Navigating Profitability in E-Commerce | Sean Agatep | Vincero Collective | Profits on Purpose

Episode Description

In this episode of Profits On Purpose, host Nate Littlewood speaks with Sean Agatep, co-founder and COO of Vincero Collective, about the journey of scaling an e-commerce business from its Kickstarter roots to an eight-figure D2C brand. They discuss the challenges of navigating profitability, the importance of adapting to market changes, and the strategic decisions made to focus on sustainable growth. Sean shares insights on the significance of customer satisfaction, the evolution of their organizational structure, and the birth of Tidal, a recruitment firm for e-commerce teams. The conversation emphasizes the need for founders to reflect on their goals, the importance of financial metrics, and the value of paying oneself appropriately in the entrepreneurial journey.

Key Takeaways

• Navigating growth requires a shift from vanity metrics to profitability.
• Tailwinds can be deceptive; awareness is crucial for sustainability.
• Understanding your business's natural revenue limits is essential.
• Adapting to market changes is a learned discipline for founders.
• Profitability should be prioritized over aggressive growth strategies.
• Reassessing sales channels like Amazon can lead to better focus.
• Building an elite team of senior professionals enhances efficiency.
• Customer satisfaction scores are key indicators of business health.
• Investing in a strong recruitment strategy can streamline operations.
• Paying yourself what you're worth is vital for long-term success.

See More from Sean and Vincero Collective

• Vincero Collective's Official Website
• LinkedIn
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• Email

Listen to the full episode to discover how Sean’s experiences can inspire and guide you on your entrepreneurial journey. Don't forget to subscribe for more insightful conversations!

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– Nate and the Profits on Purpose podcast team

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Transcript

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00:00 Introduction to Profits on Purpose
02:44 Navigating E-commerce Challenges Post-COVID
11:17 Reevaluating Revenue and Business Strategy
18:45 Team Dynamics and Organizational Changes
23:10 The Birth of Tidal: E-commerce Recruitment
25:20 Balancing Two Businesses and Future of AI
26:30 The New Gold Rush: Empowering Opportunities
27:44 Offshore Workforce: Quality Over Cost
30:54 The Gifting Experience: Personalization in Business
34:44 Financial Metrics: Staying in the Game
39:10 Paying Yourself: The Importance of Founder Compensation
43:01 Ad Spend Strategies: Evolving in E-commerce
46:27 Key Performance Indicators: Tracking Success

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Nate Littlewood (00:06)
Welcome to Profits on Purpose, the podcast for EECOM and CPG founders who are looking to scale their businesses both profitably and purposefully. I'm your host, Nate Littlewood from Future Ready CFO, which is the go-to fractional CFO solution for seven figure founders who are looking to turn financial chaos and confusion into business clarity and confidence. Anyway, today's guest is Sean Agatep.

who's the co-founder and COO of Vincero Collective, which is a San Diego based accessory brand that grew from a fairly scrappy Kickstarter roots into an eight figure D2C business in an unbelievably short amount of time. But anyway, Sean and his team then deliberately traded top line vanity metrics for more durable.

Along the way, Sean and the guys had to navigate post iOS headwinds. They had to shut down some low margin channels like Amazon, and they rebuilt the entire organization with senior leaders supported by offshore teams. A lot of this work in terms of rebuilding the team and hiring offshore talent.

Actually led these guys along the way to start a second completely separate business called Tidal, which we're gonna be talking a little bit more about today, which is basically a founder led recruiting firm for lean high performing e-commerce teams. Sean, welcome to the show. We have so much to talk about. It's absolutely great to have you on here.

Sean Agatep (01:46)
Yes, thank you very much for having me. I'm excited to get to brag about myself a little bit and everything we've been doing.

Nate Littlewood (01:51)
Well listen, I gave a bit of an intro to you just now, but was there anything important that I missed out there?

Sean Agatep (01:59)
And you kind of covered the whole gambit that we've been, the journey that we've been going on. I think it was a very well put together. I wish it happened as cleanly as you phrased it out there because there's quite a few lessons learned along the way, but no, we can just dive right into it.

Nate Littlewood (02:18)
Okay, perfect. Well, these things are, you know, rarely as clean and neat as what they might look like on paper. And, you know, one of the things that I really enjoyed about our conversation the other day when we, you know, obviously caught up offline was just some of the things that you have learned over the years. I mean, you've been in the e-commerce space now for a long time.

You've seen what the pre-COVID era looks like. You've survived the ups and downs of COVID and a lot of things in between. But one of the comments you made to me the other day when we were chatting is that you didn't realize that there were tailwinds until they were gone. I'd love to start off by talking about that lesson. What was going on at the time and how did you come to that realization?

Sean Agatep (03:13)
Well, the simplest way to put that is that we just started running out of cash when the tailwinds are gone. think depending on the life cycle of the business, when you start to see product market fit, which is really everything in the game, right? Once you start to see a little bit of traction and you can follow that progress, you can follow that growth, you get almost accustomed to easy wins, right? And there's certain things that just things just start clicking and it's just working and you'll open up a new channel and it'll just have natural traction.

Right. And so as you're going and as you're expanding, it's very easy to get very aggressive with a lot of the channels that you're expanding to. And then what happened is that as our business both started maturing, as we started to kind of reach our reach somewhat of a plateau from the just from the digital marketing space, a lot of the channels that we were in became a little bit harder to find the same sort of efficiencies that we used to have. So there's a combination of that.

I think for our product category as well, watches as a product started cooling off in popularity a little bit. So we ran into that a little bit. And so when there isn't just natural momentum for your product category and you start to see you're not as efficient, you're not as able to just like generate easy wins across all these different channels, it starts to kind of snowball a little bit. And all of a sudden you find yourself spread a little too thin.

uh... across all these different channels and uh... that's that's a situation we found ourselves in a couple years ago

Nate Littlewood (04:44)
I see and this was kind of during or post-COVID or

Sean Agatep (04:49)
It was, I think it was post-COVID. We were like a lot of brands where we saw, you know, that COVID bump. However, I think we were, in hindsight, we were fortunate to where our product category started cooling off a little bit during COVID as well. So we felt a lot of those tailwinds turning the headwinds a little, well, I think the, think there's like a little bit of still of a gold rush through e-commerce within COVID as well. So the,

the bat signals kind of went up during that period of time and it was more of a, well, if this keeps running in the same direction, we're gonna have to pivot and we're gonna have to make sure that we're still in this for the longterm and we're building a durable business. Because if the winds keep shifting the way we think they're gonna be shifting, you could be going from downhill to uphill pretty quick.

Nate Littlewood (05:39)
Mm-hmm. That's an interesting thing to happen inside a startup to have that level of, you know, self-awareness, I think is what I'm hearing about here. I mean, I've certainly been guilty of this myself, you know, when I was sitting in the founder seat, know, founders are blessed and sometimes cursed with this ridiculous level of optimism and, you know, enthusiasm for the future. And it's often

quite easy to ignore or sweep under the rug some of these negative data points that might be telling a different story to the one that you want to hear. Was this kind of a discipline and being able to look at things as pragmatically as what you just described? mean, was that kind of a learned discipline?

Sean Agatep (06:29)
definitely learned and it's not something that we instantly knew, right? took a while to one, admit that we may not have tailwinds anymore, right? Like we may not be indestructible, we may not be capable of growing, doubling year over year over year. Right, and when you kind of hit that threshold and start to see a little bit of friction with how the business can naturally grow.

Then it's more of like, okay, well, where else can we find these easy wins? And then you're not finding, it's just not as easy as it used to be, right? So then it requires you to kind of look inwardly like, okay, first off, what do I consider a win? What are we actually running towards, right? I think the allure, especially when you're early on, the vanity that you run towards is like, okay, we're just going to run towards an exit, right? I'm just going to build this thing up and I'm going to sell it.

For our situation and our perspective on it, as we started to see the watch market kind of cool off, we were looking at ourselves like, well, we're just building this into something of an exit, but there's not even an exit on the table. So what are we actually building and running towards to if there isn't a set goalpost? It's almost like you're training for a marathon indefinitely.

And you're like, okay, well, I gotta run 14 miles tomorrow. And someone's like, well, why? It's like, well, because I might run a marathon. It's like, well, when's the marathon? It's like, well, I haven't decided yet, but it could happen sometime down the road. It's like, kind of reevaluating what we actually want out of this business that we've created for ourselves.

Nate Littlewood (08:10)
Interesting, interesting. So that's really intriguing. I gather kind of reading between the lines here that you've kind of re-engineered things or reoriented things a bit to instead of being working towards an exit, you're instead working towards a long haul. This is presumably a business that you're looking to now to support yourself with a comfortable salary or distributions to the owners.

Firstly, is that correct? And if so, tell me about that process. What did it look like? What are some of the things that you changed in terms of how you were running and managing the business as you navigated through that?

Sean Agatep (08:52)
sure. think when we were experiencing high growth, the running dogma was like, okay, just ride top line up as much as possible, red line profit. doesn't matter. Just scale, scale, scale, because you want to be able to show that you can grow revenue. Now, in order to run a durable business, you want to be able to have profit at the end of the day. you

We always said in our heads and when the tailwinds are behind you, it's easy to run top line and easy to run profit at the same time. But when things become harder and there's margin compression, you ultimately have to choose one or the other. You either have to choose like, okay, we're just going to force feed our way through growth. We're going to open up new channels. We're going to reinvest. We're going to put all this money into keep chasing that top line number because we think at this number, we'll be able to unlock X, Y, and Z. For our skill set and what we knew what we are capable of,

that road and that path seemed a little daunting and it was like, okay, well, let's just make sure regardless that anything that happens throughout this we're profitable and we're taking this much amount of EBITDA and that's the benchmark and that's the expectation. And if we have to sacrifice Topline and we have to sacrifice some of these like cool vanity projects, that's a sacrifice that we have to be willing to take for the durability of this business.

Because at the end of the day too, it is a cool business to run, right? We're in a very fortunate position to where I'm running the business with my best friends. We're making products that are for our own core demographics. So like we get to make the stuff that we would want to wear. You're building a community around people in that same phase of life. It's a cool thing to be doing anyway, right? So then if you don't want to be doing it at the end of the day, you should have...

retained earnings enough to where like it made it worthwhile. The journey made it worthwhile.

Nate Littlewood (10:49)
Hmm. Interesting. Okay. Another thing you mentioned the other day that was really memorable to me was that you realized at one point that your revenue was larger than it should have been. Can you share with us, you know, how did you know that that was the case and what are some of the things that you had to do after you came to that realization?

Sean Agatep (11:17)
Right. I think it comes down to the life stage of the business as well. Right. The first few years, it's almost like the first couple of years in college where everyone starts working out for the first time. So all of a sudden everyone's like kind of like bloated, right. But then that's not sustainable. It's not like a long term. At one point you have to figure out and understand what your natural weight is. And for us, what we realized when we started to get a little bit ahead wins, we started to see

these wins on all of these different channels that weren't as easy. We kind of reevaluated from a P &L standpoint and from like an effort standpoint. And we had conversations like, okay, well this channel that we started, in order to optimize and make it work really well, we're going to have to devote X amount of resources into this. Because ultimately the way it's running right now, it's breakeven at best, right? It's contributing to top line. But when I'm thinking and looking at how much profit it's actually plugging into the business,

It's net, it's even, right? And then you factor in the mental load and the, just the resource strain of also having something to tinker with and play with, versus why don't we just simplify this thing? We have enough juice to squeeze in the channels that we want to focus on. If we do want to unlock those other channels down the road and want to be able to put more intentional effort into those channels to be able to grow them, we always can do that, right? But to have the channels up just to have them up is,

unnecessary, especially in the state of the watch mark and what we were just seeing in general within e-commerce.

Nate Littlewood (12:52)
Okay, I understand one of the channels that you ultimately decided to pull out of was Amazon. I'd love to understand what the analysis looked like that brought you to the conclusion that that was the right thing to do.

Sean Agatep (13:12)
I don't want to say pull out of Amazon. It's more of we reset our expectation of expectations of what Amazon realistically should be as a channel for our brand and for where we stood. So it's very easy from an Amazon perspective to where it's like, okay, let's just go on Amazon. Let's scale ads. Let's push revenue and let's try to scale the Amazon as an entity.

for our brand, our price point where we wanted to take the direction of the brand, Amazon always felt more of like a demand capture play, less of like a, we're going to make intentional growth and sales within this channel. And when we were making an effort, I think at one point Amazon was about 20 % of our sales. So it was a significant chunk. But the assumptions and the fundamentals and the numbers that we were drawing off of were somewhat flawed in

how we were evaluating the channel as a whole and how it contributed to profit. For us, we looked at, okay, Amazon has their cut and they have a fulfillment charge. Well, that's basically the same cost for us as our welcome offer anyway. like one-to-one, it's probably about the same. What we experienced is Amazon returns for our product were more than triple what they were on site. We also didn't have any customer data.

And we also would limit ourselves in what we could stock because Amazon wanted our best sellers because those are what moved, but we would have to pull inventory away from and only sell and fulfill on Amazon. So it constrains a lot of your resources from that perspective too. So when all those things factor in, you're like, well, actually our profitability expectations, we need to set our acquisition costs from a marketing perspective.

It needs to have a higher standard than even on our own e-com site. And can we make that work? And then you start factoring in, you're like, okay, well, this doesn't seem like it's worth the amount of effort for what it's actually contributing to the bottom line.

Nate Littlewood (15:16)
Interesting. Were there any other, you know, channels where you materially change your strategy or approach?

Sean Agatep (15:26)
Yeah, so.

Mass distribution and wholesale, big retailers, that was always a pipe dream for us. What we decided to do with the brand, we thought that there was, and we still think the direction of the brand now is more towards sentimentality and gifting. And part of what we like to offer with all of our products is just to maximize the gifting experience. So everything from the way it's packaged to everything, to even being able to engrave and personalize everything. And

If you're going to go that direction from a brand and I want to be able to personalize every watch, I can't really sell into doors and in Nordstrom because the only reason they like it just doesn't align from like a mass distribution strategy. Right. So then the ex the realization one brands like Nordstrom and everything we we've been on their dropshipping platforms forever. They're not taking a lot of new watch watch watch brands. If anything, they're consolidating the category. So.

Okay, that door seems like it's very hard to open. So I think that's another example of how much effort do we want to put into forcing doors open versus being accepting of easy wins and maximizing opportunities.

Nate Littlewood (16:47)
Okay, So there's, know, over, how long did this process go on for, by the way? We didn't really talk about this yet, but.

Sean Agatep (16:58)
I would say...

a little over a year of self-reflection and evaluation of, this isn't a hyper growth brand the it stands anymore. What direction do we want to take it? So it was kind of a conversation for a bit. And then it's very challenging, I think also from a leadership perspective to having those candid conversations and then also still trying to do the day-to-day and steer the ship.

everything you're mulling over and you're planning that could make an impact in 18 months, you kind of have to start putting the pieces in the play right now. So then how do you set that up if like you're fundamentally going to change the business or if you're going to go with a completely different direction?

Nate Littlewood (17:47)
Mm-hmm. So if I'm understanding all this correctly, and please chime in if you think I've got this wrong, it sounds to me a bit like the way that you were building the business and how you subsequently pivoted is very much aligned with the kind of VC narrative on e-commerce over the same period of time in that there was kind of a top line, you know, growth at all costs, like just scale, scale, scale, scale, scale era. Then there was like,

shit, like money's quite expensive and this doesn't make sense and we actually need to figure out how to be profitable. And, you know, this wasn't two separate businesses. You actually went through the process of like reinventing your own company to survive that paradigm shift. And I gather, you know, the business that you're running, managing and operating today is, you know, very, very different company to what it was back then. Yes.

If I've got all that correct, the next thing I'd love to explore with you is the team and the people. tell me about the org chart then, what it looks like now, and how you went through the process of kind of changing the team that you had behind all of this.

Sean Agatep (19:02)
Right. So I think this happens with every single brand, especially as we've been talking more and more with brands with entitle. When you're scaling out and you're starting, part of the burden of starting a brand is you don't have the same resources that you thought you would, unless you're backed and everything else like that. So you have a combination of trying to find people who are just willing to work for you. And then you also have a situation where

the org chart tends to turn into a lot of specialists, right? Like I need someone to run the email program, so I'm bring someone on to just handle that email program. We're terrible at copywriting, I need someone to bring on copywriting. We need someone to do paid media, I need someone to just bring in paid media. Well, we experienced, especially as Econ matured and the rapid maturation of the tools and the resources and everything that were available, when you build out your org chart like that, where you've got a high,

bandwidth or a high rate of mid-level specialists that are capable of doing one thing, right? That limits your resources to be able to hire senior people because those mid-level roles are eaten up a significant chunk of your P &L, right? And then you also find yourself, okay, well, I need to be able to nurture and develop and manage that talent. So need to bring in someone to manage those people. And so then all of a sudden you're like bringing managers to handle the managers.

And then you run into a situation where also from a company our size, there's only so many roster seats. There's only so many, like there's only so much room on the org chart. So do we need as many specialists to handle these, these one or two or three or four or five things? Also, what if we stopped doing that fifth thing? What do we do with this person? Right? Like what if that's not a priority anymore? What we would rather have in that shift that we made was I would rather have

an elite team of senior people that are capable of managing several projects at once. And we can plug in specialists, whether it's agencies, whether it was contractors, whether it was freelancers, that was the philosophy that we shifted towards. And that was the paradigm shift in how Ventura operated, which again, takes some time to kind of, you can't just rip the Band-Aid off of there, right? It takes time to fundamentally change that.

Nate Littlewood (21:24)
Yeah. Gotcha. Gotcha. And was going through this process, what kind of gave rise to what has since become Tidal? Have I understood that correctly?

Sean Agatep (21:33)
Yes. So as it was our backstory within Vincero, we had lived in China for five years. So we had a little bit of a global perspective on things. Our supply chain team in China, they're all based in China. We were early on in building out a customer service team out in the Philippines. And the thesis was, what about this mid-level role? Has an econ been around long enough? Couldn't I find a logistics manager?

Nate Littlewood (22:03)
Mm-hmm.

Sean Agatep (22:03)
Couldn't I find a content coordinator? Couldn't I find a data analyst that has been doing this for 10 years? And if we want to shift towards hiring roles remotely, why not go globally? Why not just expand the, and the cost from a cost of living perspective, let's just start hiring a content coordinator out of Argentina, or let's hire a sales manager out of South Africa.

there's ways that you can really leverage that talent pool since the world went global and everyone went remote that we were like, okay, well, in order to do that well, let's build the pipelines, let's build the infrastructure and the team to be able to do that for ourselves. And in doing that, we found ourselves, we've already got the resources and now we know the playbook on how to find the best talent specific to e-commerce, specific to the brands that operate and look at in the philosophy that look at roles, how we think.

the direction of the industry is going. So let's just spin this off into its own agency, into its own thing and help other brands do the same.

Nate Littlewood (23:10)
Interesting. Tell me a little bit more about the e-comm specific nature of TIDAL. Like what do you mean about e-comm specific recruitment?

Sean Agatep (23:23)
So our challenge when we went through this process is we had to build it ourselves because I could not work with a recruiting agency or I could not, it was, it's fundamentally hard to find good people. So imagine taking that globally, right? How do I even find the best person to do that? So I would lean on specialists or agencies to be able to help.

there were service providers that said that they could provide the expectation and the caliber of work that I would hold myself to. The challenge was all of these other recruiting agencies or all these other service providers that we explored, none of them had built an e-commerce team before. Right? So no one knew the nuances and how different, I mean, I could be talking with a direct competitor to the men's accessories brand, their skill, the way their team is structured.

is completely different because their skill sets, they may be way more creative. They have way more access to wholesale or boutique accounts. There's just so many different nuances within e-commerce that unless you've got the mind and the eye of someone that's built these teams before and that understands not only the teams, but also how e-commerce works, all those nuances, and also how rapidly e-commerce is changing.

Right. How important was a copywriter role three or four years ago? Now that's almost like an afterthought, right? Like you need it as part of a skill set, but it's not like a core function of what you're doing. So that's part of the impetus of whatever title has become is you just, it's easier to have an owner operator lens on top of the hiring decision to be able to build these global teams correctly.

Nate Littlewood (25:09)
Okay, interesting. And how are you personally kind of balancing your time between these two businesses at the moment? Is it even split or more going in one than the other?

Sean Agatep (25:20)
Well, the cocky way to answer that is I'm a victim of our own success and that we've built out our team and standardized the processes and everything enough within Vincero. They do have the bandwidth and the capacity to tackle title and headline that project as well. So that's the easiest way to say it. We've got a killer team in Vincero that's taken on a lot. Growth is solid.

My head of product is awesome. She's basically taken over my job for me. So it's been very empowering to be able to continue to develop that role with her to where we can then also pursue these other projects.

Nate Littlewood (26:02)
Where do you see AI fitting into this? I mean, I'm thinking about the perspective of Tidal. I'm thinking about the perspective of, you know, an e-commerce owner and an operator. I mean, are you actively using AI at the moment in the business? And if so, in what ways and where do you think, what is this AI landscape going to look like in a year or two?

Sean Agatep (26:30)
I think it's only going to make people more powerful. I think it's only going to enhance what people are already doing. from someone who's more of, I have a low pain tolerance for inefficiencies. It's very inspiring. It almost feels like the second gold rush. feels very, the energy at least that we have within the business feels very similar to the tailwinds we were feeling within, with Facebook.

the Facebook Gold Rush in 2014, 2018. Because there's so much opportunity and it's so opaque still that you just want to be along for the ride because you know that if you've got just your head up, you're observing what others are doing, there's ways that you can maximize and improve how everything's working.

Nate Littlewood (27:18)
Okay, interesting. And as you know, I'm a CFO and love talking numbers. So I have a question for you about Tidal and I guess, you what I'm interested in is some case studies. Like, are you able to give any tangible examples in terms of what you've seen Ecom brands do in terms of their

spending on labor and what that might've meant as overheads as a percentage of revenue, for example. How much have some of these brands that you've been working with been able to save in percentage of dollar terms by moving to an offshore workforce?

Sean Agatep (28:05)
Yeah, easiest way to answer that is also one of the reasons why we got into promoting title as its own entity as well, because I think there's a dogma and a stigma within the offshore space where it focuses a little too much on the cost savings. Right. I think every other agency that you're looking into, you're talking with, they're always saying like save 80 % on labor, save 70 % on And we almost looked at it the same way that we looked at manufacturing when we were out there.

You know, if you're making a t-shirt and you're talking with five different factories and they're all saying it's 10 bucks and then you find someone that's like, hey, I can make it for you for two bucks. Like, I don't know if I trust that quality. And if I don't know if we really necessarily want to, like it just seems a little too, what would be the way to see it? It's too aggressive in trying to maximize payroll savings.

Right. If you're just like, I'm just going to go after the lowest cost provider. I'm just going to like try to maximize my costs. There's a lot to be said about quality. And so I think the worst way to hire offshore is to be, is to overly index on cost savings. Right. So what we did in the way we approach it and before we even start any, any roles or any, any agreements or anything, we'll go to market for a role you're specifically looking at. And we'll just give you the baseline of, listen, this is

how much this role would cost. Like this is what we're seeing like mid-market. This is what we're seeing top of market. This is where we're seeing low market for what this role that you're hiring for. So let's say you come to me and you're like, I'm looking for an operations manager. Five years of experience. You know, I'm, I was going to have to post it for 75 K here in the States. I just looking for a little more stability. What we'll do is we'll be like, okay, listen, if you want to hire in the Philippines, if want to hire in Latin America, if you want to hire it in South Africa,

top of market, the top 10 % of talent is getting this much money. they're getting, you know, if you're comfortable with offering 30K, you're going to get someone who will absolutely crush it for you that will be grateful of the opportunity. We see like cost savings for a lot of these mid-level roles that realistically you want to hover in that 50 to 60 % savings because there's a lot to also like you want stability in the role, right?

If you try to go cheap on the role and then you have to rehire the role after a bit, then it's the worst of both worlds, right? Like you're already going to have to do that hiring. Like if you were to do that and hire in the States, you might as well index on quality first, make sure I have the best possible fit for my brand, for my organization, how we work, our culture, everything else like that. And then if I can maximize the cost savings as much as possible with that, then let's go with

Nate Littlewood (30:54)
Yeah, that's a really good point about turnover and having to rehire people because every time that happens, you're going to invest time and effort into a new search process and training people again, which is money that you could have avoided, I guess, had you retained the original person. Okay, interesting. Switching back to Vincere for a bit and the watcher space, I understand, and you mentioned this earlier, that you're leaning

very heavily into gifting and the gift giving experience. I understand that there's kind of an engraving or personalization element to the product. Can you tell me a little bit more about that? And I'd specifically love to the extent that you're willing to share, love to talk a little bit about some of the unit economics and math behind that. Like, you know,

is the incremental spend or cost of delivering that personalization? Like what does the ROI look like on that? And what does the economics of look like? What does the economics of that look like compared to the base product, which is perhaps, you know, not personalized, for example.

Sean Agatep (32:06)
Yeah, so this is a long learning curve. We've been doing engraving for, I want to say six, seven years realistically. And it started with us just like, okay, let's just see if we could just personalize and engrave a few watches. Let's see if people would buy it. And as we went through that process, then it also the maturation of the brand, when you're a watch company, you're spinning out watches, even we internally, we

we had this conversation where like at a certain point I just, even as the watch brand owner, I just don't need another watch. However, I gravitate and the ones that I wear have sentimental meaning and sentimental value to me. So that experience and like being able to capture that sentimentality is what we focused on within the engraving and within the gifting experience is that, you know, you can just get a watch that you like and you think it's cool.

However, if you get a watch from you're in a wedding, you get a watch from your wife, you get a watch from your girlfriend, you get a watch from your mom that has an inscription on it that's sentimental towards you and has meaning, that's just going to hold a special place in your heart. And that's also just creating a very unique and special experience for your customers. the human economics and everything is almost secondary. We make sure we don't lose money on it, right? But it's not...

The sentimentality and the long-term power of the gifting experience is what we're focused on, less than the, we can make an extra $2 per watch with an engraving order, right? It's more of like, how much more powerful is that relationship with that customer, with our brand? And what sort of service can we provide to them? An experience that we can provide to them to where, the next time they think of gifting or the next time they've got a milestone achievement, they think of us as well.

Nate Littlewood (33:59)
One of the things you mentioned there is, you know, staying in the game, right? Like building a durable business and durable brand is about staying in the game. I'm curious from the perspective of a guy who has obviously stayed in the game for a number of years now. What does that look like in terms of some of the financial metrics that you track or are keeping tabs on?

Are you obsessed with a certain EBITDA margin or a percent customer acquisition cost, overheads, cash conversion cycle? What do those numbers look like that tell you that you're in a healthy place and you're well equipped to stay in the game?

Sean Agatep (34:44)
I think to go a level higher than that is also what do you want to accomplish? I think the challenge that a lot of people that are starting companies and founders face is that they just start running and they start going in the direction that's like, I'm just going to start building this thing and do everything else. And then just, I'm just going to keep, I'm just going to go. And we had a few different reflection moments of

Okay, what actually, what do we want to get out of this business to where we're still stoked out of this every day and a day out to keep building it and to keep putting our blood, sweat and tears into this? Okay, that's the benchmark that we have to, that's the standard that the company has to hold to, right? It needs X amount of EBITDA, we need to be running at this, our numbers and our fundamentals need to be here. So whatever we need to do to get those numbers and fundamentals here, if we can't do that, then this probably isn't worth it for us to keep spending

a majority of our time and our professional careers on, right? So having alignment there and making sure that you're all running in the same direction. You have an understanding of what of the race that you want to run personally, whatever is going on with other, with other people. And however, you know, there's all this growth, there's contraction, everything else like that. It's like, what, what do I deem as successful? That's the coolest part about being able to run your own company and your own business is that you have the autonomy and the authority to decide that for yourself.

Now, do you have the skill and the expertise to be able to get there is the secondary thing. the invigorating part is like, okay, where our goals and where we want to set is this level of profit. The company's running like this. This is what we think a healthy and successful company is. Because at the end of the day, and what we'd always talked about within Vincero is that even if we flipped Vincero, we were just going to start the next thing. So we were never going to turn it off. I can't turn it off. But if I can develop a

lifestyle and a way of living that I'm passionate about the stuff that I'm doing that we're that we're also invigorated by pursuing something and chasing something. That's really what we want to go towards. And then it's just a matter of do those numbers back out and then can you execute on.

Nate Littlewood (36:53)
Mm-hmm. That was a fantastic high level answer, but I'm going to circle back on the details part of it. Is, again, to the extent that you're willing to share, like, are there any specific numbers, metrics, margins, ratios that you kind of look out for and deem, you know, it has to be this level in order for, you know, things to be healthy and performing well?

Sean Agatep (37:18)
So what's that there's a we follow a rough philosophy where Let's say a third of your EVDA can go as distributions Okay, Let's do a third that goes towards towards uncle Sam a third that goes towards Like reinvesting in an inventory and just like having that financial cash I think from a health perspective we're comfortable with taking anywhere between 20 and 40 percent of whatever the EVDA is

home as dividends. So then what's the number that we each personally want to be taking home for this to be worthwhile? We set that number. That's like the number that we want to be able to run towards. And this isn't, I've actually been talking with quite a few different companies that are on that early stage where they do a lot of delayed gratification and they don't pay themselves as much as the role that they're hiring for is worth. It's like you're telling yourself a lie.

because if you want to remove yourself from the business and plug someone in, you're going to have to pay that much money to have someone operate and run that business anyway. we want to be able to take out a certain amount of money from distributions for ourselves to make this worthwhile. We can build out the rest of the numbers, everything else beyond that, but that's the goal that we want to run towards. So if you can do that at the same time, paying yourself

respectable wage for what you want to do and what you're actually participating with within the company, then that's a

Nate Littlewood (38:52)
I think based on what you just said then that you would be an advocate of telling founders to pay themselves what they're worth and don't undersell yourself into your own business. that accurate?

Sean Agatep (39:10)
Yes, yes, and we.

Because there's always going to be a reason to not pay yourself. You're going to have a tax bill come up. You're going to have a massive inventory purchase come up. It's a slow time of year, so you want to make sure you have enough cash. And so if you don't build the discipline from the company fundamental standpoint of this is how much money is being set aside as distributions, it's a line item within the P &L. That has to take precedent over a cool new initiative, over this, over X, Y, and Z.

That's way you should be running. And it's almost like there's a guilt towards like, I'm just starting this thing off. just really want to have, I just want to make sure that it endures the long run. But there's always going to be something that comes up until you draw that line in the sand of like, no, I'm paying myself this much money when the company hits this point. And then if it's not at that point, then you either just figure out a way to do it yourself.

Nate Littlewood (40:08)
Yeah, yeah.

Sean Agatep (40:14)
or you're okay with getting paid less, you can't infinitely just defer gratification and paying yourself unless you've got like a strict exit in mind. Cause then it goes back to that same analogy of like, then you're just training for that marathon that you still haven't decided when you're going to do. And at end of the day, you could just get a high paying tech job or you can do something else and just take all those retained earnings and look where you were five to 10 years later.

Nate Littlewood (40:40)
Right. Yeah. I love your marathon analogy by the way. That's yeah. Nice. Do you guys use Profit First or have you ever experimented with the Profit First approach to...

Sean Agatep (40:56)
Wee.

We're familiar with it. We don't. I think it's an idealistic. It's with all of those books. think it's it's it's a little more idealistic than like what is practical. I think we appreciate the fact that like once you come to terms, you're like, yes, no, I should be making more money. Right. Like I should be paying myself enough because also if I wanted to leave this company and just let's say that I've been saying I'm delaying gratification because I want to be able to build equity out of it. Well, if I'm not paying myself what I'm worth,

and I want someone else to run it for me, I'm to have to pay them what they're worth. And then this whole time, I've just been paying myself. Like the company is going to need to adjust to that number anyway. So you might as well set it up. if you have to, that means you cannot invest as much into new initiatives and everything else like that. That's a decision you have to make and whatever works best in your situation. I'm not saying one way is right or the other, but I think having a clear direction of what you want.

out of the effort that you're putting into is something that it's tough to, it's tough to force yourself to kind of have those thoughts.

Nate Littlewood (42:04)
Yeah, yeah. Got it. Well, Sean, it sounds like you've built a very, very durable business here and you've taken an incredibly rational approach to thinking about profitability versus top line and so forth. You have managed to extract yourself from a lot of the day to day operations from what it sounds.

all of which sounds like a fairly desirable state that I suspect a lot of founders would be interested in getting to. And as long as the environment stays relatively stable, I imagine that this thing could go ticking along by itself, so to speak, for some period. But there's one thing that I think we both know about the e-commerce landscape is that things really stay still for very, long. There's always things changing and evolving.

And one area that we talk about all the time in e-comm is obviously the cost of customer acquisition and how that's continually going. And the likes of Zuckerberg and Google are always taking bigger and bigger slices of the pie. I realize that you're not the marketing guy on the team and you're more an operations fella, but can you tell me a little bit about what you're doing at the moment in terms of ad spend and how you see that piece of the picture evolving at the moment?

Sean Agatep (43:29)
the ops guy talked about CPMs.

Nate Littlewood (43:32)
It's dangerous, I know, but we'll give it a crack. We can edit this out later if need be, by the way.

Sean Agatep (43:40)
So I think the momentum that we have in the brand and the ad spend that we have is a lot of just reflective work and what we wanted, what we realized the fundamentals of the brand that was lacking, that was easy to be somewhat lazy with when we were, when you do have those tailwinds. So the focus on high level creative, the focus on connecting with the community, which is through gifting and having just that tribe that you're going after.

If you've got that plus very good creative, you know exactly who you're targeting and how you're speaking to them. It's changed everything from the type of products that we're launching, right? Being able to launch jewelry has been a huge unlock for us going wider with product categories. It allows us to even within, within Vincero, you've got watches, you've got jewelry, you've got eyewear. Those itself, we look at almost as like three different product categories and three different verticals. So they've each got their own different cost expectations and acquisition costs.

in what we spend and even like the customer decision journey is all different. Like eyewear is a little bit different than watches and jewelry are both kind of the same because they're really good gifts. So I think there's just been a lot of power in how we've expanded the product line and how we have put more of an emphasis on really targeting in and targeting on a community and being willing to just focus exclusively on that gifting experience, that sentimentality, you know,

dads and grads, new fathers, that moment in time makes your cost efficiencies

Nate Littlewood (45:18)
Hmm.

Sean Agatep (45:20)
more worthwhile, I guess, right? Like you're just a little more targeted, you know exactly what you're spending and how you're speaking as opposed to a broad spray and pray. Like, let's just talk about Benchero, right? Like here's a cool watch. It's like, well, no, that's fine, right? It's not like a broad awareness campaign. It's more of, I know you're at this point in time. I know that this is what your consideration is. I'm able to key in exactly on the messaging that I'm targeting with you. we can just pursue that further.

Nate Littlewood (45:47)
Got it, got it. Okay, Sean, well, listen, we do need to wrap things up in a little bit, but I'd love to invite you to participate in a new tradition around here on Profits On Purpose. And I feel like as an operations guy who started now multiple businesses and, you know, grown an econ business into eight figures that I have a feeling, not to put you under pressure here, but I have a feeling you're gonna have a pretty good answer to my next question, which is what is your favorite

business, KPI or metric. How often do you track it or look at it and why?

Sean Agatep (46:24)
I'm going to show my ops roots. Well, from a founder perspective, the most important thing that we look at daily is profit, right? That's from a high level, like that's your North Star. I think the underlying one that just gives me a good vibe to where the business is trending towards is our CSAT and our customer satisfaction score.

So we hold ourselves to a standard. think we've been the past nine days holding at like a four, six or four, seven. we hold ourselves to an extremely high standard. And for us, that is a good bellwether to how the product's being received and messaged because those expectations versus how we've been like advertising and promoting it towards the actual experience of it. there, and especially when you get into things like gifting, there's a stressor involved in that purchase decision, right? I need to make sure I get it on time.

I probably delayed this. I laid it until the last minute. So I need to rely on this brand to provide this gifting experience for us. So for me, it's that number and how we run with that number and how we track with that number gives it like a holistic idea of where the brand and the direction of the brand is heading because that's just how content customers are. And we rely a lot on repeat purchases.

So it's more of, okay, if they're happy now, I know that the next time that there's a gifting event, they're going to be even more stoked because the stuff that we're cooking up is going to be just that.

Nate Littlewood (47:53)
Yeah.

Yeah. And I assume that you would treat that as a guess a leading indicator for the profit per day. Yeah. Yeah. Okay. Yeah. By the way, what do you have a favorite tool or platform that you're using to track that profit per day?

Sean Agatep (48:11)
You know, that's what's funny about all of this is that now that finance and ops is getting all the fancy tools that marketing has gotten, right? With new softwares and everything, we found ourselves to where we've built our own infrastructure to how we report on it. So it's all, for the most part, it's all done through our own manual processes. Now, if we had the ability and access to all these tools five years ago, it'd be a completely different story. But we found ourselves, we built this house of cards of

This is how this is how it Right. last thing I want to do is just start poking holes in the boat if the boat's floating and we're cruising around already.

Nate Littlewood (48:41)
Right, like...

Yep, yep, makes sense, makes sense. Okay. Well, Sean, where should people go if they would like to learn more about you personally or the businesses that you're involved with?

Sean Agatep (48:59)
Yeah. So I would say I'm not that interesting. I think you should check out our products at VinceroCollective.com. If you've got got one of the coolest products we've launched this year is we've made birthstone pendants. I'm actually wearing a couple right now. So like to celebrate the birth of your kids, it's like a, it's a sentimental new unique way that we have to enhance that gifting experience. So VinceroCollective.com, HireTitle.com.

Nate Littlewood (49:05)
Okay.

Sean Agatep (49:27)
If you want to learn more about how we can help you staff and build your team accordingly, reach out to me on LinkedIn. I do have a Twitter presence, although I've been 50 years old since I'm 15. So I don't know. I'm not the most savvy with all of this. But yeah, I'm around.

Nate Littlewood (49:42)
I feel ya.

Okay, cool. Well, this exact date is TBD, but I currently have this scheduled to come out in late November, which is pretty prime time. you going to have time to be able to ship a watch to someone who might be listening to this in late November? Can we get that all done before Christmas time?

Sean Agatep (50:06)
yeah, that's easy. mean, that's we're okay. No, I'm you're talking to the ops guy. So we're delivering domestic orders in about 3.7 days from time from click to ship from click to delivery. So you have until the delay it but you have until I think this year mid December, I don't want to throw Aaron under the bus here. But

Nate Littlewood (50:27)
Okay.

I'm sure it'll be on your website, but anyway, head over if you're interested in a beautiful watch as a Christmas present this year. Sounds like you have plenty on offer and jewelry by The Sounds. Sean, thank you again for joining me this afternoon. I've really enjoyed learning from you. It's not often that I get to chat with e-comm operators that have your depth of experience and knowledge and.

have seen so many different phases and chapters of the journey and have thought about it and reflected on everything that they've been through to the extent that you have. So yeah, I've really enjoyed the conversation and thanks for sharing it all with us.

Sean Agatep (51:11)
For sure, appreciate the time, Nate.