The Unofficial Shopify Podcast

The Financial Blind Spot Costing 7-Figure Stores Millions

Episode Summary

Why Your 7-Figure Store Has No Cash (And How to Fix It)

Episode Notes

"You can't control tariffs. You can't control the weather. But you can control what's happening within your business."

Salena Knight has audited thousands of retail businesses since 2007 and found that 4 out of 5 seven-figure stores share the same blind spot—and it's not marketing. It's money. We talked about why inventory is secretly taxable cash sitting on your shelves, how one brand increased profit margins 30% by auditing their pick-and-pack costs, and why running a 30% off sale on luxury products got zero orders.

WORK WITH KURT

Apply for Shopify Help
ethercycle.com/apply

See Our Results
ethercycle.com/work

Free Newsletter
kurtelster.com

The Unofficial Shopify Podcast is hosted by Kurt Elster and explores the stories behind successful Shopify stores. Get actionable insights, practical strategies, and proven tactics from entrepreneurs who've built thriving ecommerce businesses.

Episode Transcription

Kurt Elster • 00:00.001
This episode is brought to you in part by Swim. Here's the thing about wishlist apps. Most of them just sit there. A customer saves a product, and then nothing happens. Swim actually activates that data. When someone wish lists a product, you could trigger price drop or back-in-stock alerts and feed that intent directly into Clavio or your CRM. You're not guessing what people want because they've told you. Plus, customers can share wish lists for gifts, and your team can view them to offer personalized service online or in store. And unlike card abandonment, wishlist data is permission-based. These are people raising their hands saying, hey, I want this. Just not right now. Swim's been around for over a decade. It powers 45,000 stores and installs in about five minutes. You could try it for free today at getswim. com slash Kurt. That's G-E-T-S-W-Y-M. com Slash Kurt. Today on the unofficial Shopify Podcast, we are joined by retail strategist Selena Knight, who says she knows the uncomfortable truth. about why your Shopify store isn't growing and she says it's not marketing. So Selena Knight has audited thousands of retail businesses. and believes that uh roughly four out of five of these seven figure businesses, which if you're lucky, maybe one of you, have the same blind spot and it isn't traffic, it's not marketing. It's money and not understanding how it moves through your business. You know, and being the start of the year, I've had a lot of these conversations with some clients about like, okay, you know, what was our our media efficiency ratio and kind of understanding, you know, profitability in the business and discovering that that she's right. It is a blind spot. And so uh Selena Knight joining us. Uh Selena, thank you. Where uh where are you joining us from?

Salena Knight • 02:03.140
Uh right now from sunny Newport Beach in California. As you might be able to tell, I am not a native Californian. I'm from Australia. I'm here enjoying a little bit of uh winter sun.

Kurt Elster • 02:15.640
They yeah, no, I can't uh can't fault you for that, California. Very pleasant. So uh you've also you're podcast hosts, and like me, you've done uh 500 plus episodes. Congratulations.

Salena Knight • 02:27.700
Yeah, congratulations to you too. It's it's interesting, isn't it? Because it I think when you've been in the industry so long, and and for me it's been since 2007. It's amazing what stays the same, but also what changes. And so it was interesting when you're saying, you know, they have people have this one blind spot. It's like I've seen this for years. It hasn't changed. It's one of those fundamental things that regardless of what's happening in the economy, what's happening with um all those external circumstances. There are fundamental things within your business that never change. And I love that like I think I love the control that you have over those things. You can't control the external circumstances. You can't control tariffs, you can't control the weather, but you can control what's um happening within your business. And I think for the most part, I would say most Business owners and entrepreneurs, we're actually secret control freaks. So how nice is it to have something that you can actually control?

Kurt Elster • 03:29.720
It no, absolutely. Yeah. Worrying about, you know, I'm just an anxious person by nature, but you're worrying about, you know, all these external factors that you can't control, especially as a business owner, you very quickly would make yourself completely crazy. So yeah, all right, first tip there from you, focus on the things you can control. Okay, I like that. Um it you know, we're really it seems like the the issue, uh very clearly that people are running into is understanding monitoring viewing cash flow and understanding it. As an e you know from an economics background, health of a country is determined by how much how much and how easily money flows back and forth through a system. You know, not, you know, what anyone's doing with it, just, hey, where how easily does this flow, how much flows? Great. That is how we're going to measure health here. Tell me, you know, what is the how should we be viewing our business? What's like what are people getting wrong here? You know, what what should they be doing to get it right?

Salena Knight • 04:27.240
I don't think that people get it wrong. And I'm gonna put my hand up and say, I did university uh when I was older. I did a business degree. I failed accounting, not once, but twice. Which makes me Oh, it's so boring. You're probably thinking, well, what the hell, like my whole brand uh mission, uh my brand vision is we create strategies that make money for retail and e-commerce stores. We are not actually financial advisors. Everybody on my team just loves helping people make money. And that does not necessarily have to be, you know, through more marketing and we all have different expertise. But the reality is we have to be in control of our money. So your question about where like where do people go wrong? I don't think they go wrong. I think there are a few things That sit in the background. One is you could be like me and when you did commerce or accounting or whatever at school You failed. And I distinctly remember when I opened my first door, I knew nothing. I had a business degree. I knew nothing. Like the business degree does not teach you about running your own business. It teaches you teaches you about working in an enterprise level company And I had my Excel spreadsheet and I was putting in all the you know the the income and the expenses and I still to I actually just get chill saying this, still to this day remember sitting on the stool at the counter, the shop was quiet. And I remember thinking, oh my god, this accounting thing, it's just money. It's like, how much money do I have in my account? How much money do I have to spend? How much money do I owe? Like, how much money is in the til Why didn't someone just say to me, It's just money? And at that point I probably would have understood it, but the double journal account, like, still to this day. I don't understand it. What I understand is money. I understand money needs to go to pay for this. Money needs to come in from here. This money is accruing interest. This money is costing us, you know, this this is costing us money. And so I if I think about it in terms of money, I'm totally okay. So where do people go wrong? As your business grows Keeping a handle on income and expenses in an Excel spreadsheet is really easy when you're doing $20,000 a month. It's not so easy when you're doing $200,000 a month because This not only is the scale bigger, but the economics, the unit economics change. And so where you maybe used to get uh a one box from a supplier with multiple different products, you now might be getting containers worth of stuff. And so working out things like uh you know shipping like I call it freight in and then shipping out like shipping to the customer is shipping bringing it to you is freight I just like to have two different words because here here's where do people get it wrong? Not having financial people like bookkeepers and accountants who understand retail. And so for example, that simple thing like calling getting the product to you freight and calling it getting it to the customer shipping. I can't tell you how many businesses I've audited where the shipping line item was crazy. Like I'm like, I don't You've only sold this much money. How have you have you spent that much on shipping? I was like, well, some of that is getting it to me. I'm like, no, you can't have that because how do we know what to change We don't know if the problem is getting the freight to you and we need to organize our own freight service or we need to look at, you know, getting a different logistics company. Or if it's you getting it out to the customer, in which case do we need a different courier service or do we need you know different you know dish different um what what's it called again? Sorry, I'm having a mental break. End of end of line? No. Um I don't know, there's a term, like the finish line, the the part. Last mile. Last mile. Last mile.

Kurt Elster • 08:17.180
I was like, I know this, but I also took me a second.

Salena Knight • 08:20.780
Yeah, so is it getting it to us or is it the last mile? And if we don't understand those things we don't know where I I call them money leaks and money fountains. So they're always money leaks and money fountains in a business. Money leaks are those generally those quiet things that are just dripping away. That's one of them. Not understanding what thing we need to change or what what thing we need to look at. Utilities quite often gets lumped together. And I'm like, so is it is it the electricity that we're having a problem with or is it gas or is it the inter like how if you don't separate these things out, we don't know. I said, I'm not a financial advisor. My brain can just see these patterns and it just goes, that number doesn't look right. So that's one part. I mean, that's a P and L Thing, I think really getting your PL in order and understanding, you know, what where the costs are coming in and where they're going out is one. The biggest Can I just skip to this part?

Kurt Elster • 09:20.980
Because this is like my Yes, please.

Salena Knight • 09:23.140
This is the thing you will always hear Sal harp on about. It's inventory And it uh if I can tell you a story. Back when I first started, and they didn't teach me about this in accounting, I didn't understand that inventory is actually an asset. I thought an inventory was an expense. And so I got to end of financial year and all of my suppliers were having sales. And I was like, oh my God, this is amazing. I can just buy all this stuff, all this 30% off. Like, what does that do to my margin? I'm gonna make so much money here. Uh fast forward a few months later when I go to my accountant and he's like Why do you have so much inventory? I'm like, because everybody had it on sale. And he's like, you know, now you have to pay tax on that. I'm like, but I don't I don't understand. How do I pay tax on an expense? It's not an expense to you. It's an asset. And so the difference that you pay between what you had at the beginning of the year and what you had at the end, that difference is now an asset in your business and you have to pay tax on it, which completely still to this day boggles my mind. But it is the way that tax office works. So That is a huge one is just having money sitting in inventory because it is, if you come back to my analogy of Everything is just money. Every product sitting on your shelf is cash. It is literally a bundle of $20 bills. It's a bundle of $1 bills. That money that is on that freight that it's on its way to you is literally a container full of hundred dollar notes, my friend.

Kurt Elster • 11:01.660
Well, I don't know about literally

Salena Knight • 11:04.340
Well it kind of is. Figuratively, figuratively.

Kurt Elster • 11:08.900
Figuratively it is. Figuratively. We have to have our bookkeeping right. If we have our bookkeeping right, then we know assets and liabilities and expenses. So now okay Their money leaks are it's real easy with a recurring expense to go, oh, well, it's only, you know, X dollars a month. But then when you see it over, say, twenty-four months, you're like, oh, that added up to real money. Um So we want to fix that stuff. And you know, that's like quarterly annual review. You could do that. Assuming you have the balance sheet, right? It starts with bookkeeping. I use bench, makes my life easy. And a lot of people use like QuickBooks Online. I'd say you use whatever tool. For bookkeeping. What do you use? Sounds like spreadsheets.

Salena Knight • 11:50.300
Uh no, I don't use spreadsheets. Um I use zero, but what I do do now is I refer all of our clients to um a bookkeeping and accounting firm that actually specialize they only do retail and e-commerce brands. That's the only thing they do. So they are looking at these little tiny things or these exponential things where if you continue to do this, this is going to blow out. And so it retail is just a different beast Because you have so much money sitting in inventory, it takes a different kind of person to understand that How you move money through your business needs to change as you grow. And again, I'm not an accountant, but understand the difference between cash basis and accrual basis. And I've seen businesses on accrual And and them telling me that they have this extraordinary profit margin. And I'm like, but you have no money in the bank. Oh no, no, but my profit and loss says this. I'm like, yeah, yeah, because I don't know. There's most people listening to this podcast are not going to need accrual-based accounting. Um We won't go into the into the details of it, but cash is basically when you spend it, when you earn it, it gets written down. Accrual is a little bit like, it's a little bit. . Esoteric. Like, I have that stuff coming so I can write it down as being here. I have that stuff going so I can pretend it's not here. Hold on to that. You kind of need to be a bit smart to learn that stuff. But I would say for the most part, people need cash. So it's where do I do my accounting? I give it to people who understand retail and e-commerce.

Kurt Elster • 13:30.620
And so, all right, if we get that right, now we have a a much better picture handle on ri you know, really the health of our business. So now we can make more informed, confident decisions. Yes. Because you know, the worst case scenario, and you would it would shock people how often this happens. I mean it's not like all the time, but A business where they think they are profitable on a purchase. They think they're making money. You know, revenue's great. Cash is moving through the business. And then when you look closer at it, discover, oh, we actually lose money every time we make a sale. We are paying customers to take this stuff away from us practically.

Salena Knight • 14:09.839
And this this kind of comes back to that where I see this the most is if we come back to that inventory conversation, uh one of my 5x clients literally just had this discussion. She had a bit of a brain moment where she an aha moment where she said, Sal, I have all of the we we just done the audit through her business and I'm like, I don't but you've got a warehouse and you've got stores and what's sitting in the warehouse are all of like stock from like three seasons ago. What? Three seasons ago? Yeah, I'm like, so can people buy that? Oh, we just kind of drag it back out at sale time. I'm like And in my brain, it's ding ding ding ding ding ding ding ding ding. It's like, okay, so we're paying to warehouse it. Um, we've written, you know, the cost of those has depreciated so much because it's three seasons ago. Like that who even wants that stock? And she said, I think I will bring it back out for a sale. I'm like, just hold up a minute. Let's just think about this. And she said to me, I know what you're going to say. You're going to say to me, I'm going you're like, is it worth my time and money? She's like, I've this is what I have learned. And she said, here's what I think about it. I've got two choices. I can either um call Goodwill and get them to come and pick it up. I can actually write it off at cost price, which means I'm actually going to be earning money on it Because if I sell it, it's depreciated so much that I'm gonna have to sell it way below cost. And I have to bring it out from the warehouse to you to send a truck to get it. She had to send labor to pick it all up, to put it on pallets, pick it up, she had to bring it back to one of her stores, she had to market the sale, and then they had to staff the sale. So she actually decided, we we sort of nutted it out, and we actually decided that she would do that for the specific reason of the fact that the store that she was going to ship it to was seeing a downturn in foot traffic. And she said, I'm going to use this as a reactivation campaign. And so I know that I'm not making any money, but it gives me a reason to get people back into that store. I'm like, okay, we made a data-driven decision here. And she weighed up the cost of she would have actually earned more money, you know, technically on paper, to get Goodwill to come and take it away. But by using it as a reactivation campaign, she was literally paying people to take that product.

Kurt Elster • 16:29.899
But we're happy about this?

Salena Knight • 16:31.940
I'm happy about it that she made a decision based on the data. And so what did end up happening obviously is people come back into the store and then they see the stock and then they were buying new products as well So it i it I don't think that she made any money on it, but the purpose of that s of that was not to make money. And so one of the things if we just Throw over to a tangent here. When you ever do a promotional campaign, I always want you to have a goal. And in this case, her goal was not to make money. Her goal was to reactivate the shoppers in that precinct to come into the store. They're two totally different things. And so if she had gone into that expecting to make money, she would have been bitterly disappointed But she wasn't. She was like, I'm I'm super happy. I got rid of four hundred and fifty units. Like whatever's left, goodwill is taking. I'm not shipping it back to the warehouse. But it did. It brought hundreds of customers back in to be a to to activate that store. And so again, this is like a money leak, right? It's not understanding what is the what is the purpose of your marketing. Because if you go in with one idea of like every marketing thing has to be about making money, you and I both know that sometimes marketing is about just Building your email list or driving foot traffic or reactivating customers and not all of those things will make money. Sometimes those things cost you money.

Kurt Elster • 17:56.620
Ever had a customer cancel an order because they were shopping? Well high, or because they broke up with their significant other. Those are real reasons customers could cancel, and they're a real headache for both you and your customers. Why should they have to email support to change, cancel, or update an order? Enter Cleverific. With Cleverific, your customers can edit their orders themselves through a self-service portal. That means fewer support tickets, faster shipping, and fewer returns. Everybody wins. Peter Manning, New York cut their order support by 99% with Cleverific. Now it's your turn. Listeners of the unofficial Shopify Podcast Get 50% off the pro plan. Just $49 a month. Go to Cleverific. com slash unofficial and use promo code Kurt50 at checkout. It's less hassle, happier customers with Cleverific. Staying top of mind, you know, that really uh often is an expense. But then, you know, the thinking is, all right, this leads to future money. So we're gonna make a a short term investment with you know by moving this uh by running the sale, get people into the store Remind them that the store exists. Give them a positive experience with the store because they get this, you know, great sale item. Maybe they buy other merchandise while they're there But then, you know, in theory our customer lifetime value goes up or a total number of customers for that location goes up. Okay. So there's a little bit of It's kind of interesting to think about, you know, with money like, all right, what's what what's the accountant say, what's the marketer say, and what's the economist say? They're gonna tell you to spend that money three different ways. And so, you know, what's the right answer?

Salena Knight • 19:31.660
You and you're saying where do people get it wrong? I don't think people get it wrong. I think that there is so much to be across that sometimes it can be overwhelming. Like if you don't have great people who are coming back to you with the data and the information that you need, and if you don't surround yourself with people like that client I was just telling you about, that that you know, the aha moment came because of the fact that we audited her business and we saw the inventory and then um we have some like education modules that she has access to and when she went through this one about understanding money She was the one who had the brain moment of, oh my God, this is costing me money. And so I love educating people, but I don't think people get it wrong. It's just that no one teaches us this stuff. And as you grow I see people grow broke. Like I see $5 million businesses with no money because they're self-funding everything. Like they're taking every every growth moment is coming from profit. And as much as people don't like to go into debt, there there comes a time in business where you are going to need external money, whether that is just to ride out seasonal um fluctuations, whether that is to grow, to open a new location, to expand your product range, whatever that is. Very few businesses can grow off profit alone. And if they do, it's generally pretty slow

Kurt Elster • 21:01.820
Yeah, it's really taking no loans whatsoever. Even a bootstrap business, really, it's like you should have access to a line of credit, even just as a safety net.

Salena Knight • 21:12.080
Because most people don't grow when you and you would know this too, because you talk you look at websites, you look at marketing And most people, the fear comes from I can't spend that money either because I don't have it or what if I don't get a return? And so What do you if if the simple fear is you don't have enough money, get the damn money. I d I It seems pretty obvious. Like, if that is the one thing that is stopping you from growing, get the damn money

Kurt Elster • 21:43.960
Are we advocating getting loans or getting I'm not a financial advisor?

Salena Knight • 21:48.280
I'm just saying find ways to put the money into your business. Like if if you are complaining that that is the thing and I don't know, Kurt, is that the thing that you hear? Like, oh, I can't spend more money on ads because I don't have it. You know, I need to do more marketing, but costs have gone so high. Like what do you hear people saying is the constraint in their business?

Kurt Elster • 22:07.120
Well, off it's it's the formula, you know, for a an online store, you know, what's that What's that cost of uh customer acquisition? You know, when I send traffic to the site, all right, what's my conversion rate? What percent of that's gonna buy? What's my AOV? You know, how much of that? Ultimately, you know, at the end of the day, If I don't understand contribution margin, those are, you know, in the last several years I've discovered that's like the magic KPI that separates the wheat from the chaff among online stores. And if I understand that number, then I can have a a healthier business. But until they can get, you know, until you get to that point, you end up in that scenario where I'm definitely I could acquire customers, I could build an audience, I can get that list, but for sure I'm paying them a little bit of money to take the products. Yep.

Salena Knight • 22:56.880
Do we need to talk about contribution just really, really quickly?

Kurt Elster • 22:59.680
Absolutely. Okay. Just even just to reiterate its importance.

Salena Knight • 23:03.280
Okay It's money, right? Like how about you you talk about it and then I will just be like, yes, it's money, it's money, it's money, it's money

Kurt Elster • 23:12.019
So contribu the problem with contribution margin is like, you know, how much which costs are we gonna put in there into it? But ultimately you need to understand is, you know. All right, I could figure out tip on a typical purchase, like there's gonna be a number one bestseller. So let's just focus on that. Uh we don't wanna get contribution margin for everything. I just wanna know when that hero product in your store sells in an online store sale. Deduct the average uh CAC customer acquisition cost from that cost of goods sold, right? And then we will roughly have the profit, the margin that this one sale contributed to the overall bottom line. It doesn't have to be exact. You know, you make yourself crazy figuring that out. And then I want to pair that with a much broader number, media efficiency ratio, where I'm just, you know, I'm looking at, okay, what are uh my all my expenses going into marketing, you know, and what's this rendering uh for straight revenue? Then I've got my efficiency.

Salena Knight • 24:13.659
And so one of the things that I would say, and people are listening going, cost of goods sold. Another money leak that I see is it it kind of comes back to that shipping concept, which is the fact that people forget about the money that they're spending. And so where I where I mean that is If you're not using 3PL, you forget that it costs money for someone to go and pick an order. You forget, you know, for one of your staff to walk to a shelf and pick it up and put it in a box. costs money. The box costs money. The tissue paper costs money. The flyer that you stick in it. The sticker that you use. The shipping all costs money. And quite often what we do is we go, this is what it costs to get it to me, and this is, you know, this is my average shipping cost. But their shipping cost is the actual postage cost, not the box, the tissue, the sticker, and the time it takes for someone to go and pick and pack it. And so that That bit there, we worked with a brand and increased their profit margin by 30% just by doing that. by auditing how much it cost for her staff to pick and pack and then moving to 3PL. So she ended up, when she did the math, it was $6 for her to pick and pack, not including the postage. Now most 3 PLs are not going to charge you $6 to pick and pack.

Kurt Elster • 25:41.660
Yeah, they have operational efficiency and economy of scale. Uh and essentially pass the savings on to you, right? Because they're doing it in this much bigger operation. And so you're all kind of sharing the benefits. of those reduced expenses.

Salena Knight • 25:56.020
And that like when we come back to cost of goods and your your contribution margin, I think that is like another big piece that people just forget. It's like, well cost of goods cost me this. And it cost me that to ship it out. But this little bit in between, and it's so much easier with 3PL, right? Like they just give you a bill and you understand it. And so you can account for it a lot easier. But when you're doing that in your own warehouse Or, you know, if you've if you have a bricks and mortar store, you've got, you know, if you've got e-commerce but someone in in a store is packing for you because you're shipping from different destinations, if you don't understand that, your contribution margin is like whack, right? It's it's just a made-up number.

Kurt Elster • 26:35.360
The Yeah, I 100% you're right. Um The other thing, like flipping it on its head, you said the thing that merchants that uh entrepreneurs that store owners don't get is Is psych is money, understanding it, psychology of money. We focus it on like the money in their own business. What about consumer psychology? You know, did I see a lot of people projecting, you know, their own subjective values on pricing onto their customers?

Salena Knight • 27:09.500
Okay. This is like my second love, can I just say? Um I'm like a pop psychologist. I have literally no psychology degree. I'm, you know, no psychology degree. However, I have done a so much research on behavioral psychology, both within um like within teams, but also obviously consumer. And so this is just Sal's version. Don't come at me with pitchforks if I'm wrong. But I think one of the one of the things I see is founders and owners putting their own economic bias onto the customer. Right now, as I film this, I'm sitting in a five-star hotel and I've stayed here before. I was literally in a scenario last time I was here where I was by the pool, and The trash can was through it was just across the footpath, three feet away, like one step to get to the trash can. And the guy beside me asked like the pool person to put it in put his wrapper in the trash and then handed him cash. I know we laugh about that, right? But this is how rich people think Rich people are constantly looking at ways to collapse time and they're happy to pay for it.

Kurt Elster • 28:26.240
Because time is money is a tool to buy back my time

Salena Knight • 28:29.660
Money is a tool to buy anything. It gives you choices. It gives you um it can buy time, it can buy experience. It literally collapses time because If you have money, you can go to an expert and say, what do I need to do? You can ask the poor person to put your trash in the can so you can continue your conversation with your lovely wife. We don't necessarily think like that. And if you don't understand how rich people think, then this and I I'm gonna say I came from a very, very poor like extremely poor background. So this has been a lot of work for me. If you don't understand how people value, what people value then you could be doing your marketing completely wrong. You could have the wrong product mix. You can have the wrong pricing. And so and it's the wrong positioning. R wrong positioning. So an example there, my own example was in my stores I had this beautiful handcrafted wooden, I sold kids products. Stacking toy. It was like a pyramid with the rings that stack up. And the guy who owned it, um, his whole thing was I want to bring wooden toys to the everyday person. And so beautiful products. Very affordable, made sustainably. He like he literally went and hired a village to make them in Ethiopia, I don't know, somewhere. And He so much ethos went behind those products. Now, I used to buy them for fifteen and I would sell them for $29. 99 general marketing, right?

Kurt Elster • 29:56.580
Yeah, Keystone Pricing.

Salena Knight • 29:58.020
Keystone pricing. Everyone else was selling it for $20. 99. And I it was our top selling product. But as my brand started to grow and as I started to position it, we had people come in who would, you know, it was the first thing we'd say, I need a baby shower gift. Oh, you take this. Talk through through the whole story behind it. And we would get people saying, look at the price. Oh, it's it's only $29. 99. Oh, do you have something else?

Kurt Elster • 30:23.860
Because it's a gift. It's g it needs to be fifty.

Salena Knight • 30:26.720
So what did we do? It took a took me a long time to work this out, Kurt. I'm like, I'm gonna put the price up to $39. 99. Bearing in mind you could have walked down the street and bought that same thing for $29. 99. Do you know how many more units we sold? Because the value for my customer was it's a gift. It's a wooden toy. If it's $30, it must be cheap crap. I, you know, I could have bought this thing at Walmart. Um so putting the price up actually put it in line with my brand positioning.

Kurt Elster • 30:55.780
Now it's premium.

Salena Knight • 30:57.380
Now it's premium. Now I'm prepared to pay. And now I'll even add something else because maybe I had $50, but this thing's really pretty. And I've still it's only $40, so I'll just grab something else. So it actually pushed the average order value up. And so I think understanding consumer psychology is that as as experienced business owners, we are so used to buying everything cheap. Like we are like wholesale price, baby, wholesale price. And so we don't understand that for customers, paying ten dollars more is is uh you know, that's sometimes more p more important for them. Like they don't want to I've got another brand I can think of where um literally a luxury product and she did a 30% off sale and people nobody bought. Literally no orders. And she's like, what the hell happened?

Kurt Elster • 31:47.679
I would have panicked. I would have assumed that something was broken.

Salena Knight • 31:51.039
She did. And I and and this was before we worked together and she came to me and she's like, I don't know what's going on. I s I sell this product day in, day out. She only had like five items, five SKUs. I just had a 30% off sale and I didn't sell. I was like, well no one's buying your stuff because it's cheap. It's like $100 a bottle for this serum At $70, the only people who are going to buy are the bargain hunters, and you don't actually have any bargain hunters on your email list. So The reality is you actually just devalued your product in the in the eyes of your existing consumers. Um, and so something like a gift with purchase works better for that. Like you don't go to Chanel It's not on sale, right? Like it that they understand that customers don't want to devalue the experience. And so I always say that if you ever use the word affordable when you talk about your store, you are probably the most affected by external economic climate and you're probably not making a lot of money

Kurt Elster • 32:48.820
Here's a word from our sponsor, Zippify. Hey, the holidays are over. Traffic's down, ad costs are still up, and you're staring at Q1 wondering how to keep momentum going. Here's the move. Stop leaving money on the table with every order. One click upsell automatically increases average order value by up to 30% with AI-powered upsells across your entire customer funnel. Launch pre-purchase and post-purchase upsells for every product in your store in one click. Customers get personalized offers and spend more as a result. Unlike other apps, you only pay for those results, not views. It takes under two minutes to set up and it starts working immediately. Q1 doesn't have to be a slump. Make every order count while you rebuild traffic. Go to zipify. com slash Kurt for your 30-day free trial. That's zipify. com slash K-U-R T. And let's start the year profitable Yeah, affordable kind of a yeah, a a trigger word, but like completely subjective, right? And that's the issue here. Yeah. Is a dollar is not a dollar. Consistently. It depends on who is viewing it and to what it's being applied.

Salena Knight • 34:03.360
Yeah, a dollar is not a dollar to someone who only makes a hundred dollars a week. I mean that is one one hundredth of their entire income. It's one percent. But if you earn a thousand dollars a week, it's 0. 1 of a percent. And so it's like it's like it's like pay the guy to put my trash in the can. Right?

Kurt Elster • 34:23.520
And so at a thousand a week, I'm still getting up and throwing out my own trash.

Salena Knight • 34:27.120
Yeah, me too. I mean a thousand dollars a week is I mean it's probably not even baseline, right? Like that's fifty-two thousand dollars a year. So It's not really a lot of money in this day and age.

Kurt Elster • 34:38.359
If this is before tax, yeah. Um I'm getting a side hustle.

Salena Knight • 34:43.079
You're driving Uber on the weekend, my friend. Um If I have to. Can I just quickly talk about I've just got another great story. I'm full of stories, so just cut me off whenever you're ready. Um I worked with a store that sold adult products. Um and the owner was very, very passionate about sexual education and sexual health and um did a lot for the industry. Um but When we went through, here's a money leak, right? We went through the orders and I'm like, you get an awful lot of orders on a Thursday. Like, what happens on a Thursday? And she's like, well I guess because we do express shipping, I guess people are buying it for the weekend.

Kurt Elster • 35:28.180
Uh-huh.

Salena Knight • 35:29.380
I'm like, ah, because we have over you know overnight shipping. And I was like So why don't we just offer Uber? Like they can have it like on on Saturday even, on Friday. It'll be there in you know to less than two hours. And she was like, like, would would would people pay for that? Like it would be expensive. I'm like, you know what? Someone's buying $500 worth of product to pay $35 to have it in the next hour or two. Like, let's just test it. It costs nothing to test. You put the plugin into your Shopify, you plug it in, and the customer does the rest. The customer can choose whether they want the free overnight shipping or do they want to pay the $35 for Uber. A remarkable amount of people chose the two-hour delivery window with Uber. But to make it even better, so one, we've made the customer happy.

Kurt Elster • 36:19.559
Like all of a sudden it's like date night on Saturday. They're ordering on Thursday. They're planning ahead. I appreciate it.

Salena Knight • 36:29.080
But it's that's at that em that's the Amazon mentality, isn't it I want it now, I want it now. And so as an independent business, we have to work out, okay, we we maybe can't bit compete against Amazon, but we can compete on this last mile bit. And so that happened, but even better, Cash Baby. When people were getting the overnight shipping, she had built that pricing into her products. And so it was free, free overnight shipping.

Kurt Elster • 36:51.660
Whoa. That's unusual.

Salena Knight • 36:53.980
Yeah, well she had good margins. But when they were paying for Uber, that ten dollars that she was paying to get it shipped out and profit in the back pocket. Because the customer was now paying the full price of shipping.

Kurt Elster • 37:08.340
The shipping price had already been baked into the product, but now they're you're passing through the cost. The full cost, yes. Of the yeah. And you could, you know, in a Shopify store, you could plug in in the US anyway, you could plug in DoorDash. And if set this up where it's like, okay, I know I have the inventory in this zip code. Someone ordering from this zip code should have this as an option. I see this very rarely, but it just, you know, it seems like such a cool thing.

Salena Knight • 37:35.120
It's one of the most underutilized things. And you know why? I I will put my hand, you know, hand on heart and say it is because Most retailers won't pay that money to get the thing to them because they're not thinking like, you know, what does my customer value? What what's a rich person? And I I told you about my DoorDash story, which was I was working on a huge product, um, a a huge proposal and my my um mouse ran out of batteries and we had none in the house. Now I live maybe five minutes from a store, not very far at all. Uh and in Australia, like we just walk everywhere. It's okay. So I was like, oh walk down. I was like, oh my God, I need these batteries. I don't want to stop. I was in the flow. I am a tight ass. But I pull up DoorDash. I see that I can get it from the store. It's going to cost me $20 for a $9 battery. But in that time, in the 20 minutes, how much work do I get done? How much more of that proposal gets done? How much more money am I making? A hell of a lot more than the $11 it's costing to get it to me. So I think not valuing our own time as well as valuing what our yeah understanding what our customers value, I think those two biases stop people from doing this very simple thing. And and does that app cost anything unless like most of these things don't cost anything unless you use them.

Kurt Elster • 38:58.059
Yeah, no, you're not you're right. You're not paying a subscription fee just to have access to the utility of that if I need it in the future.

Salena Knight • 39:05.020
Yeah. So test it. Just test it. And maybe your customers won't use it and you can I always say, I'm happy for you to prove me wrong. I'm happy for you to prove me wrong.

Kurt Elster • 39:14.260
Yeah, if I have if I have the ability to do this, which like from a technical standpoint, if you're on Shopify, you could plug DoorDash in. And then it's just a matter of like, okay, are you s if you have a retail store, obviously like much easier for DoorDash to show up, get the order, leave.

Salena Knight • 39:27.560
If you got a warehouse, they can do it as well. Um just the key thing here, make sure we're looking at pricing, right? Because DoorDash obviously takes a fee. Just make sure we're understanding that we don't want it to eat into profit. So what you'll find most customers, most most brands do is you can, and I'm sure you can do it in this app too. I know you can do it in the DoorDash app, is they'll put like a 30% increase in the price. So your ten dollar item now is $13 if you buy it on DoorDash, and that covers the margin that DoorDash takes from you. I just don't want to.

Kurt Elster • 39:55.240
Oh, it's yeah, listing it on DoorDash.

Salena Knight • 39:57.440
Yes.

Kurt Elster • 39:58.000
Okay, I got you.

Salena Knight • 39:59.119
But what but we're talking about two separate things, but I don't want people to get confused thinking.

Kurt Elster • 40:02.880
Okay, no, I did you're right. Yeah, two separate things. One I can In my Shopify store, I could use it as a delivery option. Yes. Or I could also have my items, you know, if I'm Instacart, DoorDash, whatever I could get listed in there and then you know they handle the whole thing.

Salena Knight • 40:19.920
Or you could do both.

Kurt Elster • 40:21.599
Yeah, I was gonna say it shouldn't be either or. Like if we're doing one, we may as well go f go do the other.

Salena Knight • 40:26.359
Yeah. But the the DoorDash Uber cut Instacart delivery, um, you guys have Uber delivery here too. I've got some clients that use it. Um I I don't understand why more people don't do it because I'm in a hotel right now and if I need something, I don't have a car to get somewhere. I'm in a conference. Like this this is why Amazon wins so often. I can just like open my phone and it will be down at reception in two hours.

Kurt Elster • 40:55.640
Yeah, it's your conve convenience.

Salena Knight • 40:57.720
It's convenience and there are people who will pay for convenience. And this is where it comes back to understanding what your customer values. Because if you don't if you don't understand that convenience is important to them Then you you are missing out on money and you're missing out on customers and you are missing out on giving your customers the experience that they actually want that will bring them back again and again. I'm just gonna say this is a point of difference, right? If you have I'm sitting here in my hotel room and I need to buy a new phone case. And I have a choice between someone who can Uber it to me in the next couple of hours or Amazon or I have to go across to a store and get it. Which person's getting my business? It might be Amazon if they have what I want, but if they don't have what I want, the person who can get it to me while I'm here is the person who gets my business. So you've just something so simple as plugging that into your business Plugging that into your Shopify store literally could be a point of difference for you against a sea of sameness

Kurt Elster • 42:00.460
You're absolutely right. Yeah. I mean that being able to offer that convenience, uh, really like suddenly you have access to the same level of convenience and utility that Amazon Prime offers, only you don't have to charge a subscription fee. No. Yeah. Okay. No, you're you're making a lot of sense here. All right. You have you have a a 12 week program, like a in a course or coaching program. Obviously it they all start somewhere. You know, using that framework for people listening who like this advice, you know, what what's the starting point? Like what's the thing leaving this episode that they should go do?

Salena Knight • 42:43.620
Whether it's that 12-week program or we also do strategic advisory for seven-figure businesses, the first thing that we ask you to do. Has nothing to do with money. It has nothing to do with your marketing. It has nothing to do with whether you've got five stores or ten stores. And it's actually probably the thing that most people find the hardest, which is simply Telling me what you want. What do you want? What do you want in life? What do you want in business? What you know, when do you want to how long do you want to have this business for? Do you want to hand it down to your kids? Do you want to maybe sell it one day? Uh do you want to go on holidays three times a year? One of our um Latest clients, literally, we made her do this exercise and she's like, I wanna take c can I take three holidays a year And and two weeks each. And I'm like, girl, you can do whatever you want. Like, we just have to build it in. But if you don't know what that is, we can't plan for it. We can't plan for the money to pay for it. We can't build the business that works for that. We can't build the team that works for that. And so if you do nothing if you take nothing else from this podcast, and hopefully you've taken a lot more than than this Just simply ask yourself when you go for a walk, when you're in the shower, when you're sitting down with your family tonight, just talk about what you want And and don't feel judged. Don't feel like you can't have these things because maybe only rich people have hell, you might be the person who's I want to pay the poor boy to put my trash in the can. No judgment here, my friend. If you've got enough money to do it and that makes you happy, he's happy, you're happy, everyone's happy, no one got hurt. But understanding that And not feeling guilty for wanting stuff? I mean that's something I've had to work a lot on, from poor person to sitting in a five star hotel. Trust me, it's it's a lot to work on. Oh I was just gonna say, but without knowing where you want to go, how will you ever know if you get there?

Kurt Elster • 44:43.079
I like that advice. Yeah, it's so much easier to grow and scale if you have clear goals. You know, without the goals, you shouldn't be surprised when the status quo is the thing you end up maintaining, even if unintentionally. And the goal can't just be like, oh, we want to get bigger. It doesn't work. You know, you have to have you know more concrete things in mind to shoot for because then you can work backwards. You know, you start to backfill. It's like, oh I want to do X. Okay, well, and start unraveling the steps to get there. You're right.

Salena Knight • 45:13.380
But it's also that in life too, Kurt Like, I think a lot of people aren't happy because and as overachievers, which most business owners are We get to somewhere and then we just move to the next thing, we move to the next thing, we move to the next thing. We do that in our life as well as in our business, but like if you're if if you just want to hang, if you want to go to your kids' school recital every Friday. That's okay. But know that you've built this business to do that and be happy that you can do that. And it's okay for you to want that. Someone else might not want it, but this is your life and you get to live it. And so if you don't know what you even want, maybe just start there. I reckon you'll I think think it'll probably help solve a lot of people's problems if they just like, you know what? I actually want to buy a boat or I want to send my kids to private school or I want to Stay in five star hotels and great. Now we can reverse engineer what it's gonna take to get there, exactly like you just said.

Kurt Elster • 46:09.500
So we start with step one. Define your rich life. Like what's you know, what's that thing.

Salena Knight • 46:13.660
Okay. Oh, I like that. That just gave me goosebumps. I feel like I'm gonna steal that

Kurt Elster • 46:17.100
Oh, please do, because I just stole it from Remit Sethi.

Salena Knight • 46:19.980
Oh, did you?

Kurt Elster • 46:22.140
Yeah. Uh all right, last question. You you work with people who want to make money, who wanted to define that rich life and get there. Give me one trait. What's one trait that kind of that separates the people who are successful doing this from those who aren't?

Salena Knight • 46:36.240
Do you know what? I'm just sitting here trying to think of through all the people that we've worked with who have, for want of a better word, achieved and other people who have stayed. stuck despite all the best efforts. It's not doing. Every person is a doer. Every person will stick their hands in and do the work when they need to. Oh yeah, I'm gonna say confidence. A lot of people I think a l I think a lot of people have a have self-doubt and especially a lot of self-made successful business people, millionaires, whatever word you want to stick in there. We spend a lot of time worrying if it will all go away. worrying if we're smart enough to get to the next level, worrying about what's going to happen. And so I think that erodes our confidence. And I I mean I mean here at a conference and one of the things they talked about yesterday was being emotionally healthy. And I'm gonna I'm gonna put my hand up and say, I did not pass the test. I work way too hard. Everybody in the room worked way too hard, all business owners. Let's just say I'm gonna go with that, being emotionally healthy and that takes a lot of work, Kurt.

Kurt Elster • 47:48.800
Oh, yeah. I mean first you have to admit it. First you have to admit it.

Salena Knight • 47:52.640
Yeah.

Kurt Elster • 47:53.120
Work on it and be aware of it. For me, it's the awareness. And when you said like, well, you know, you spend so much time worrying about everything because you're trying to control it. And there's so much you can't control, but then you waste the energy worrying about it. But then, you know, ultimately, what does that do? Well, it erodes your confidence in you know, making some of these decisions or like some of these bigger swings. And so unless you make those that part of your goal, like, all right, I'm we're gonna make take three big risks this year.

Salena Knight • 48:20.420
Yeah.

Kurt Elster • 48:20.980
Yeah. Then it probably not gonna happen because you know too much

Salena Knight • 48:26.240
But it also takes a it takes a a toll on your emotional health. It takes a t that stress, constantly living in that stress. Hurts your body phys they know it hurts your body physically. They know and I've got another story there, but we're running out of time.

Kurt Elster • 48:41.619
Yeah.

Salena Knight • 48:42.819
It It changes the way you interact with your friends and family and your loved ones. Like you're not present. So that it's affecting your relationship. So that constant worry and need for control is affecting your health. It's affecting your relationships. It's affecting the way you turn up. And so I think this is why a lot of people end up like getting divorced or getting disconnected from their family is because we are very determined and tenacious and we will do all the things, but in the back of our mind it's this constant worry and the stress and You know, I yeah, I'm gonna go with yeah, the confidence, the emotional health, the and awareness. So I'm gonna put all those things together. Think of one word for all of that stuff.

Kurt Elster • 49:25.960
Uh J Emotional intelligence? That's the closest I'll get a phrase. The but okay. No, it it's honest. It's great advice. Selena, where can we go? I want more Selena Knight in my life. Where do I go? What do I do?

Salena Knight • 49:40.660
So I have a podcast called Bringing Business to Retail. More than 500 episodes. And you've been on it. And if you just want to find me, I'm the Selena Knight, spelt S-A-L-E-N-A-K-N-I-G-H-T, not like Selena Gomez. I like to say I am not O G Selena Um but you'll find me. Like I'm on all the places except for X.

Kurt Elster • 50:01.460
Excellent. Uh cool. Very good. Selene tonight. This is great. Thank you so much.

Salena Knight • 50:06.820
I love these conversations. Thank you so much for having me.

Kurt Elster • 50:09.300
Oh, my pleasure. All right, uh, theselenaite. com. Check it out. Hey, before you go, I was hoping you would check out our new app, Promo Party Pro. It is what I want to be the single best, easiest way to run a free gift with purchase promo on Shopify We just put it live in the App Store. We've got less than 50 users. We want your feedback. So if you need to run a free gift with Purchase Promo in the near future, install it, try it. There's a live chat. I check that all the time. And so if you have any issues at all, you know, or any suggestions on how we can make it even easier to use, let us know. We're happy to help.

Kurt Elster • 50:48.800
If you want to try it, search promo party in the app store, promo party pro's the app. Give it a shot. It's got a free trial. Thanks