E609: 3 Ways Your Business Is Leaking Profits And How To Solve It

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Jul 21, 2025

Nate Littlewood, a fractional CFO and mentor, shares his wealth of knowledge on financial pitfalls for e-commerce businesses. He highlights three key areas where entrepreneurs often leak profits: inventory management, cash flow, and overhead costs. Nate explains how improving these can significantly boost profit margins. He stresses the importance of understanding cash flow dynamics and offers practical strategies for inventory investment and cost management. With insights on negotiating discounts and leveraging financial tools, he guides listeners toward more profitable operations.

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ADVICE

Think Beyond Unit Cost Savings

Understand the financial impact of purchasing inventory beyond just unit cost savings.
Consider cash flow consequences like storage, interest, and obsolescence before buying large amounts of inventory.

INSIGHT

Cash Costs Can Eat Profits

Inventory financing costs can consume all profits in bootstrapped e-commerce.
Generating profit above debt interest is essential to actually keep rewards from your hard work.

ADVICE

Use Zero-Based Budgeting Regularly

Regularly apply zero-based budgeting to indirect and overhead costs.
Assign expense owners to justify each cost and seek vendor alternatives or negotiate discounts.

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Nate Littlewood, fractional CFO and mentor, is on today's episode to shed some light on the 3 most common financial challenges that affects most e-commerce entrepreneurs and talks about how to fix them. He talks about the ways you can optimize inventory, cash flow, and reduce overhead costs.

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Cash flow is king when it comes to e-commerce businesses.

More often than not business owners need to use debt to order more inventory, while keeping the price the same.

Does that really make sense if all your profit ends up going to your SBA loan leaving you with nothing?

It doesn't.

That's why in today's episode we have Nate Littlewood on the podcast. He's a fractional CFO with a background in finance, and he helps e-commerce entrepreneurs figure out how they can improve their finance literacy. He's on the podcast today to talk about the 3 ways e-commerce businesses can improve their profit margins so they can start feeling their bank accounts grow.

The Big Takeaways

Many entrepreneurs have most of their cash flow tied up in inventory, making business cash flow a huge struggle.
Fixing inventory can be an easy way to gain back some cash flow which makes your business more nimble and adaptable.
Every now and then, you should assume that your SaaS budget is zero and make a case for why certain tools need to be purchased again.
The 80-20 rule or The Pareto principle should help you with deciding which products to axe and which to keep.
Offering more product variations does not lead to linear increased sales.
Having low cash flow stops your business from growing faster than it could.
Investing in supply chain optimization can also free up cash flow for your business.

Timestamps

00:00 - Introduction to Financial Challenges in E-commerce
03:02 - Understanding Inventory Management and Cash Flow
18:48 - Optimizing Indirect and Overhead Costs
25:02 - Negotiating Discounts and Customer Retention
26:29 - Identifying Overspending in SaaS and Marketing
28:23 - The Importance of Inventory Management
30:40 - The Unsexy Side of Business Operations
32:00 - Applying the Pareto Principle to Product Portfolios
39:00 - The Dangers of Overcomplicating Product Offerings
41:03 - Focusing on Strengths and Delegating Tasks
44:28 - Helping Founders Achieve Financial Clarity

Guest Resources

As always, if you have any questions or anything that you need help with, leave a comment down below if you're interested.

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Thanks for listening!

Until next time, happy selling!