David Carbines: And they may have used different words but they've actually asked, do we have to pull the kids out of school?
Hayden Brass: So if we run out of stock of our best selling sku, we have to be so careful.
David Carbines: We're trying to build three to five year relationships with brands where we buy single millions of dollars of inventory and they make tens of millions of dollars of sales. Hi, I'm David Carbines, co founder at Cogs Flow. In this episode of Add to Cart, I'm talking with Hayden Brass from Zia about how we helped their growth through unloc working capital, inventory and cash flow.
Nathan Bush: Hello and welcome back to Add to Cart. Coming to you from the land of the tourable people here in Brisbane, Australia. I'm your host, Nathan Bush. Now you've built something, the product works, customers love it, you're growing. And then you hit the wall that almost every E Commerce founder hits. At some point. Your ambition outstrips your bank balance. You've got a wholesale order you want to say yes to, a campaign you want to run a warehouse that you need to fill, but the cash just isn't there yet. Most founders at this point either slow down, take on equity they didn't want to give up, or start calling banks that don't really understand their business. But what if there was another way? Today's episode is a bonus episode, an exclusive episode brought to you by our partners and at CogsFlow. CogsFlow is an Australian fintech built specifically to solve the inventory funding and cash
Nathan Bush: flow challenge for growing E Commerce brands.
Nathan Bush: They provide inventory financing anywhere from 10k upwards without equity dilution, personal guarantees or traditional collateral. And they've brought along one of their own merchants to show exactly what this
Nathan Bush: looks like in practice.
Nathan Bush: Hayden Brass is the founder of Zia, a Tasmanian health and wellness brand built around, get this, Kanzia Ambigua.
Nathan Bush: He says it a lot better than me.
Nathan Bush: And it is a native oil with unique anti inflammatory properties that you can only source from a handful of farms in Tasmania. Hayden stepped into what was essentially still a family market stall operation and has spent the last decade building it into a multi channel brand new now in pharmacies, Woolworths, Amazon and eyeing off China
Nathan Bush: and the UK as potential markets.
Nathan Bush: That kind of growth doesn't happen without some serious cashflow lessons along the way.
Nathan Bush: And Hayden gives it all to us. He doesn't gloss over any of them.
Nathan Bush: In this conversation you'll hear what Zia's cashflow conversion cycle actually looked like when inventory had to be paid for up to six months. Before it hit a shelf. And how Hayden learned to shift from growth at all costs to profitable growth. And what changed once Cogs Flow came into the picture. And how David Carbines, Cogs Flow's co founder, distinguishes between a brand with a demand problem and a brand with a capital structure problem. If you've ever had to say no to a growth opportunity purely because the cash timing didn't work, this one is worth your time. A big thank you to our friends at CogsFlow for making this conversation possible and for supporting Australian e commerce operators
Nathan Bush: at every stage in their journey.
Nathan Bush: Now with David Carbines, co founder and CEO of Cogs Flow, and Hayden Brass, founder and CEO of Zia, let's get into our conversation.
Nathan Bush: David and Hayden, welcome to ADD to cart. I am so happy that you are here to join us today. We've got a very special exclusive episode with both of you where we're going to get into both of your stories because they're fantastic stories. Now, we are very, very lucky to have Cogs Flow on as a bronze sponsor of ADD to CART this year. And we thought that this was a brilliant way to introduce what you're doing, David, with Cogs Flow, but also to tell the Zia story. You know, it's an incredible Australian e commerce story and you guys have worked together and helped each other's businesses out. And I know it's a pain point that you've been through, Hayden, that I know a lot of our e commerce founders listening will also be experiencing. So I'm hoping that by going into your story, we can uncover where you landed, what you did, and then what you're able to unlock together. But before we do, David, can I throw to you first, for our audience who haven't heard or used Cogs Flow before, tell us how you came up with the concept of CogsFlow. What problem were you solving in e commerce?
David Carbines: Yeah. Thanks, Nath. I'm delighted to be here. Cogs Flow exists to help e commerce businesses get bigger. So the big idea is we want to make cost of goods sold, the inventory part of e comm businesses, a cash item as much as possible. So for anyone that has ever had the tension of not knowing how to order inventory or being confident around, can I pay those supplier bills as they fall due? Our team would love to talk to you. We encountered this problem in a previous role when I was in Consulting Land. We were employed to help people with planning, budgeting and forecasting, effectively building their spreadsheets. And as anyone who's done that, that's a mixture of art and science. There's some hard data, there's some soft data, and there's some aspiration, if we're honest. But the real purpose for most folks going through that exercise is to make decisions and commit to spending cash in the hopes that you'll make cash. And that's really the whole point of it. We found that the people that engaged us had a chicken and egg problem on they weren't really sure of their numbers. They weren't sure as they look the future, how that would play out. And because of that uncertainty, they couldn't access or find the money that they needed to make this run. And because they didn't have the money to fill their warehouses, they couldn't sell it and go again and go bigger. So we did one of these transactions as a consultancy where we built some spreadsheets. We then raised a tiny bit of money and funded one of these purchase transactions. And having done that once we said, look, this should probably be a business. If this is true, we think this should be accessible for everyone that is running an E commerce business and being an option for them as they think about their growth. So that all happened, gosh, six years ago when we started the business. Five years ago.
Nathan Bush: Nice. And from a cash perspective, obviously cashflow is huge in E commerce. If you can't manage your cashflow, then you won't have an E commerce business. Is it always inventory that you're unlocking?
David Carbines: We started with inventory, so that is for most folks, the single largest line item on their business. Committing to pay suppliers as they fall due. Really at a fundamental level, we're trying to help people make those commitments, knowing that they can be paid as they fall due. So typically the big ones are anything that folks need to commit to and then fund before they sell and receive the cash proceeds of that sale. So the other things we look at are inbound freight. So typically people purchase from overseas and they need to get it here. Often there's marketing costs in there as well. Buying ads. We're a Meta Ads partner and we can help people fund those and sometimes there can be some fulfillment costs in there as well. Although typically we're seeing more and more folks get terms out of their three PLs and their other providers on that front.
Nathan Bush: Gotcha. So no one was giving terms for inventory and some of those other areas that you are now playing in?
David Carbines: Yeah, the big idea is, and in a former life I worked at a big supermarket. They famously extracted terms from their supply chain to say to let that supermarket Deliver the products, sell the products, collect the cash and then pay the bills. And if you can manage a cash cycle like that, all power to you. Honestly, I don't think you need us. Just become a big business and remember the rest of us as you get there. For us as mere mortals though, most folks need things paid for in cash before they leave factories or before they will issue a bill of lading. And for those folks, it's really hard. So most brands and merchants that we deal with, look, they have cash. Money's fungible though, and their ambitions probably outstrip their bank balances.
Nathan Bush: Yeah, we've had a few of those stories here on Add to Cart. We had Tara from Proud Poppy who went through that exact scenario and you know, had to get to the point where she realized, woke up overnight and thought of the cash flow in her head and was like, oh yeah, we've got a problem looming here and had to hop on a plane to China the next day to have those relationship talks. So it's a very real problem in E commerce.
David Carbines: Absolutely.
Nathan Bush: Now Hayden Zia, Tell us about Zia because everything that I've seen, you just look like a growth machine on the global scale. One of the great Australian e commerce businesses. Tell me the origin story of Zia and where you've gone over the last few years.
Hayden Brass: Yeah, absolutely. So Zia in its current form has been around for, it's coming up to our 10th birthday this year, so 10 years. So we, we launched in 2016 but prior to that as a family project. So I used to work with my parents who are in the space doing markets and shows. Very, very humble but all in the health and wellness space. So basically I got born into it doing market stalls like working with sales, all that sort of stuff. That's kind of like my childhood. I used to do the Sydney Royalista show in Sydney and then I've done grew up in Tassie. So I had did expos in markets down there. So I was around it the whole
Nathan Bush: time, the glamorous founder off and then
Hayden Brass: people kept asking for this unique Tasmanian oil called Kunzia. So that's back when we were still doing this type of work and we investigated it a bit more, did some research and made some like bench samples and worked on it for a few years as a bit of a side project.
David Carbines: What's special about that oil?
Hayden Brass: So it's, it's got unique therapeutic properties, particularly our anti inflammatory properties, while also being very suitable for the skin. So in the early days and still to this day, some of the best results and research is around its anti inflammatory properties for pain relief, etc.
Nathan Bush: Okay.
Hayden Brass: So that's kind of what we've continued to build on and what we're best known for primarily. Yeah. So we were working on as a family project and then I moved to Melbourne, did marketing and business and then in 2016 I wanted to take it to a from a family project and turn it into a real business and like went all in on it and basically decided to bootstrap it from there. The first couple of years were focused on research and developing the medicinal product or medicine and then I've just been growing it ever since then. Now our vision is to improve the quality of life of 10 million people by 2030 and we've been doing a lot in that space to continue to build towards that vision and focus on being a really strong purpose business.
Nathan Bush: Cool. And in terms of channels and markets, I'm interested to get your view especially as we're talking scaling and growth here. Predominantly wholesale dtc. Where do you normally play?
Hayden Brass: Sure. So first six, seven years was E commerce almost solely. We did a little bit of wholesale but it was a small part of the business. That's still massive. That's still the biggest part of our business. Just. But across the board other channels have grown and I think it's really important in this day and age if you can be a omnichannel brand. So we've grown into pharmacy, grocery, Woolworths, Amazon and we're now safe to launch into overseas markets. So we're really looking at omnichannel approach to the way we grow our business and having our brand out there in more spots.
Nathan Bush: Did you just name a big supermarket that David might have been alluding to? Tell me about markets. So obviously founded in Tasmania, expanding through Australia. Have you gone beyond borders?
Hayden Brass: A little bit. A little bit. So we're early this financial year. It's where my focus has been. So looking at setting up a T mouse store in China and Indian markets as well. So I've got a few things in the works. Working closely with Globalbic and putting this together and really seeing because Australia is where we produce all our products, all locally made but it's a very small market comparative lead to the rest of the world. So there's just a lot of opportunity out there that we think we can make the most of.
Nathan Bush: And remind me, what's the name of the oil again?
Hayden Brass: Kunzea.
Nathan Bush: Like can you only get it in Australia or Tasmania? Is it like geographically correct, kind of sacred? Yeah.
Hayden Brass: Okay, correct And I think what makes unique about us as well, compared to a lot of I'd say E commerce businesses, is we actually work directly with the farmers like we are working directly with the land. It's one of my favorite parts about it because it's actually like seeing it being harvested, seeing the whole sustainability process. We're a B corp as well, so that's all really important to us. So I love that aspect of it. I don't want to be a farmer, but I love how close we are to the supply chain and making sure that everything's being done right and building that relationship.
Nathan Bush: That's awesome. So crazy growth. And it sounds like you've got even crazier growth ahead of you with those targets that you've set. Tell me about a few bumps in the road so as especially when it comes to cash flow and managing what that outlook and that growth path looks like. Have there been any hairy moments?
Hayden Brass: Absolutely.
Nathan Bush: You look so chill though. You look like you just. It's been an easy ride.
Hayden Brass: I put on a brave face sometimes, but I think for us when you're so focused on growth, you can sometimes lose sight of profit and like you just focus. And this is very common. A lot of E commerce brands for a period there, probably up until About COVID or 2021, the brands just going up a leather, just going for it. And we were in that sort of situation where we just thought, okay, we'll just go for growth at all, at all costs. And then you, you realize at some stage that that's not necessarily the most sustainable way of doing it. So we had to shift gears and focus on profitable growth and do it in a way, particularly as the numbers grow, it's a bit harder to find extra cash flow when you need it as you grow. So for us it was really a personal journey for me as well. So really doing that financial acumen, understanding and find those partners to work with, to grow with you. So we made some tough decisions at a period in our journey where like it was hard, it was really tough from a cash flow perspective. We don't have property backing, so we had to rely on the very little assets that we have in the business to actually put buy capital and buy inventory, etc. As we were growing. So it was definitely some hairy moments that we had to get through.
Nathan Bush: So you essentially had to put business assets up to get more inventory in. Is that right?
Hayden Brass: Correct? Yeah, absolutely. And when you're, when you're an E commerce business that was like at the time fully remote, didn't have like an office space or anything like that. We just had to really focus on like more inventory is obviously one of the main things you've got there. And then obviously just managing it really strongly and not overstocking and et cetera and making sure that you're managing your inventory very, very well.
Nathan Bush: Scary moment. And would you consider yourself a numbers person?
Hayden Brass: I would now. I think I always was. I was very good at finding capital when I probably shouldn't have when I was focused too much on growth. So I really did a very good job at finding capital when it was probably I needed to focus on profit at that point. And then I think for me I'm obsessed with the numbers now. Like I'm looking at them all the time, really understanding the. Really understanding where the margins are. So yeah, I think you need to, to a degree. But also be mindful of the advice that you're getting from different parties so you can like we had bad CFO fractional advice early days. That kind of one of the reasons why we went through this challenging period. And then we went to another one. If it was too corporate, it was just like too corporate would send through three way forecasts to the hills. It's like, okay, this is great. I've learned a lot. But it's not practical in this from where we are right now. This isn't going to grow our sales necessarily. It's just like looking at what's happened in the past. But I think it's find those right partners and also building up enough financial acumen so you can actually monitor it yourselves. Because it's one of the lifeblood of a business.
Nathan Bush: Yeah. Is that what you find, David, when people come to you for the first time and they're exploring their options, is it that they don't know their numbers? Are they confused or like when they come to you in that moment? What's the general mindset?
David Carbines: Yeah, no one's a superhero at everything. And most of the folks that we deal with are super passionate and love their product and love their customers. So I think almost every brand owner that you've had on ADD to cart, you could speak to them for hours about the ins and outs about why they've structured their product this way or their target customer and who they're trying to reach and how they're probably also pretty good at channels and where those folks hang out and the best ways to talk to them. I don't know many folks that when they get free time, fire up a spreadsheet and just start Looking at decimal points. And we, we have the, the full range of folks that, that work with us. We've worked with co founding teams that are industrial designers and chartered accountants. And then we have other folks that have kind of stumbled across gold that have, you know, they started doing something in their, in their spare time. They spun up a website, they, you know, started looking for few suppliers and now they struggle to keep it on the shelf. I love Hayden's story of being obsessed with the numbers now, but that journey and getting the right folks and learning at the right pace, the right things at the right time in such a way that helps you hit your goals while also helping you sleep at night. We see that a fair bit.
Nathan Bush: Yeah, that makes sense. And we do, we hear it all the time on Add to Cart. And I think part of the founder's journey isn't it to a certain extent, but that financial literacy could determine how far you come out the other side or not because they're hard lessons to learn. Like it will punish you really hard in E commerce because it is such a cash flow game. So Hayden, when you got to that point, I'm really keen to understand how you came across David met CogsFlow. Like how did that even come on your radar? Because it's a fairly new offering. Marco said he'd been around for six years, but still traditional route might have been to go and try and get a bank loan. How did you come across this solution?
Hayden Brass: Yes, well, we first met as part of an earlier life when I was still in uni. So that was, that's how we first connected. So. So we'd actually met while I was still in uni doing a management consulting subject. So that was the first contact. And then I guess to be honest, I was at a period where I was just going through and seeing all the options out there and I came across Cogslow. Also noticed a couple of brands that I recognized on their website at the time. So reached out and we had an initial couple of conversations and we weren't the right fit in the first instance. And then David and the team put some faith in our knowledge and where we were going and we were able to come to a solution at a time where we was really valuable for us. So it made, it made a big difference when others weren't able to work with us.
Nathan Bush: Gotcha. It's a bit brutal. Dave comes to you for help, you know, he's not the right fit for it.
David Carbines: When you say it like that, it feels rough.
Nathan Bush: What is it? What is it that you're looking for at that early stage in those, in those first meetings, we are pretty focused
David Carbines: on what we do. And we're not all things to everyone. We're not running defense, we're running offense. So we are really good at filling warehouses with inventory for brands where volume growth makes sense.
Nathan Bush: Okay, so you're not interested in survival, you're interested in brands that want to grow?
David Carbines: Yeah, we like to think of ourselves as helping people get to the Olympics rather than patching up a leg that's bleeding out. And I feel bad a little bit as I say that if I'm honest, but that's kind of our direction of travel.
Nathan Bush: Hayden, you had to go away and patch up your leg before you went to the Olympics.
Hayden Brass: Correct. And prove it a bit further that we were on the right path. And to be honest, it was very reasonable. Like we were in that survival mindset at the time. So we're just trying to find a solution that would work for us. And when we were able to get to a position where we were the right fit for what they were willing to partner with, it was great. It was a great solution.
Nathan Bush: Yeah. And how are you measuring that, Dave? How are you measuring whether people are ready to grow? Is it that there is great margin sitting there, there's latent demand in new markets? Is it that you look at their meta performance and you can see that you can probably push CAC a little bit harder? How do you know they're ready to grow?
David Carbines: All of the above. It's a mixture of the numbers and the stories.
Nathan Bush: Yeah.
David Carbines: So we don't have a traditional application form, that's fill out a PDF and sign your life away. Typically when we work with businesses we sign a non disclosure agreement and then we get partner access to their core systems. So typically for most businesses, that's their e commerce platform, Shopify, that's their accounting bookkeeping platform, Xero, that's their ADS platform. So we're a meta ADS partner and for some businesses that are growing their inventory management system, sin 7. And really what we're trying to determine is if we put inventory into this business, what happens? And we know there's no certainties in business as a matter of course, we don't generally take personal guarantees on folks. We are really keen to keep business risk on the business but our dream is to see more small businesses become medium and large sized businesses and to enable the decision making for folks like Hayden in that we would love to see everyone sitting on 90 days of inventory. Sitting on 90 days of inventory. In their warehouse on terms that help them sleep at night. So every business is unique, every market is different. So what worked a few years ago won't work now or may not work now. And the way that people come to fund their businesses and grow their businesses is different. So one of the core metrics we look at, Nath, is sales quality. So the mix between D2C and B2B sales, the collection terms, how those cash flows through those two different types of sales.
Nathan Bush: What are you looking for there? What, what does good look like?
David Carbines: It's different for each business. And many businesses start, like Hayden has just outlined, hey, straight with customers, individual consumers. It's easier, it's quicker, it's cheaper to. You're not having to negotiate big supply agreements with large distributors or wholesale networks that lets people typically be in control. It's smaller, so you have more ability to move. Whereas all of a sudden, when you're locked into large supply agreements with big moqs on your supply side as well as for your customers, good in all of those instances, though, work for those businesses. So like Hayden said, there's a distinction and a difference for business between what works in accrual or what works on paper and what works in cash, what actually hits your bank account. And each business is different. If you put a million dollars into the bank accounts of every single business, some things now start to work that didn't previously. But most businesses can't or don't or are unable to or just can't access that kind of capital. Not everyone has a prime piece of real estate that they can sign over and commit to their e commerce business and all power to those folks that want to do that and are compensated for doing that. You know, we like to say that the cheapest money that you will get is is terms from your suppliers or better terms out of your wholesale customers. That that's kind of where we think everyone should start. And for folks that do want to commit their house to their business, you're allowed to do that. But when your partner at dinner time asks, how's the business going? What they've really done is turn dinner time into a risk committee meeting. And they may have used different words, but they've actually asked, do we have to pull the kids out of school?
Nathan Bush: Straight to the heart.
David Carbines: You're allowed to do that if you want. But most people, when they take out lenders, mortgage insurance, pay a lot of money to the person they're giving that to. And that's not appropriate for most e commerce businesses. Most folks want to put their heads down and grow their business on their own terms. And that's what we exist to support.
Nathan Bush: And I suppose the hard part there is that if you're putting business assets or even, you know, family assets up security for inventory. Inventory most of the time is a short term problem. If you're buying correctly and you're buying right, it should be a short term problem and you're giving it long term assets that you're putting up for risk. Is that how you framed it, Hayden, did you see it as kind of a short term when David's talking about the terms that you're putting forth for you to have a look at, which would obviously be very different to the terms that you might get from a bank or from your suppliers? How'd you frame that in your head as a new model?
Hayden Brass: Yeah, I think I like to call it just unique. That was one aspect of it, like I felt at the time because as I said, I'd spoken to a lot of different options in the Australian market and we're pretty limited here with what you can do when it comes to finding capital. And for me, I liked it because it was unique and it could link it to the inventory, which is obviously, as Dave said, it's one of the biggest things you're purchasing in the business and it allows you. And obviously there's support in terms of not just the financial aspect of it, but wanting to support is the forecasting and thinking about other aspects of it as well as all part of the journey and thinking about like that whole story and what it all looks like. So for me, I think it was refreshing to see something quite unique during a period where we were looking for different options to find for that would fit our needs and our requirements as we grew.
Nathan Bush: That's a good point, isn't it? Like David, I could assume that you want visibility over those numbers, you want to help your founders because you got skin in the game, right? You need this to work.
David Carbines: Yeah, we want to keep business risk on the business and we are a highly motivated partner. We want to turn our cost price inventory into revenue and sales for our brands and merchants. And we want to get paid as well. If it goes sideways or it goes pear shaped, our recourse is against the inventory. So that's what we want to see turned back into cash. But our dream is that this is a repeat relationship. We're trying to build three to five year relationships with brands where we buy single millions of dollars of inventory and they make tens of millions of dollars of sales. That's where we hope more brands are on the trajectory to achieve those sorts of numbers. And we think we're a small but important part of that. You need to get a lot of things right. We are trying to solve the inventory credit, purchasing piece at scale.
Nathan Bush: That makes sense. So, Hayden, you have this meeting. David tells you to go away, fix your leg, come back when you're ready for the Olympics. You're back and you've agreed to the terms. Did you secure all the funding that you wanted to kind of get to that next scale of growth? What were your next steps after securing the funds that you needed?
Hayden Brass: Yeah, I think for us at the time it was a progress. So it wasn't immediately it was just like showing proof of ability to repay, etc. Which you'd expect with any partner. So for us it was about, yeah, really just like proving that and then building up that sort of like trust and ability to repay and demonstrating that knowledge, et cetera.
Nathan Bush: So doing it incrementally.
Hayden Brass: Correct. Absolutely. And continue to build that trust out, which has been a key part of it as well.
Nathan Bush: Great. And I can imagine that your situation might be a bit different to some of your other clients, David, because Hayden, when you're talking about going, securing inventory, are you literally going to your farmers and, you know, getting more like or is there, is there inventory ready for you to buy straight away? How does that work?
Hayden Brass: It is quite unique and our cash conversion cycle is quite long. So, yeah, it can be up to six months based on like, at the long end of the scale, based on having to buy packaging directly from overseas and raw ingredients from Tasmania and shipping it up to our manufacturer and getting it tested because it's a medicine which can take up to a month in just testing. So we have quite a long life period from when we start paying to inventory to when we actually receive it and start selling it. We have pretty good terms with most of our wholesale partners, actually, but there's quite a big lead time up until that point. So to be honest, only started to really understand that in the last couple of years. It's become more and more apparent as we've grown and with the need for more like Kunzee Oil, et cetera has become like we need a ton of it here. So, like, it's like really thinking about how much, how we plan that out. So for us, we need to be really mindful of that and make sure that we're forecasting in a way that really works.
Nathan Bush: I guess it must be also comforting for your partners, your supply Chain partners to know that you've got access to funds to grow as you need to because their livelihoods probably depend a lot on you as well and taking your product out. So by securing that kind of is having a magnifying effect across the industry.
Hayden Brass: Yeah, well, we kind of work directly with a farmer on Tim's island to build a whole industry. Like there's a whole. It's a very small population, there's 500 people living there. But we've helped to build this in partnership. They're doing the. Doing it on the land and we're promoting it and it's been a pretty natural progression over 10 years. So, yeah, it's really key and we've got a really, really strong relationship between our family business and that's awesome.
Nathan Bush: And David, when you are like releasing that money because you're working with some people who've been on the show, actually, I saw on your website we've got the memo bottle, gents doing. Doing the bottles which have expanded globally. As well as Ida Sports. We had Laura and Tom on here talking about that. And again, global expansion, but very different products. I could imagine that memo bottle could scale up pretty quickly in terms of distribution. Itis sports probably a little bit harder when you're talking about making football boots, but not as intensive as. As growing things from scratch. How do you normally see founders go about that onboarding process of securing that first bit of inventory from you?
David Carbines: Yeah, a couple of observations. Supplier relationships are really important to us. So for our dream to support brands becoming medium size, they're going to need ongoing relationships and support from their suppliers. So again, we sign NDAs, we don't disclose that and we fund invoices, but we don't negotiate terms, we don't extract cost savings or term advantages. By design, we're a platform that says this brand is buying these products, issue that through cogs flow. So bill Cogs flow deliver to the merchant. We don't want to by design touch products. We want to keep it under the brand's control and in their supply chain. We just want to ensure that bills are paid in full on time.
Nathan Bush: So you're ordering the inventory from cogsflow?
David Carbines: Yeah, our platform. Once we connect to merchant systems, we will issue them terms, so a credit limit and what payments to us look like. And then brands like Hayden originate ordering decisions on our platform. And our platform issues a purchase order to suppliers that typically say bill cogs flow deliver to this merchant. So deliver to Hayden and the Zia team. The reason that we structured like that was to move faster as a small business ourselves, but also to provide more flexibility for our brands and merchants. So everyone is unique in the way that they fund their business and the capital that they bring to this business. We've seen some weird and wonderful financing arrangements. Even the ones that require exclusivity or restrict other forms of capital in still allow those brands to buy products on credit from suppliers. And that's where we act as a middleman or a purchasing platform between this brand and their core suppliers and effectively turn cash purchases into credit terms. And what we're trying to do is align those credit terms with the sales and cash generating profile of those businesses so that folks can, can put a zero on it and go for growth, go for volume growth typically. And so you asked before around what does good look like for the split between D2C sales and B2B sales? That's really hard because it's different for every business. There's a combination of often distributors and suppliers come seeking out brands and knocking on the door of brands. And we've seen lots of brands make really hard decisions around turning those down not because there wasn't brand alignment or they didn't want to, but purely they didn't have the stock or they couldn't make the numbers work or it just wasn't right for their business at that time. We hope that cogs flow would help make more of those opportunities appropriate and profitable for those businesses. Again on terms that help folks sleep at night.
Nathan Bush: Yeah, that makes sense. You must see some pretty wild terms out there that you have to go in and rearrange.
David Carbines: Every business is different and every supplier is different. Again, Hayden's probably in the Kunzia team are probably unique in that they're, you know, so hands on and starting to play in their supplier markets and get really hands on there. The least risky version for us is there's a one for one relationship between what people buy and what people sell. That's rare for us to see that directly. Folks often have to buy components for their products or packaging or a lid or a mailer or you know, the way to get kind of from their brand to their customer. And that's fine, we understand all of that, but we've seen lots of weird and wonderful things. I think the prevailing thread that goes through all of those is the brands that seem to work the best are clear on who they are and what they do. They're prepared to work with partners to help them get to where they want to be and they're a faithful business. Partner. So even when things go sideways or don't turn out the way things people intend, when they set them up, they're prepared to come to the table and work well for all of them to get the outcome they want. So if you have missed deliveries or quality issues or things are late or whatever happens, as long as the suppliers you're dealing with are making money off this transaction and want to support you and want to go again, we've seen some pretty good outcomes. Honestly, given the situations and for instances where suppliers and relationships are broken, it's really hard to get a resolution or it's on the other end of nasty letters and legal action.
Nathan Bush: I've got to ask you, and I bet you will dodge this question, Standard terms if we're talking one for one E Commerce product buy from a factory in China to sell here in Australia, what kind of terms are you looking for? What does good look like?
David Carbines: Standard terms for starting out businesses that are at or below the moq. Often founders are doing a really good job to get below an MOQ is typically it's a hundred percent paid before it leaves China to come to Australia. And there might even be most of that is at the deposit stage, not the final production stage. It really depends on the product as to how long it takes to get here. So most folks, especially if they're small, high margin products like in health, beauty, wellness, they probably air freight things, they're not waiting for things to sit on a shipping container and get along here. But typically things are fully paid before they leave China, which means that folks are sitting on or functionally they've invested in pallets, they've invested in their inventory and then it's a question of how quick does it take to get here. Usually a week or two. Although you know, at the height of pandemics where things get stuck and things are held up, it can take longer. And then really it's a question of how quick that brand can sell through those. And that's where again you look at their sales channels and types, it's how quickly can you turn that pallet or that purchase into a sale and then collect the cash again? D2C we're measuring days. If you sell it on a Monday, typically you have the cash in your account by Wednesday or Thursday. Where if it's on B2B terms that we're measuring weeks and months. And again we've seen some hard stories around B2B sales that go astray where yeah, your wholesaler or your your B2B transaction gets lost misdelivered not receipted, have quality issues, whatever it is, and all of a sudden you're left holding the can for bills that need to be paid. That's really hard. I think that's what keeps a few of our clients up at night.
Nathan Bush: Yeah.
David Carbines: Was that too much of a question dodge there, Nath?
Nathan Bush: No, no, no. You actually gave me some numbers. That was good. We've got numbers in there. Hayden, I'm really interested from you because you mentioned there that now you kind of had to incrementally build for growth with inventory and working with cogs flow. Is that just part of your business and cash flow cycle now? Do you see that this is kind of a forever solution? David mentioned that he's looking to build relationships with businesses over three to five years. How do you see cogs flow fitting in with what you're building and growing
Hayden Brass: long term for sure? So I think it depends on business to business. I think there's a period where it's a great solution to certain businesses at certain sizes and then you can potentially get to a point where you do move to a bank or whatever it might be when that makes sense. For us it was, there's still, still a value there that we can continue to leverage for what we're using and what we need it for and for particular situations as well. So I think it's a case by case situation and they do really sit in a sweet spot for those sort of not just start, not definitely, not just small startups, but like those E commerce businesses who don't have many assets, they've got inventory they need, they're growing and they're growing fast. So I think there's a, there's a really sweet positioning there for these businesses in that spot.
Nathan Bush: And where do you see it freeing you up for growth like you mentioned international there at the start? Where do you see the growth of Zia?
Hayden Brass: Yeah, so we see growth in a lot of different channels, I think. I think there's options. I think we've still got a lot of growth to become a household name in Australia. So I think we've come a long way but still a lot of people don't know who we are. So we've still got a long way to go and I think we're going to continue to build that in the major retailers for B2B in Australia and then overseas. I think E commerce and particularly Amazon, I think is a great channel. Like Amazon for us has been a really good insight in terms of testing a market. So it's going from strength to strength in Australia and we're using it as a good starting point for like the uk, et cetera. And it's low risk compared to like going through a whole new business structure in new markets. So it's allowing us to test these markets at a global scale and see see where we fit and where we can get some traction.
Nathan Bush: It's a really good point because obviously there's global expansion that a lot of businesses are looking to do. There's always new markets that you want to try. But I think we're at a point in E commerce too where there's new channels constantly evolving and that ability to be a first mover and having that security and access to cash when you need it, when you spot those opportunities is nice to have that relationship ready to go when you find those opportunities.
David Carbines: We see that a fair bit with brands that have done all of the hard work around building the product so getting something that they can put on shelf and they are at some stage of they understand what their D2C sales velocity and how that's going to grow. We love repeat purchases. We love subscriptions. We love products where people are consumable and people need to repeat purchase and do this again. The thing that breaks my heart is lost sales due to stockouts. A degree of that's inevitable for growing brands, I suppose because they're getting better at understanding their sales velocity and their channels and how that all works. But for folks that have done all the hard work on putting a product on the shelf, not being able to sell, it kind of breaks everything. Yeah, it hamstrings growth. It means you're not generating cash. All of a sudden your marketing metrics are broken because it's divided by zero or it's undefined. And that's one of the reasons why I think more small businesses don't get to medium sized again. I'm really encouraged to hear Hayden say that we're an option and we're helpful for him. We want to enable more folks like Hayden to get as big, if not bigger than Hayden. I suppose the race is on.
Nathan Bush: Yep.
David Carbines: And we know that inventories can be a limiting factor there. So my dream is that we would help brands spend less time looking over their shoulder and wondering can I pay that bill and can we make that work and more time. I'm running offense and thinking about the future and going for growth. How do we unlock new markets? What's the best way to reach new customers? What else should we do on bundling or pricing or new product development? Or how can we position a partnership with another brand or a comparable brand who's also talking to our customers? That's the hard bit. That's the bit that might not be reflected in numbers or in your Xero or in Shopify. That's the real skill that we're going to need and that's going to drive more of our brands forward.
Hayden Brass: Yeah, I'll just add to that. I think like inventory planning is so bloody hard. Like it's really challenging. Like you're growing, you've got certain products that are selling well, others that are slower, but then one takes off. If one SKU goes off on a bestselling bundle that you've built a whole landing page around, go down to stop your whole marketing funnel broken. And for us now we're major retailers so if we run out of stock of our best selling skew, we have to be so careful of making sure that we've got that stock. And they surprised us in January and ordered a second pallet and we're like where did that come from? Thank you. But it was like unexpected growth and it's a good, some people say good problem to have but it's a hard problem to navigate when you're trying to grow and it puts an extra amount of stress on. So having that sort of like ability to scale up that inventory is super critical.
Nathan Bush: Makes a lot of sense. Now I would be remiss if I didn't ask you David, how does it work contractually? So I'm assuming you're not going out just giving loads of cash away so people can buy inventory. What's the commercial arrangement usually with cogs flow look like?
David Carbines: Yeah, we want to make sure that we're working with folks that are in our wheelhouse. So that's folks who are doing 10k a month in sales that have been in business for six months and have a minimum credit score beyond that point. We think you're still figuring it out or you're growing to a point that we love to get to know you but we probably won't contract with you. We sign a non disclosure agreement just protecting your data to make sure that we're not going to disclose that to other folks. For commercial and confidence parts of your business, we would access the data of the E commerce store of the brand. So again that's typically Shopify, Xero meta ads and Sim 7 if appropriate. And then we would seek to clarify any data or give a provisional purchasing offer of what inventory we want to buy on what terms. It's completely Free for businesses up until that point. And we typically make money off purchases that we make. So most brands think of us as a wholesaler that is letting them buy the inventory that they want for cash, selling it to them on credit and paying them back on terms that align with their cash cycles. So it's typically under six months. Hayden's business and Hayden's product is unique on those terms. But again, it's transaction by transaction and what we're trying to do is simplify that. So with the greatest respect to my team, the mathematics on what we do is not super complex. It's kind of high school maths. The complexity comes with foreign transactions, part payments, multiple transactions, where in any one month you're paying for things that you've done previously. Trying to think about stuff that you're doing right now as well as plan for the stuff that's going on in future. And when you've got dozens of those transactions across multiple, multiple suppliers, we can be really helpful in simplifying that.
Nathan Bush: Doesn't sound like high school maths to me. Sounds a little bit more than that.
David Carbines: We went to different high schools. I still did.
Nathan Bush: I didn't finish Fair Play. That's awesome. So, and then when you're talking about brands who are coming to you for the first time, how long is it typically between that first conversation and that first order of inventory? If they're the right fit?
David Carbines: Yeah, we like to move at the speed of our merchants. Maybe a third of folks knock on our doors with a bill that they needed to pay yesterday, maybe around another third are kind of kicking tires and thinking about what's ahead. And for most folks it's oh yeah, what does the next month or next couple of weeks look like? We can move as fast as 48 hours, but really we seek to move at the right speed and the pace with our brands. Again, we're looking for long term relationships and we're happy to wait if that's the right thing to do with brands. But again, it's the ability to help folks order with confidence, knowing that they can run their business and, and be successful.
Nathan Bush: Yeah, brilliant. Well, I love that you are focused, you're very clear on your market and who you're trying to help. We're talking E commerce in Australia, that 10k per month and upwards bracket and making sure that you're helping kind of take away one of the biggest barriers that is there for E commerce businesses. It's really hard to grow an E commerce business if you've got no inventory to sell. So Amazing to hear the story. I really love unpacking these solutions because I'm not a finance guy. And Hayden, when you were talking about, you know, going that learning curve on the numbers, it's like, yep, I'm learning every day. And every day I think we all get a bit smarter with the numbers and it's the bumps and bruises along the way that really teach you them. So, Hayden, I really appreciate you sharing your experience, not just with CogsFlow, but with how you've kind of grown this business and made that realization around Cashflow and how important it is to growing Zia and the exciting opportunities that you've got ahead of you now.
Hayden Brass: Thanks, Nathan. No, it's been good to share and hopefully got some value out of our journey and kind of what we've learned through going through the business and the different elements of it.
Nathan Bush: Yeah.
David Carbines: Awesome.
Nathan Bush: And David, thank you again for coming on and sharing the Cogs Flow story and how you're helping e commerce businesses in market. It won't be the last that our audience hears about Cogs Flow this year. We love partnering with you. So thanks again for your support and for joining us today.
David Carbines: Thanks, Nathan. Super excited about what you're building here in the Australian e commerce community and for everything ahead.
Nathan Bush: What an awesome conversation that was. And I'll be honest, the bit that hit me hardest wasn't the big growth numbers. It was Hayden quietly admitting that for a long time he didn't fully understand his own cash flow conversion cycle. He's a founder who's been building for nearly a decade, running a genuinely complex supply chain from Tasmanian farms onto pharmacy shelves, and it still crept up on him. And that's not a criticism. That's just the reality of how fast you move when you're focused on growth. And I think a lot of people listening will recognize that. Understanding cash flow isn't necessarily the first thing you think about when you're starting a business. Here are three things that I I took away from today's conversation. Number one, obvious. Know your cash flow conversion cycle down to the week Hayden walked us through what this actually looks like for Zia. Raw ingredients sourced from Tasmania, packaging shipped from overseas. Manufacturing, testing because it's a registered medicine, then distribution. That's a whole lot of process that can run up to six months between between the first payment and the first sale. Most e commerce founders have a rough sense of this, but haven't mapped it precisely. Map it, because the gap between when money goes out and when it comes back in is the number that determines how fast you can actually grow and whether you say yes to the opportunities that show up. Secondly, the bandage on a bright broken leg test. I love this one. That's why I kept coming back to it. This was David's framework and I think it's one of the most useful ways I've heard this framed inventory funding or any kind of growth capital should be accelerating a healthy model, not propping up a broken one. If your underlying unit economics aren't working, more stock just means more loss faster. David is looking for brands where the demand is real, the repeat purchase is there, and the question is purely one of timing and capital. Know which situation you're actually in before you go looking for money. Thirdly, stock outs, they don't just cost you that sale, they break your whole marketing machine. David made this point and it really stuck with me. If you've invested in ads, and we're all investing a lot in ads at the moment, if you're getting customers to the door and then you're out of stock stock, you've burned that spend for nothing. Your ROAS is undefined. Your retention is broken before it starts. Inventory isn't just a logistics problem. It's the thing that makes every other part of your business work or not. If any of this has you thinking about your own cash flow situation, David and the team at Cogsflow is definitely worth a conversation. You can onboard onto their platform for free. Or if you want to Talk through your 2026 growth plans, first, book directly with david@cogsflow.com and for add to Cart listeners, there's actually an exclusive offer. Your purchasing fee is waived for the first 12 months, you get priority onboarding and you get reduced margins by category. Details are in the show notes. Make sure you mention to David that you listened to this episode of Add to Cart. And while you're in the show Notes, come and join the Add to Cart community over on add to cart.com it's free to join.
Nathan Bush: We have over 600 e commerce professionals
Nathan Bush: over there sharing tips, asking questions. We welcome all questions around cash flow. Let's kind of find out where all those broken legs are. Join us add to car.com until next time. Thank you again to David and the team at Cogs Flow for bringing us this very special episode. I learned a lot. I hope you did too. I'll see you next time on Add to Cart.
