you know, what a lot of them do, which is think, okay, I want to do my own thing, right? I want to be the founder and CEO. And I did that for 6 years or so. What I eventually came to realize, however, is that my role in that ecosystem is actually not to be the CEO. There are parts of the CEO job description that I'm quite good at and rather enjoy, but there's also parts of it that frankly, I was never really that great at.

What part did you not enjoy?

So I was running an e-commerce business and a hugely important part of that is obviously brand building, you know, marketing, social media, digital advertising. And what I really struggled with, with that is that there's no right answer. I am an engineer by training and have spent most of my career in numbers, finance, analytical sort of jobs. Things where there is certainty at the end of the day, like you can calculate the right answer. And I really, really struggled with branding, marketing related topics because there was never a right answer. And you never really knew whether some iteration or improvement that you made was actually enough or whether there, it was worthwhile, you know, trying to make things even better and keep going down that path. And I just, you know, my brain is just not well wired for those sorts of situations. And I, you know, along the way I did some mentoring with an accelerator program, accelerator called Food Future Co based here in New York. Through that, got a lot of firsthand experience working with other founders and CEOs and basically realized that my role in the ecosystem was not the one I initially thought as a CEO and founder, and that my capabilities and my skillset and what I have to offer this industry is actually much better channeled through what I'm doing now, which is basically CFO and strategy advisory for businesses. So rather than being the guy in the driver's seat, I'm now his copilot, and I much prefer functioning in, in that sort of role.

So what did building then Urban Leaf teach you that your career in finance never could? Besides the marketing and the branding lessons, because even if you weren't enjoying that part, You still had to pick it up and, and understanding. And I was actually writing about that on Millennial Masters in the newsletter part last week, that you still have to understand anything that you outsource in order to be able to judge it, whether they do something good or not on your behalf.

Yeah. Yeah. So I guess two big lessons for me in terms of being a CEO founder. Number one. Is the importance and value of focus. So when I first got into this seat, I was honestly like a kid in a candy store, right? There's just so much to learn. There's so many tools, so many disciplines, so many things, shiny objects that you can pick up and play with. And I kept myself very, very busy for the first year or two, you know, playing with all of these new toys and shiny objects. But I eventually came to realize that I was basically on this big dopamine rush from all of this learning and figuring stuff out and, and doing new things. But it wasn't particularly productive in terms of the progress of the business. And so I discovered EOS, I discovered OKRs or objectives and key results, and I figured out how to basically build a strategy, design a reporting system or a framework to keep me and my team accountable. And essentially set longer-term or medium-term goals and put in place a system to just keep chipping away at them. Sounds, you know, kind of basic, but it was such a foundational skill for me. And, you know, the, the business went from a state of basically floundering and kind of going pretty sideways for a while to really picking up and, you know, growth accelerating. The other big lesson for me is, you know, I'd come from the world of Wall Street, as I said, where there was, you know, pretty much unlimited budgets in terms of data, information, access to resources. And when you're working at a bootstrap startup, you've got almost no budget. You've got very, very limited access to information, people, and resources. So it was just a completely different operating environment. And you have to get comfortable with imperfection and uncertainty. Like you are not going to have time to dot every I and cross every T, and you're not going to have time to dig into everything and understand everything as well as you might want to. And, um, you know, for me being an entrepreneur and founder, it was really a game and a lesson in juggling those two things, like how to be focused, how to prioritize, and getting comfortable with imperfection and uncertainty.

Getting comfortable with imperfection and uncertainty is also part, a big part of delegation and letting go of certain things in your role at the beginning. As we all know, you have to do everything. Uh, you're the office cleaner, but also the CEO. And how did you manage that process? Was this one of the tricky parts? Were you not able to delegate or hire the roles that you didn't enjoy that much?

No, we hired. I mean, at our peak, it was a team of maybe like 8 or 9 people. So not huge, but like, you know, it was significant for an early-stage e-com business. So I, my approach to hiring people and team is I never really liked hiring based on a job description. Hmm. Instead, my approach was that I hired for interesting, motivated people who were driven and kind of values aligned. And then I would adapt the job description to fit around them. I didn't, you know, my approach wasn't to say, okay, I need this salesperson or I need this marketing person or I need an operations person. It was instead to say, let me look around at the resources and people that I can find that are willing to help me. And let me then build a strategy that reflects the resources that I actually have. Because if I can find a person who's, you know, particularly competent at, I don't know, like Instagram Reels or short-form YouTube content, or, you know, is great at negotiating with suppliers and manufacturers, like, I want to build a strategy that actually, you know, works for the team and resources that I have access to. One of the— I've since come to see this in a lot of other businesses, um, working as a fractional CFO more recently. But one of the, the huge issues I think that startup founders make, particularly when they're managing a small team, is that they have these visions or strategies or roadmaps which they've, you know, maybe adopted because, you know, that's what everyone else is doing. But if you don't actually have the team to be able to execute on that, you don't have the competencies and skill sets to be able to do it, it's kind of freaking irrelevant, right? Like your, your team and your resources, if they're not equipped to follow that strategy, then you're gonna probably flounder at that strategy. So, you know, what I tried to do is—

That's also if you manage to get it all out of your head.

True, true. Yeah. I mean, we, we designed systems and processes for doing that. It wasn't, you know, really something I struggled with too much. But yeah, I guess the short answer is developing the strategy and designing the objectives and key results based on the team members that you actually have working with you rather than the other way around.

So, Nate, you said the money part, income, revenue, and the growth part were the most interesting things for you.

Mm-hmm.

And there's a trap, which was also part of kind of like how we started talking about this episode, because a lot of founders see revenue going up. And assume the business is getting healthier, naturally more money. Why not? You spent a lot of time around brands that were, that reality wasn't there. They were growing in terms of turnover, but not in terms of profit. What are the first signs you'd say that a business looks fine on the surface, but it's getting weaker underneath?

Yeah, well, some of the first things that I look at and look for is businesses that are obviously not profitable. Okay. And to break that down—

That's a calculation you make, so to speak, at the end of the year. You can fly blind for 6 to 12 months depending on how often you look into your accounts. If you roll through.

You can. I would argue you shouldn't. And if you're working with anyone on finances, you should be looking at this stuff at least monthly. Not more often. But, you know, from, from where I sit, we need to break this down into a few different layers and understand what each layer of our profit and loss statement or our financials is actually telling us. At the very, very top, we've got revenue or the top line of your income statement, right? What that is basically telling us is it's an indication or proxy of product market fit, right? That means that we have a product or a solution, and we have a customer who has a problem. And when there's some degree of fit between those two, we create revenue. And the customer is willing to hand over money in exchange for a solution of their product that results in a transaction or a sale, and we get revenue. So the more revenue we have and the quicker that we're generating revenue, that is usually a good sign for product-market fit. It might also be an indicator that our marketing and advertising and customer acquisition machine is working fairly well. It does not, however, tell us that our business or our business model is working. And in order to understand if the business and business model's actually working, we need to go a couple layers deeper into the financials. So the next significant layer down would be to look at the direct costs in, in my world, which is e-commerce and CPG. This includes obviously the cost of the product, shipping the product, the freight on the product, packaging, fulfillment, all that sort of stuff. Every business is going to have some type or form of cost of goods sold, which we would put into the direct cost section. Now the direct cost tells us as a function or a percentage of revenue, how efficiently are we actually solving that customer's problem, right? If a customer's paying $100 to have that problem solved, but it's costing you $120 to deliver your solution, then you've just lost $20 on every single order or every product you're selling. The margin. Yes. So the gross profit margin. Exactly. And so that's a business that, okay, revenue might be working, you might be solving a legitimate problem, but you as a business owner have not figured out how to solve that problem efficiently. And so you have a cost efficiency problem. The next layer down would be when we look at the indirect costs. And so this is staff, labor, rent, software, legal, accounting, all that sort of stuff. And these are all the costs associated, associated with basically administering and managing the company. Now, an effective CEO will be very good at finding resources, whether it's people, you know, consultants, agencies, whatever, bringing them into the organization and extracting more value from them than what they're costing, right? They bring in an agency for $5,000. That agency can create $20, $30 of value, right? That's positive ROI. But a poor manager, be it of an agency person or some other resource, is not going to be able to do that. And they will bring resources into the organization, which will show up as indirect costs on their P&L, but they won't generate a return from them. And therefore will have a very high portion of indirects or overhead costs relative to the revenue. So, you know, going through these different layers of the income statement, we can look at how efficiently the business is being managed. And it's not until we get to the bottom line of the income statement that we can really understand and get a big picture of how well this business or business model's working. So what we're looking for at the bottom is obviously a profit. That is a core objective of any entity that's been structured as a company or a business. And we ultimately need to be generating some form of profit in order for this to be functional and sustainable.

And you can build those costs in, for example, your margin, if you produce something or if you resell something in e-commerce, for example, but that might still not cover it. So your costs could be much higher than say your competitors who would sell the same thing at the same price.

Yeah, entirely possible.

So what do then the founders miss when they say like, we are growing, so we are fine. Every month we have we sell more.

Yeah.

They don't look 2, 3 layers down as you suggested. So what's the most common cause of this cash disaster?

So there's a number of reasons for this, this profitability or, or cash flow disaster that you're asking about. Number one is I see a lot of founders and business owners who are falling into what I call a context vacuum. What that means is that they let lack context and understanding of what good or bad actually looks like in terms of these various profitability metrics, right? I could tell you that your business is spending, say, 30% of revenue on cost of goods sold. But if you have no idea what your competitors, peers, the rest of the industry is doing, you don't really know if that's good or bad. Now I can tell you for some industries, 30% COGS is great. For other industries, 30% COGS is terrible, right? So we need the benchmarks and reference points to know whether we're performing well or poorly. And we can look at these benchmarks for cost of goods sold. We can look at how much of our revenue we're spending on marketing and advertising. We can get benchmarks for overheads, indirect, staff and labor, or, you know, the data's out there if you know where to look. So what happens when founders and business owners lack this context is we often get a misallocation of resources, time, and attention on the problems that don't actually need to be solved. So a good example of this, I had a call with a founder a while back who, you know, I'd just finished a review of her financials and she came on the call, was telling me about these new products and campaigns and TikTok and this, that, that she was working on. And I said, whoa, whoa, whoa, hold on a sec. Your cost of goods sold is 60%. Of revenue right now. There's no way that you're gonna make money on any of this stuff unless we fix this product cost problem, right? You're spending all this time, you're hiring these people to help you with all of these other things, but if we don't address the COGS problem, the financial math of this business is never gonna work and you are never gonna achieve any of the financial goals that you've, you've told me that you want to. So You know, we have to go through a process of like dropping all that stuff and getting focused and prioritizing on the things that we actually need to fix and address in our business. So that I'd say is probably the number one issue that founders make. In my space, you know, the physical goods space, I see issues with revenue leakage through coupons and discounts. I see issues with people carrying too much inventory and the cost of excess inventory.

That's been a retail issue, e-commerce as well as traditional retail with too much stock Correct.

Correct. You see it very, very often with businesses that, you know, have any sort of physical inventory. And the reason is that for operators of these businesses, they tend to be very, very sensitive to stock outages and not having the inventory available when a customer wants to sell it. The problem is that when we overcompensate for that and get too much inventory to ensure that we don't have a stock out, there's this whole myriad of silent profit eaters that go chipping away at numbers in the background. And these will take the form of product obsolescence, expiry date issues, storage at the warehouse. It makes you less nimble and less adapt, you know, adaptive to change. And you know, it takes you longer to iterate the product. Then you've probably got more debt because you've got more inventory. And if you've got more debt, you're going to be paying more interest. So that's hitting, hitting the income statement at all levels here. Yeah.

And in your own business, was there a moment where you realized that the market was seeing the product differently from how you wanted to see it? And I'm trying to touch there on product market fit, uh, as, as we, we coin it, but in the end, it's, it's a matter of how people perceive your business and or the product that you are selling.

Yeah, absolutely. So my business was in the gardening space. More specifically, we were, uh, had a strong mission around food and sustainability. Essentially what the, the business was all about was getting people to reconnect with their food. And we wanted to, to do that because we had learned that when us as humans get more engaged with our food and understand more about where it comes from, we become far more likely to make intelligent food choices, whether that be for the perspective of our own health, the environment, whatever. So that was, you know, fairly grandiose mission. I think maybe a little bit ahead of its time. Noble, you might say, but you know, I think a lot of people are catching up to this theme now. I think maybe a decade ago when we launched into it, we were maybe a little bit too early with it. But anyway, what happened as we got these products into market and talked to more and more customers is we came to realize that that problem is not really how a lot of our customers saw our products. The way that they saw our products is, you know, cute gifts, like something that you could give as a housewarming party, a Christmas present, even a stocking stuffer. And quite honestly, I, as a founder, having gotten into this for these fairly grandiose ideas, wanting to do something impactful and from a sustainability motive, to realize that you're in the business of producing stocking stuffers with, you know, at least some of our product catalog was pretty fricking demoralizing. If I can be honest with you, it's like, I didn't get in this to produce fricking Christmas presents. Like I wanted to do something impactful here. And it, it really taught me a lot about, you know, prioritizing the customer's needs, understanding how you fit into their life. And there was a whole lot of lessons I had to learn around communication and marketing and when and how to incorporate and share your mission into your communications with your customers. There's certainly some wrong ways to do that. And I eventually learned some ways that were a bit more effective.

So you said most businesses don't die from one huge mistake, they bleed out from these ignored inefficiencies that you call. Are there leaks that you can ignore from the beginning up until they start opening the floodgates? And one that I'm, I want to touch on is it's very easy to patch your growth with advertising. And you can buy ads at, at the beginning they can seem cheap, but once they start adding up. They can have a huge markup on your CAC, your cost of acquisition for your customers. And I think from one of the episodes that I've listened of your podcast, do you have some interesting thoughts on that one, Nate?

So good question. And I guess this partly links back to what we were talking about earlier with the revenue basically being a proxy for product market fit. And that tells us that the ad account or the customer acquisition function is working, but there's still this whole other story about, you know, whether or not the, the business is actually working. To, to, um, give you a, an example of this, I actually, one of my most recent clients, when I first started engaging with them and looking at their numbers, they came to me and said, hey, you know, like our, our media buying or our Facebook ads are not working. We think we need to replace the agency because they're not doing a good job with managing this ad account. They weren't super happy with some of the metrics they were seeing there, things like ROAS and marketing efficiency ratio, and they thought, okay, something's gotta change. Anyway, I did an audit of the account, looked at all of their data, and what I discovered going through this is that the ad metrics actually weren't too bad. Like, yeah, they could have been improved a little bit, but they weren't too far off, you know, benchmark for their industry. The real problem that these guys had was on repeat purchase rate. So their peers had a repeat purchase rate of about 50%. This company only had a repeat purchase rate of about 5%. So the contrast, if we say that, you know, A and B both acquired 100 customers on day one, we're talking about 50 of those initial customers coming back versus 5. So essentially my client was missing 45 of these repeat customers. Now that's very significant because for the, when you looked at the unit economics for this business, basically all of their profitability was being made on that repeat purchase, right?

Mm-hmm.

The profit that they made on first order was usually just enough to cover the cost of customer acquisition, but it really didn't leave much left over. The profit was being generated when people come, came back. So if people aren't coming back to buy your product, we need to understand why. And from my perspective, there's two common reasons for that. There's usually an easy reason to solve and a more complicated reason. The easier reason to solve is you don't have retention marketing in place. And that was partly the case here. Like they were doing no SMS. They had no email newsletter. They really weren't even asking people to come back or giving them a reason to come back and place another order. But the bigger reason, and often the one that's a lot more complicated and expensive to solve, is product-related, right? If people don't love your product, there's no amount of text messages and emails that you can send them that are likely to persuade them to come back again. And unfortunately, that often means a lot of work to, you know, revisit the product, redesign the product, improve the quality, improve the customer experience. And this can often take months, quarters, if not years to properly sort out. And these guys have got a combination of both of these problems, I think, that we're now working through. Now, the point of this story is that they went into it thinking they had a problem with the ad agency. They left this interaction realizing that they actually had more of a product quality problem. And so that's, you know, a completely different issue to solve.

And, you know, we're working on getting them back on the right track at So that would be one of the things that the founders are spending, they're spending time on the wrong things.

Mm-hmm. Yep.

What other things in your experience they're spending time on while telling themselves that it's something else? So it's easy to blame the agency because you don't look at your own product.

Mm-hmm.

And I'm guessing it's easy to blame the platform because you don't look at your marketing as well. As a fallback to that.

Yeah. So it's difficult to generalize on a question like this, but what I would say is that I have a few different archetypes or categories that I can put founders into. And sometimes it's possible to look at a business's financial statements and numbers and have a pretty good guess about which archetype the founder is. And you can actually, you know, figure out what type of personality they have just by looking at the numbers that they're generating. So a good example of this is the, what I call the, the product designer, creative, sometimes a subject matter expert founder. So another example, I worked with a nutrient or supplement brand. The founder was a nutritionalist, a herbalist, and she just loved making products. And the metric that I often focus in on when I think I might have one of these type of founders is revenue per SKU, or how much sales are you generating per widget that you have available for sale. Now, when this is extremely low, it's usually an indicator that the founder believes the solution to their revenue problems is to have more stuff, right? I'm not doing as much sales as I want. It's because I don't have enough products. Let me make more products. Therefore, there'll be more things for people to buy, and therefore I'll have more revenue. The problem is that that almost never solves your revenue problem and often having more SKUs and more choices and more options for customers actually does the complete opposite and it can sabotage your own revenue. So these sorts of people, yeah, are usually very, very focused on product. They have large catalogs in addition to the problems and decision-making issues it can create for the customer. It also makes a business way more complicated to run. Like each of these is something you have to order, manage inventory, keep track of. It's just a big admin burden. The next type of founder that I come across is what I call the media buying or the digital marketing founder. They might come from an agency background. They at least understand the paid media game. And often these folks, as long as they understand, you know, their CAC and lifetime gross profit, they're usually pretty content just focusing on their ad account. They tend to have much simpler customer acquisition and sales channels or marketing channels. They tend to have much simpler product catalogs. To put this in, into context for you, the nutritionist founder I just mentioned had a revenue skew, a revenue per skew of $5,500 per year. Not long after that, I ordered the accounts from one of these like digital marketing founders and he had $7.5 million of revenue per SKU per year. Like that is a gigantic difference in terms of how much you're selling of, of each widget you have available, right? So they're, they're another profile. The third profile of founder I come across, and frankly, this is the one who I tend to work with most often as a fractional CFO, is what I call the, the business owner. They tend to be a bit more mature. Most of my founders are in their 40s, 50s. I've even got one who's in his 60s. They've been around the block a few times. They have been slapped on the head a few times. They've made some mistakes. They know what a mistake feels like because they've lived through it. And having lived that mistake and knowing the cost of that mistake, they tend to be much more willing to pay for help to avoid it. I do not work with any 20-year-olds. I do not have a single 20-something client because They tend to be a lot more—

We are Daniel Masters, so we can talk about that safely here.

They do tend to be a lot more, you know, confident and they just haven't had the life lessons yet to know that they need help.

But you have to learn those somehow. And part of why I'm doing this podcast is the educational journey for other founders in business, maybe at the beginning, maybe a few steps behind, or maybe still learning along the way. Because it's very easy to say, be very tight with your money because there's not much, especially when you're bootstrapping, but you end up being very loose with your time. Like it's free. That has been my experience, especially when, when I look back and I'm wondering whether you've had the same experience when you moved from, you know, a a billable hour type of job to your own startup where you had to look after things nonstop. And what's your insights now that you moved away from that and are teaching other founders how to make better use of it?

Absolutely. This is a great question. So just to set the stage here, I think it's important to recognize that if you're building a bootstrapped business, then the number one investment that you're making into that company is probably not financial. It's actually your time and the opportunity cost of your time. If you are smart enough—

Sweat equity, is it?

Yeah, that's another way to put it. Yeah. So if you're smart enough and capable enough to start a business, then, you know, you're educated, you're motivated, you're a go-getter. I'm willing to bet that you could probably quite easily get a job working for someone else making comfortable 6 figures of salary, right? There's also a good chance that you're not going to be making that when you first start working on your own bootstrap business, at least not if it's an e-commerce brand. And so the delta between what your company is paying you and what the market rate for your time is, is basically your opportunity cost. And that's part of the investment that you're making in your business. Now, what I see with pretty much every single client is that they when we first start working together, they just have way too many things that they're trying to do. So during my onboarding call, I'll say to them, hey, like, tell me about the projects that you're working on at the moment. And I'll hear new sales channel, new product launch, new agency, TikTok shop, Meta ads, blah, blah, blah, blah, blah. List goes on. I actually have, you know, a system to record these all. And we typically end up with a list of 20 or 30 of these ideas. Now, what I inevitably have to say somewhere during this conversation is, hey, when I hear that you have 20 or 30 different priorities and projects that you're working on, what I actually hear is that you've got none. And therefore you're spreading yourself too thin, probably not making enough progress on any of these things. And one of the things that I work with on these founders during our first 3 to 6 months is getting that list of 20 to 30 down to 2 or 3. And we do that by looking at the ROI of all these ideas. So looking at how material they are in terms of the financial impact. We assess all of them based on a bottleneck framework or multiple, you know, versions of a bottleneck framework. And the third way is we look at skills alignment. I touched on this earlier, but I actually have this framework that I use that looks at every skill and competency and basically plots it on two axes, which is how good are you and your team at this thing, function or task, and how much does it energize you? Now, obviously the best quadrant to be in is you're very competent and you get a lot of energy from it. That's your sweet spot. But the opposite quadrant is things that you're not good at and you feel drained from doing. And these are things that you're probably not going to excel at. Now, if you've got a team helping you build this business of 2 to 10 people, which is where most of my clients are at, you don't have an infinite talent pool to pull from. The reality is that you have a very, very finite number of skills and resources and things that you're genuinely good at. And so it doesn't make any sense for me as your coach and advisor to put a 30-pound bowling ball in front of you and tell you to kick it 400 meters into a goal, right? You're just going to break your toe, toe, and the ball's not going to get in the goal. It's a waste of everyone's time. So what I want to do is work with the founders and try to put balls in front of them that they're actually going to be able to kick into the goal. So looking at ROI, bottleneck, and skills alignment, we can go from 20 to 30 down to 2 or 3. Now the implication of that, getting back to your question, is that we just figured out 80 or 90% of the stuff that you can ignore, right? That's 80 or 90% of noise that wasn't generating ROI, isn't addressing a bottleneck, or you don't have the skills to actually tackle and tackle well. So I've just, you know, liberated 80, 90% of your time and got you more focused on the things that are actually meaningful for, for the business. So that's kind of how I go about helping founders like just improve their own productivity and effectiveness in, in their companies.

So you'd say that this is a symptom of the, the founders, for example, are going where they feel comfortable versus what needs to be done and where the business needs them, based on the archetypes that you mentioned, the creative founder or the builder founder, who, for example, don't want don't feel like sales would be their strong suit and they think that working on a different side of the business will increase that and it won't.

Exactly. Yeah. So without the context, without someone to guide us and tell us where we actually need to be investing our time and attention, if we're just left to our own resources without any of those guardrails, us as humans have a tendency to drift into the things that we enjoy, to do the things that make us feel good. And if we've spent, you know, 10 or 20 years of our career managing a Google or a Meta ads account, we're probably gonna hang out there. This is what we know how to do and it makes us feel good because we feel like we're effective. But that may not be what the business thinks.

And that applies a lot to e-commerce because I'm assuming because they think they have a flywheel going on of advertising a product, putting the margin, getting the CAC in, and then continuing to run it. But once it goes into motion, it's more than that. Is that my correct reading, Nate?

That's a reasonable reading. I guess I'm giving you an e-commerce centric, I'm giving you an e-commerce centric example here, but I think you could apply the same concept to any business, right? Every business has got a product or service that it's selling. And if you really enjoy being the one to make and design products, I'm guessing you've probably got a big product catalog, right? Because you get a kick out of designing widgets, services, or, you know, whatever your thing is that you're selling. If you really, you know, like operations and analytics and finance, like I did, you've probably got amazing spreadsheets and databases and sources of information. And yeah, that's what my startup had. Like I over-indexed on that stuff because it was what I was good at and I enjoyed doing. And, you know, I did so at the expense of some of the other areas of the business, which, you know, Frankly, the company needed more than a better spreadsheet, right? So, you know, there's many different ways that I think founders can get pulled in the wrong direction if they lack the guardrails and guidance in terms of what the business actually needs.

So what would you say then is the line, which I'm assuming is pretty fine, between being useful and being too much too soon? And trying to do for your business? Because you said you can easily over-index on one side. Hmm.

So the line between being useful and going too far. Well, I guess if you're being useful, then you're somehow adding value to the company. But I think what we need to understand or keep sight of is that there's always going to be more projects and priorities and things to do in a startup business than you realistically have hours in the day to do them, right? My own experience—

never ending.

My to-do list was normally about 10 times longer than what I was actually able to accomplish on any given day. So even if you're feeling useful and you might be making progress, the trap that you can fall into is that the value you're adding might not be the highest value opportunity that you could be working on in your company. So yes, you might be making progress on lowering your customer acquisition cost, but if that's a $20 or $30 an hour job and the benefits that you're making there are fairly minimal, it might be costing you an opportunity elsewhere where you could be adding $1,000 of our value. By making a decision about a new product catalog or opening up a new sales channel or hiring a new person, for example. So what we need to do is, you know, find mechanisms and ways to stay accountable for our own time and not get dragged into the low-value tasks and functions and always try to give your time, attention, and mental bandwidth to the highest-order problems with within your company.

You would be the fourth guest who mentions this particular trap that the founders fall into. Have you fallen into it? It can be as simple as if you have to deal with a large amount of emails, you can spend like 2, 3 hours a day just by dealing with your emails and triaging them versus having creative time to say, come up with a new campaign idea.

Yeah. Yeah. So I've, like any founder, I think I've certainly been guilty of it. What I would say though is I am, I'm a very efficiency-minded and systems sort of thinker. And so I'm pretty good at recognizing when a process or methodology is developed enough that I can then systemize it and automate it. And so once a task, you know, usually early on when you're figuring out how to do a thing, it requires a lot of attention, focus, and, you know, mental bandwidth. But eventually you can get to the point where you can say, all right, I can now document this. I can write out 2 or 3 pages of instructions, which means I can give it to my Filipino-based VA and pay her $5 or $10 an hour to do this for me. Or in 2026, I can figure out how to do this with Claude Code, possibly as well. And, you know, just figure out how to build routines or standard operating procedures to get this stuff off your plate. So I've done a lot of that and, you know, both in my own company.

What has been the biggest saving you've done? What's the biggest? Because we're getting into AI here, so we might as well just dive in with the automation and the AI. What's, in your experience so far, where does it bring the biggest savings in time or money or both?

Yeah, so for me, I have spent a huge amount of time designing systems and processes for managing like SOPs SOP databases. So in my old company, we had an SOP database of probably 100 different tasks, and we had a system in place to basically look at the task, determine the function, put it on the right person's calendar on the right person's day, and then we could basically, you know, offload that to people offshore. And quite frankly, I think the one of the only reasons that we were able to maintain profitability for most of our history was that we were very heavily reliant on offshore labor to get this stuff done. Right now, I'm dabbling with Claude Code, actually in the process at the moment of building my first ever AI agent, which is a chief of staff named Donna. She is, she has access to my calendar. She has access to my Notion to-do list. She has access to all my podcast recordings. And she's actually about to start managing the communications for all of these, you know, podcast placements. So when I reach out to a show, they respond. They often ask for me to book a meeting or more information or fill out this questionnaire. I think I'm a day or two away from having Donna, the AI chief of staff, basically handle all of that.

So that's with Claude. Have you tried any other system? I'm assuming ChatGPT was one of the other ones you're using.

ChatGPT in 2025? But Claude has just moved so much faster than ChatGPT has over the last 6 months or so. I don't even have a ChatGPT account anymore. I've gone all in on Claude.

So you can found a time-consuming task, which was either reaching out or dealing with the inquiries from your podcast. I, for example, have a similar automation, which at least filters and then assesses the guests or the guest pitches against a set of criteria, my internal aims and targets, as well as their general profile, goes and does searches, et cetera. But in a business that doesn't involve a podcast, where, where else can you easily find such efficiencies?

So the main, the framework I use for thinking about this is looking at how linear the tasks are and how repetitive the tasks are. So the best tasks for automation and delegation are tasks that are fairly linear. There's a defined number of steps and you all can almost always predict the path of those steps and they're highly repetitive. So, you know, need, need to be done daily. Yeah. Groundwork. The tasks that are poor candidates for automation or SOPs are things that are highly variable. There's a complicated, you know, decision tree percolating through them and they don't happen very often, right? They're the things that I usually keep on, on my plate. So I'm always, you know, looking at a task, looking at how I spend my time, figuring out where it sits on these two axes. And as soon as I identify something that's repetitive and is a linear workflow, then we're putting it into Claude, we're putting it into Zapier, or I'm giving it to, you know, someone offshore.

Let's get practical now in this final part of our chat, because if someone listening has revenue growth, loads going on. There can be loads of activity, which is masked as momentum, but it's not traction. But, and they start having this nagging feeling the business is less healthy than it looks. What should they check first this week?

Well, they should check their profitability or their profit and loss statement and their cash flow statement. They need to understand how much profit the business is generating and the cash flow. If we're not generating either of these things, then your financial statements are trying to tell you something. They're trying to tell you that this business or business model that you're running is not actually effective or efficient. And we then need to start looking in and, you know, breaking down the different layers of these statements to understand where the problem is.

And finding, uh, sometimes it is not the biggest cost, is it? Or it's usually related just to a cost or a service costing more than it should and eating into the margin.

Well, I don't, I hear what you're trying to do. I think it's really difficult to generalize here. You know, I wish I could give you a one-size-fits-all solution to this and say, you know, every time there's a business with a profitability or a cash flow problem like this is going to be the solution, but You know, it's different every time and it depends on the founder, the founder's personality, the problem, the product, the industry that they're in. What I will say though is that I think it's really, really important for founders to understand that it is possible to build a healthy and productive relationship with these financial statements. It is possible to go from a state of being overwhelmed, intimidated, and scared.

And no one should look, no one should look at it. Yeah.

Yeah, which is where a lot of us start off. Like a lot of people start off in what I call the denial phase, which is like, hey, I don't want to look at this. It's, I don't understand, like just get these numbers and financials out of my face. The problem with that is that the financials are going to continue to exist whether or not you're looking at them. And they're often telling, you know, a pretty dark story. The next stage is what I call the overwhelm phase. And this is where people start to look around, but they get overwhelmed with data information. It's too confusing, and unfortunately they often revert back to stage 1. The next stage is the intrigue phase, and this is where we kind of start to look over the fence at the financials and go, huh, there could be some interesting stuff over there. I don't quite understand it all yet, but I probably should. The third and final, or sorry, the fourth and final phase is what I call the enlightenment phase, and this is where I'm trying to get all of my clients to. And this is where the penny drops. This is where we have the aha moments. And this is where we start to recognize that some of the lessons and the signals that these financial statements are giving us are actually there to make our lives easier as a business owner and founder. They can make it clearer what we should or should not be doing. They can make it clearer and give us transparency on the things that we're doing that are adding value to the company. And the things that are destroying value from the company. And so what we really need to achieve and aspire to is understanding that these financial statements are actually your strategic ally. They're waiting there to help you and make your life easier as a business owner and operator. Now, if you're not from a finance background, you might need a little bit of help in getting there, but like there are plenty of people out there who are willing to, you know, give you a hand. With this sort of stuff in 2026. There's obviously plenty of AI tools that can assist as well, but you know, the, the one message I'd want folks to take away from the conversation here is try to get over that overwhelm. There is light at the other end of the tunnel, and when you get there, it can make your life so much easier as a business owner and operator.

I think that's a great healthy point that you're making there, Nate, but I do have one more question for you. Because I'm wondering what belief do you hold now about business health that you probably wouldn't have understood earlier in your career, even in the Wall Street days?

Wow. That is an interesting question. Very interesting. I guess what I have come to learn about business going from Wall Street, which was like big, you know, billion-dollar type companies where resources were abundant and teams were huge to now working in the startup world is just how much personalities can impact the businesses and the way businesses are run. I guess I, you know, when I first got into the world of startups, I thought that there was a template, a standardized way, like everyone needed to do this if they wanted to grow, and then you needed to do that. And that, you know, there was a standard playbook. Playbook. What I've come to realize now is that there is no standard playbook and that everyone's playbook is different. And you need to discover and write your own playbook based on your unique strengths and competencies as a founder and operator. And trying to copy what everyone else is doing and take notes from their playbook is not going to get you very far. You need to, you know, really craft your own journey in the world of entrepreneurship.

And to do that, where would you look to? You still have, like in art, everything is a remix and you have to find inspiration somewhere. If you're not gonna copy somebody else's playbook, how are you gonna do it?

Self-examination, like look at how you spend your time, look at your hobbies, look at your interests, look at the books that you read, like understand, you know, the sort of person that you are. I mean, don't go building a business that's highly dependent on efficiently running Facebook ads if you don't enjoy coming up with creative and crunching numbers every day and optimizing campaigns. Like, you're not going to be good at that. So look at, look at how you spend your time and look at what motivates you and excites you and interests you and figure out how to translate them into skills and competencies that are business might actually value and that could be a positive contribution to a company.

I guess that takes us to a wrap-up point, Nate, where we can say that you need to do work that you love in order for it not to feel like work, which is a, which is an old saying before the AI and digital world and still applies today. But I do like your take on looking inside and discovering yourself and finding out more in order to grow your business. And that's possibly something that I have not heard on Millennial Masters episodes so far. So thank you for sharing that insight.

You're most welcome. Well, I appreciate the conversation today, Daniel. It's been great to come on and chat with you.

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