356 | Shaping Products to Establish Market Leadership | with Nathan Vasquez

Originally from Wisconsin, Nathan Vazquez studied computer science at Yale University. He       worked for 15 years as an options trader at Citibank until he was eventually tempted by the idea of being his own boss with work that allowed him the flexiblity to spend more time with his family. 

In 2015, he left his job in finance to join his wife’s sticker subscription company, Pipsticks. Within a year, Pipsticks had thousands of subscribers in over 50 countries. As CEO of Pipsticks, Nathan now manages the company’s growing business in the subscription, E-Commerce, wholesale, and licensing markets. He lives in Brooklyn, NY with his wife and four kids.

In This Conversation We Discuss:

• [00:00] Intro
• [01:23] Balancing creativity with business logic
• [05:43] Learning by doing and adapting fast
• [08:21] Growing an organic customer base
• [09:57] Stay updated with new episodes
• [10:06] Finding spending balance for growth
• [12:38] Seizing opportunities during market shifts
• [14:29] Sponsors: Electric Eye, Freight Right, Taboola, Next Insurance
• [20:00] Scaling your brand through audience feedback
• [24:10] Focusing on one thing at a time
• [26:32] Expanding a product to wholesale 
• [28:25] Learning from early B2B mistakes
• [30:07] Measuring break-even for smart spending
• [33:04] Aligning resources with marketing strategy
• [34:29] Targeting break-even timelines strategically
  

Resources:

• Subscribe to Honest Ecommerce on Youtube www.youtube.com/c/HonestEcommerce?sub_confirmation=1
• Cute stickers for kids, crafters, anyone pipsticks.com/ 
• Stickers + stationery that say what you wish you could theswearjar.com/ 
• Follow Nathaniel Vazquez linkedin.com/in/nathaniel-vazquez-5b663222/ 
• Schedule an intro call with one of our experts electriceye.io/connect
• Turn your domestic business into an international business freightright.com/honest 
• Reach your best audience at the lowest cost! discover.taboola.com/honest/ 
• Easy, affordable coverage that grows with your business nextinsurance.com/honest/

If you’re enjoying the show, we’d love it if you left Honest Ecommerce a review on Apple Podcasts. It makes a huge impact on the success of the podcast, and we love reading every one of your reviews!

Transcript

Nathan Vasquez

Keep it as simple as you possibly can. Get one thing working, get it right, and then move on to the next bit. I think diversification is incredibly important for a company for its longevity, for its redundancy, for its ability to grow and ability to scale. But don't try to do 10 things until you're doing one thing very, very well, because you're gonna fail at 10 things instead of doing one thing right. You have to build the blocks first before you can keep going.

Chase Clymer

Honest Ecommerce is a weekly podcast where we interview direct-to-consumer brand founders and leaders to find out what it takes to start, grow, and scale an online business today. 

Hey, everybody. Welcome back to another episode of Honest Ecommerce. Today, I'm welcoming to show Nathan Vasquez. He is an ex-banker and now the CEO of PipSticks, a sticker and stationery company. Nathan, welcome to the show. 

Nathan Vasquez

Thanks, Chase. It's an honor to be here. I'm super stoked to have a conversation today. 

Chase Clymer

I'm excited to chat. And for those that don't know, or maybe you don't even know, I've been trying to make this interview happen now for about 2 years. And we're finally here. We met at SubSummit. I always like to shout out places where I meet people at conferences, try to get them out of their houses.  How do you like that conference? 

Nathan Vasquez

Yeah, SubSummit is great. I've been going since, I think it's the second year. So it's probably 7 or 8 years now. I started in Austin. They did one in Detroit. And then year two is in Austin. And I missed one year for my son's middle school graduation. But otherwise, I've been there every year. It's a great group of guys. It's a good conference. A lot of fun. 

Chase Clymer

Yeah, I'm excited. Next year, it's gonna be in Kansas City. So I'm excited for a change of scenery. But awesome. Let's talk about it. So PipSticks is a sticker and stationery company. Give me a little bit more than that. What are the types of products you bring into the market? How does it work? Just what's the elevator pitch about the company? 

Nathan Vasquez

Yeah. So the elevator pitch. I give you the one-floor elevator pitch: we sell happiness.

Right. So, there's lots of bits and pieces of what we sell. We sell stickers, we sell stationery, we sell notebooks, journals, anything sort of stationery adjacent. We started out as a subscription company. We've moved past that. We sell one-off products, non-subscription. We do it on our website. We do it wholesale, a B2B market. 

And in the last couple of years, we've launched into licenses. So we have licenses with companies like Sanrio for Hello Kitty and Friends. We do Care Bears. We're about to launch  Rainbow Brite. We do Peanuts, of anything that's, I would say, 80s rainbow, happy, puffy, scratch and sniff. I mean, if you look at me, if you're on video, I'm pretty off-brand. 

I'm in my late 40s, nearly 50 guy wearing a blue shirt and a gray beard.  And our audience is all scratch and sniff, rainbow, unicorns, and care bears. That's what we do. But the elevator pitch is that we sell happiness. 

Chase Clymer 

All right. I love that. Now, take me back in time. Where did you get this idea? I'm going to sell stickers on the internet for a career. 

Nathan Vasquez

Yeah. So to be clear, I did not get this idea.  My wife is the, she's the genius behind the idea. We were living in New York and about to move to London for the second time for my work. I used to be in finance. I was a trader at Citibank for 15 years. And my wife was or is a graphic designer and had always, sort of wanted to start a company. 

She'd always had the entrepreneurial bug. And so she would have ideas. She used to call me the destroyer of ideas. She'd come up with great fun ideas. And I'd be like, “No, that one's not going to work. That doesn't make any sense.” And she came up with the idea for a curated sticker club. And this sort of Dollar Shave Club was big at the time. 

It was the subscription boom. I guess, 11 years ago now. 10, 11 years. So subscriptions made a lot of sense. They were very popular. The economics made sense. And this one seemed reasonable. So I didn't destroy that idea. And she went on about it herself. Got the company started. 

She spent, probably six, nine months just working on it, getting it going in the background. She  was a graphic or is a graphic designer, but was also a stay at home mom at the time. And was looking to do something that would keep her active so that when the kids were off to school, she could jump back into the workforce and have a resume that didn't look like there was a big gap in the middle. So she launched the company.  

We were  about to move to London. We moved in June or July. She did the soft launch with friends and family right about then. And then in September the hard launch went public. We got to New York. Pardon me, we got to London for my second stint there.

And immediately, politics of the bank, my boss's boss left to join some hedge fund. It got political. They wiped out the entire department that they sent me to London to help manage.  And it was just a very good time to maybe spend less time at the bank. So I ended up being in London only for a year at that time. We came back a year later. 

The company was about a year old. It was growing well. We moved back to the States. And I thought I'll take a couple of months off to take a little bit of a break before I jump back into finance. And in that break, I decided to help Mo, my wife, with the PipSticks, with stickers. And, three, four months in, it was kind of interesting. 

The numbers looked a bit interesting. You know, I had turned down a job that I didn't like. Didn't really enjoy the idea of going back into finance. And we thought to ourselves, well, it's January 1st now. Let's give it a year. Let's see if we can hit some targets. And if we do, we'll reassess. A year passed. We hit the numbers. A year passed, and we hit the numbers again. 

And now 11 years later, I've gone from a career in high-frequency options trading to selling puffy stickers. So it's a bit of an unexpected twist. But here we are. 

Chase Clymer

Yeah. You covered a lot of milestones there. So I'm going to make you go back and talk about specific things. All right. Your wife is working on this business in the background, getting it off the ground. What did that entail? What was she doing? I know there's a lot of listeners out there that have the bug in their busy work. But it sounds like she did something right because she launched, and you guys got subscribers. So what was she doing? 

Nathan Vasquez

Honestly, the easiest answer is she was staying up far, far too late. We had 3 kids at the time and she was pregnant with number 4. So she was doing all of this while raising 3 kids who were under 5 and being pregnant. So it's been a long time. It's a long time ago at this point.

I'll be hard-pressed to get you the start of what she did as well because I was a bit absent from the bank. It was a lot of investigating with friends and family. We ended up, initially, we weren't producing our own stickers. We were sourcing stickers from third-party vendors. So she had to spend time finding all the vendor relationships, working on all the pricing negotiations. 

She's a designer. So the look and feel was super important. So she had to come up with all the packaging. Come up with a website, and then just all of the blocking and tackling, where are we going to do it? Okay. We're going to do it on Shopify. How are we going to manage the subscription? We managed it with Recharge.  

We knew nothing. We knew nothing at all. We didn't know what email marketing was. We certainly had never run an ad on, on Meta. I think she went with her gut and had a fantastic idea. And then, once people, once people jumped on and started buying, and there was proof of concept. We just panicked backfilled, and tried to solve problems as fast as they came up. 

Chase Clymer

That's amazing. So your first version of the website was on Shopify? 

Nathan Vasquez

The first version was on Shopify. We took a bit of a tumultuous path with our tech platforms. We started on Shopify with Recharge. Right when Recharge was brand new. Our customer ID is some very, very low number because we were one of the early, early customers. And it was so early that they were at the time. It's changed since then.

Probably not the best subscription platform out there. We moved to a platform called CrateJoy because they were much better at subscriptions. We were on CrateJoy for a couple of years. And as we expanded and determined that we wanted to do a lot more than subscriptions, that's when we decided that we needed to be with Shopify. 

Because every app, every tool, anytime we wanted to do anything that was e-com, not subscription-based, Shopify was just a much better option for us. So we then a number of years later, did the reverse. Migrated back from CrateJoy, back to Shopify, and back to Recharge again. And we've been there ever since. 

Chase Clymer

Oof. I understand the pains of that. But I guess now with launching on Shopify, launching with Recharge, I know that one of the… CrateJoy as a platform, does help with discoverability, but that came later on. So with the going to market of this initial sticker subscription concept. Where did your wife, and then you when you hopped on board, where were you guys finding these customers that weren't your friends and family after that soft launch? 

Nathan Vasquez

It was all completely organic to begin with. The first year was friends and family, and then was word of mouth. She had a blog on the website that she would post on. But it really just was organic growth. Subscribers would tell their friends and they would pass it on. It was after we'd been around for about one year when I came back from finance that we decided we wanted to understand how marketing worked a bit better. 

And then I jumped in, set up the AdWords account, set up the Meta account in Ads Manager. And then we started running ads. So we were probably a year in before we did any paid ads.  But once we got that up and running, then we had a bit of a lever where we could control it more. I mean, think we were probably in the first year, maybe up to 500 subscribers.

Certainly not enough to make a lifestyle out of. But it was enough proof of concept that we knew that there was something there and that we thought we could make it work. It was worth me not going back to my work and trying it for at least a year and putting our chips all in. 

Callouts

Hey everybody, just a quick reminder, please like this video and subscribe. If you haven't, we're releasing interviews like this every week. So don't miss out. Now back to the interview.  

Chase Clymer

With this launching Meta and launching AdWords. Obviously, that's 10 years ago, maybe to now. So budgets have changed, value has changed. The power buying of a dollar has changed. And how much ads are, they're obviously more expensive now than they were back then. 

But if you had to put a percentage against it, or just rough math. How much were you guys spending a day or a month when you were first getting started to try to get in front of people that weren't just referrals and friends, and families, to try to let the other listeners out there understand like, you got to start somewhere. 

Nathan Vasquez

Yeah. I mean, it was wildly different. The platform has almost nothing in common other than you give them money and they hopefully send you traffic. It's not even Facebook anymore. It's Meta, right? But when we started, it was a very, very, very low risk. I mean you could run an ad set for 20 bucks a day, $30 a day,  and see what happens. 

The important thing to remember when you're spending money in advertisement is not necessarily how much you spend in a given day, but it is about sample size. So there's nothing wrong with spending 20, 50 bucks a day. You just can't trust one day's worth of data, right? 

You need to make sure you have a sufficient number of impressions, a sufficient number of conversions that you have a statistically relevant sample size. So we started out small. We started 10, 20, 30, $40 ad sets, $50 ad sets. Maybe we got to a couple hundred bucks a day. 

And then, it's a cashflow question. How much money do you have available to spend on those ads? But I would say if I could go back and change one thing, and this is the question everybody always asks, is I would go right back to when we first started with Meta. And I would have a much better understanding of what my customer lifetime value is. Much better understanding about my cashflow break-evens and my contribution margin. 

And knowing that I was getting $12 CPAs in 2016 for a subscription, I would have gone out and leveraged everything I had to try to scale that up. When you do find the CPA that works, when you understand your cost of goods, when you understand your cost of sales, when you understand your marketing spend, and fully understand your contribution margin. 

If you hit that number that lets you scale it, you should scale it as hard as you possibly can and as fast as you can because those windows, they do not last. That's happened twice in the business. And one time, I let it walk right past me. And then we tried to jump on a little better the second time. 

Chase Clymer

Absolutely. Yeah. When you started talking down that path, I was like, I know exactly what he's going to say here. He wishes he spent more when the getting was good on Facebook.

Nathan Vasquez 

Yeah, I should have mortgaged the car, mortgaged the house. Done everything we could have. Take all the money out of savings. Because if you're at the right CPA, and you can make the money back right away or within a month, and you can scale it, it's a fantastic thing. 

Unfortunately, it didn't last. CPAs, like you said, only go in one direction on average and everything is much more expensive and much, much, much harder to do with dollars on Facebook than it was in 2016. 

Chase Clymer

I'm just gonna venture a guess that the second time this happened was with TikTok?  

Nathan Vasquez

Nope. The second time it happened was with COVID.  

Chase Clymer

Oh. 

Nathan Vasquez

Yeah. During COVID, everybody  was home. Everybody was tied up in front of their monitors. People weren't going out. And a lot of the big companies were nervous. So a lot of the big companies had reduced their marketing budgets and there was less spend going onto Google and Facebook, at least initially. 

So all of a sudden there was less competition and there were more eyeballs and the CPMs plunged and the conversion rates shot up. First month or two, three months into COVID, we were terrified and just like everybody else, and we thought, what's going to happen? Is this going to work? Is this going to be done? 

And by the time we got to May or June, it became clear that while there were a lot of very serious challenges, at least in the online advertising arena, there were a lot of opportunities. 

And CPMs and costs per click, conversion rates, CPAs all came down. It was still nowhere close to where it was back in 2016, but it was at a level where we were comfortable leaning in and spending more money. So I would say the six to 12 months after COVID was when we were spending the most.

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Chase Clymer

Now, I do want to take a step back because I'm assuming during COVID, you were back on Shopify, back on Recharge? Or were you still on CrateJoy at that point? 

Nathan Vasquez

Yeah. No, we're back to Shopify by then. That was, I want to say 2019, maybe, something like that, when we went back to Shopify. 

Chase Clymer

So it was before COVID. Gotcha. So talk to me. So the first four or five years of the company, you were focused on essentially one product, which was this curated subscription sticker pack. What changed that you're like, we want to diversify a bit more? 

Nathan Vasquez

Yeah. So I'll give you a couple of steps. So when my wife launched the company, the idea was it was going to be a product for kids and really a product for mothers to buy time with their kids. It was a sticker, a kid's sticker subscription. And that worked. But we learned pretty quickly that the majority of people buying the subscriptions were not necessarily moms for their kids, but they were women for themselves. 

People who loved stickers, loved stationery, loved crafting, were fans of the 80s, fans of our brand, fans of Lisa Frank. So the very first thing we did was we launched a second subscription.  We started with our kids' pack, which we still have. And we launched what we call our Pro Pack, which is the adult version of the subscription. 

And it's adult, not in a Las Vegas adult way. We have another brand called The Swear Jar, which we just launched, which is for that. But it's adult in a just more sophisticated, smaller stickers, harder for small hands to use, maybe a more sophisticated palette or content. You can put different images onto the stickers. And we launched that. So we launched our Kids and our Pro in two different sizes.

And that was the first big pivot we did. And that worked great because women, mostly women, were buying stickers for themselves. And it was a lot easier to market to somebody to buy themselves a sticker than it was to buy others. That was the first big time we shifted in product. Then we stuck with the subscription path for a number of years. 

And eventually, we decided to move to designing our own stickers. We were no longer buying stickers from third parties. So we would hit minimum order quantities on the units of stickers. And if we knew that we were going to sell, and I'll make up a number of hundred subscriptions, but we had to buy 200 stickers, we'd have excess inventory. 

So we figured out ways to package that as individual one-off stickers. And we started adding those to the store. And that's really what pushed us to move back to Shopify. Cratejoy was a really good subscription platform, but it was limited in our ability to list one-off products. And with two subscriptions and 30 new stickers every month, we were adding 30 new SKUs to our catalog. Every single month there were a lot of products that we wanted to put on Shopify. 

So that was the first big push was when we started producing our own artwork and then going to our own factories and producing our own inventory. We had MOQs that we needed to  reach. When eventually we got past those MOQs in the subscriptions, we just continued buying a couple hundred extra units here or there. So we had product. 

And what we recognized was, we launched the subscription during the era of the Dollar Shave Club. And subscriptions were a thing. You mentioned SubSummit. We went to SubSummit because we were a subscription company. But we learned at some point that we're not a subscription company. And I think in very few cases is anybody actually a subscription company. 

We realized that we were a sticker and stationary company and that subscriptions were just one way that people could buy our product. And we had tens of thousands of rabid followers who loved Mo and loved the brand and loved our product. And we were telling them, sorry, you can only buy two things a month from us. I don't care if you want to buy anything else, we're stopping you at two different products. 

And when we realized that, we started adding more products. Not just our one-off stickers, but we started adding notebooks, journals, planners, scrapbooks, sticker collector books, which is kind of a cross between a trapper keeper. You're probably not old enough to remember the 80s trapper keepers, but a trapper keeper and a baseball card collecting kit. 

And we recognized that not only could we get higher price points, because that's a struggle with stickers, but had people that wanted to buy more than just a subscription. And we could bring them back again and again again to buy more and more product on our store, on our online store. 

Chase Clymer

That's a very, very awesome story there. Now, obviously, knowing what you know now, maybe you'd make some more decisions. But do you think for a brand that's just getting started, having that focus on  one product, one funnel, one message to optimize makes things a little bit easier than trying to launch a catalog for say?

Nathan Vasquez

Yeah, certainly operationally. There's a trade off to be had, right? Simplicity is important. Simplicity is powerful. I mean, one of the things that we did, I would say we did badly or that we still do badly is we chased after the shiny new thing. So anytime something looks interesting, we get excited about it, we go chase it down. And that can leave you in many cases 80% through  with a lot of different projects, which is not good. 

So yeah, I would certainly say when you're starting out, keep it as simple as you possibly can.  Get one thing working, get it right, and then move on to the next bit. I think diversification is incredibly important for a company,  for its longevity, for its redundancy, for its ability to grow and ability to scale. 

But don't try to do 10 things until you're doing one thing very, very well, because you're going to, rather than, you're gonna fail at 10 things instead of doing one thing right. You have to build the blocks first before you can keep going. 

Chase Clymer

Yeah, I always like to say the shotgun approach to anything. If everything is important, then inherently nothing is important. 

Nathan Vasquez

That's right. 

Chase Clymer

So nothing will get done. We are very, very hard-lined at the agency and the way that we work with clients. We are working on this one thing until it is done, unless you can prove something else is more important. 

Nathan Vasquez

Yeah. 

Chase Clymer

And it allows us to actually move the needle.

Nathan Vasquez

I couldn't be more, but I will say that's a strong do as I say, don't do as I do. Because I still have a hard time focusing on one thing until completion. Because there are so many exciting opportunities out there. But yeah, I would strongly agree. Pick one thing, do it well, prove that it works. And then when you've got that on a well-oiled machine, then go ahead and figure out what's the next bit you can add. 

What's the next customer you can find? What's the next sales channel you can add to? Because all those things, like I said, are very important in redundancy and in survivability and in growth and expansion of a business once you reach a certain point. When you're starting up, especially if you're a solo entrepreneur, find one thing and do it very, very well. 

Chase Clymer

Absolutely. Now, let's talk about adding another complexity to your business that you've done recently. After we said, keep it simple. You guys, you've launched wholesale now. How did that come about? What was the learning curve there as just a native D2C brand from the get-go? Where did that idea come from? And how's it going for you? 

Nathan Vasquez

So wholesale, first of all, is a completely different beast. The cash flow implications are monstrously different. You have to hold far more inventory. The sales cycles are very different. The customers are very different. It's very, very, very different from D2C. It is, however, a natural fit once you have the other part of the business in place.

We had the D2C brand and we would just constantly get requests. Hey, I want to sell this in my store. Can I sell this in my shop? We had a friend who owned a toy store who wanted to sell these products. So we just thought, well, we'll give it a try. We'll help somebody out. And we backed into it. 

The first year, year and a half of it, we knew absolutely nothing. We did all sorts of things backwards. We had the wrong kind of catalog. We didn't provide the right service to the customers. We didn't understand the terms. Our inventory was wrong. But eventually over time, we managed to get the basics in place. 

Wholesale's great. It's been a phenomenal opportunity for growth for us. But it requires  a different business outlook. Cash is by far the biggest  hurdle and the biggest difference between D2C and wholesale. You need a lot more money upfront for inventory. And then when you sell the product, you have to wait sometimes depending upon the customer, before they pay you. There's net terms. 

So you have to outlay a lot of funds to have the inventory to make the sale. And you're not going to see it in the back end for sometimes months, depending upon the customer. 

Chase Clymer

Absolutely. What were some of the mistakes that you guys made initially with your wholesale offering, I guess?

Nathan Vasquez

Yeah, sure. I'd say  one of the mistakes we made was when you have an online store and you have 1500 SKUs or 1000 SKUs or whatever some large number is. When the SKUs are in stock, you can sell them. When it's out of stock, you just hide it from the website. Maybe you order more, maybe you don't, it's available. People browse the site. 

So we thought to ourselves, okay, well, one of the big benefits we're gonna have for B2B is we've got this constantly updating cycle of products. So these customers are gonna have constantly new stickers. They're gonna refresh it. It's gonna be great. They're not gonna be stuck with the same old sale product over and over and over again.

They don't care and they disagree and that's not what they want. They want a catalog that they can see and understand and then they put it in their stores. If it's selling, they want to reorder it. So we would constantly sell somebody. We'd sell them a rack, a display with 30 SKUs on it. And then of course the SKUs that sold the best, maybe five of those 30 would sell out and they'd come back. They'd be like, great, we'd like to do a reorder of the five best SKUs.

And we'd say, sorry, we don't have those, but here's 12 new butterflies that you might like. And they didn't like that at all. So they were constantly trying to reorder things that were working. And because they were working, we were selling out, which leads back to the fact that you need to figure out your inventory. 

You need to have more in advance, but you also need to cut down and whittle down that catalog and not allow as many options. Because if you give them too many choices, it's sort of like the shotgun approach. You want to do a few things very, very well, have those things in stock, and figure out what those are. So I would say our catalog offering and the way we managed inventory was very difficult, very difficult. Yeah, that was a big challenge for sure. 

Chase Clymer

Gotcha. Now, not even just with wholesale, but with just looking back on the last 10 years at PipSticks, is there anything I didn't ask you about that you think would resonate with our audience? 

Nathan Vasquez

Anything you didn't ask me about? I'm happy to drill into any sort of details about the marketing, how we look at CPAs, or how we look at  acquisitions. 

Chase Clymer

Let's get nerdy with it.

Nathan Vasquez

Yeah.  Alright. What would you do? Any questions for me? Or how do you want to do it? 

Chase Clymer

Yeah, guess distill down. Earlier in the conversation, you talked about the contribution margin and knowing your numbers. So I guess, could you give me a high-level overview of if I'm getting into Facebook ads, we've got product-market fit sorted. We know there is a market for our product. People are selling. We put out ads, people are buying it. Walk me through that math, into which where I should put my foot in the gash, I should invest more. How does that look? 

Nathan Vasquez

Sure. So, what you need to understand to know whether or not you can accelerate and increase your ad spend is you need to understand what your customer's lifetime value is. You need to understand how long it takes them to get to that point. And you need to understand what your contribution margin is to your product. 

And by contribution margin, I mean, if I look at how much I sell the product for, and then I need to subtract out 3 things. Cost of goods, which is what it costs me to buy the product and ship it to my warehouse. So what I pay the factory, the boat, the receiving gets in my warehouse. I subtract that out. That's my cost of goods. 

Then I subtract out my cost of sales. So for us, that's our merchant transaction fees. That's my pick fee. That's any fee related to Shopify. That is the shipping fee out to my customer. That's any other cost that I incur when I sell the product to get it to the customer. 

And then you have to peel out your actual marketing expense. And you need to know what your CPAs are, if you're paying anything to an ad agency, what that is. And that number that's left over, that's your contribution margin. So when you look at your CPAs, you need to understand how much that customer is paying you and what all those numbers are together and how long it takes to break even. 

With a subscription, let's use some real numbers. So if I have a subscriber that makes $30 in the first month, and then $10 every month afterwards. I'm at 30, 40, 50, $60. And if I know that my cost of goods and cost of sales is 50%, then at $60 in revenue, I have $30 left over. 

Then I have to subtract out my marketing expenses. And if my marketing expense is $30, I'd be exactly zero for my contribution revenue in that fourth month. So you have to be comfortable in understanding what your breakeven is to know how long you're willing to go. Because you can always spend more for more customers. But you don't want to necessarily wait 3, 4, 5 months before that break even. 

Chase Clymer

Absolutely. And obviously, your appetite for risk plays in here. But knowing your numbers and then having access to the capital to acquire those customers is also always a consideration for some brands if they aren't necessarily bootstrapped, finding those resources to actually to spend more sometimes is difficult. 

Nathan Vasquez

Yeah, the resource is hard. And the trick to remember with the resources, if you're spending $1,000 in a month, just to pick an arbitrary number, and you know that you're not going to break even until month 3, you need to have $3,000 available. Because you're not going to have that money back until 3 months. 

So for every $1,000 in spend, if you break even it is at 3 months, You need $3,000 and that money that's just, it's just used up. Might as well, it might as well be floating in the air behind you. You can't utilize it. So you have to borrow or you have to have the cash on hand to have that spend. So the faster you can break even on your money, the easier it is. 

But if your CPAs go up and all of a sudden you go from three months to four months to five months on your break, even not only is it more uncertain because you don't know what customers are going to do on the fourth or fifth month, but you have to have three, four or five times as much money as you want to spend just to even play the game.

So it becomes hard to  get the funds. So the more confident you are in your numbers, the more comfortable you are taking that risk. 

Chase Clymer

Yeah. And then there's some other potential. If you're borrowing the money, it isn't necessarily a one-for-one exchange. Now there's more expense going into acquiring this customer that you have to keep in mind. 

Nathan Vasquez

Yeah. That would go into the contribution margin as well. Probably not on the way you'd listed on the income statement. But if you have to pay 10%  or 15% or 20% or whatever you're borrowing on that money, then that's going to come out of the net money at the end. So the numbers are very important. You want to spend a lot of time making sure you understand explicitly your numbers. 

Now, the dream situation is maybe you don't sell a subscription, you just sell a single product, and you look at the numbers and you say, okay, I sold a hundred dollar product. It cost me $25 in the cost of goods. It cost me $25 in the cost of sales. I have $50 left. If you can find a CPA for less than $50. You do that, you make money immediately, you do that as much as you possibly can. 

That's how it was in 2016. You could buy the customer for less money than the customer is paying you right now, and you'd be cashflow positive immediately. Now, unfortunately,  Facebook ads have gotten more expensive, and you have to consider the fact that you might not make that money back in month one; you have to look at the lifetime value of that customer and hopefully make that money back. 

We target month three. It’s arbitrary based on our risk appetite and our cash flow. I know there are a lot of companies out there that are willing to take longer than 3 months, but for us, that's comfortable. 

Chase Clymer

Absolutely. Now, Nathan, if I'm listening to this show and I like stickers, where should I go? What should I do? 

Nathan Vasquez

Well, if you like stickers, mean, obviously, I would recommend you come to Pipsticks.com.  But those are going to be all scratch and sniff, puffy, unicorn, glow in the dark, sparkly. Like I said,  a very particular brand. 

We have also just launched a not safe for work brand called theswearjar.com where you'll find stickers that are maybe a little more edgy. Have a couple of words that you might not want your grandmother to see. But you come to PipSticks or come to The Swear Jar, and we'll help you find all the stickers you want. 

Chase Clymer

Absolutely. Nathan, thank you so much for coming on the show today. 

Nathan Vasquez

Yeah. Thanks, Chase. It's been a blast. I appreciate it.