Recently our co-founders Yuval Selik and Chris Ambarian joined Alex Bayer, founder of Genius Juice, on his 15 Minutes of Genius podcast. Various topics were covered - from the story of how the co-founders met, Yuval's recently launched podcast, The 7 Hats, to how and why Promomash was one of the lucky businesses to survive through 2020 and the pandemic, and finally - a topic most emerging CPGs don't want to talk about - deduction management.
Check out the full episode here on YouTube or watch/keep reading below for some notable excerpts.
On How Yuval and Chris Met [3:15]
Alex: "So tell me the history, how did you guys meet, and tell us about Promomash?"
Yuval: "So it's a funny story how we met...my wife Alla was networking and met [Chris'] wife Susie who was in multi-level marketing...she was trying to sell my wife wellness products and get her into the MLM community...my wife was trying to sell her skincare products so there were just a bunch of entrepreneurs trying to sell to each other and they met at Chris' house. Allah fell in love with Chris, introduced us and that's how we met."
Chris: "We were just having drinks and cigars out in the backyard waiting for them to be finished, and hey..."
On the Challenges Promomash Faced in 2020 [4:55]
Alex: "Tell us about Promomash...it was definitely brutal last year, the fact that there [were] no demos. I know that's...where your software really thrives...tell us how did you guys weather the storm in 2020? I'm sure you've heard this [question] a million times, but tell us more about the history of it and where you're at now."
Chris: "Talk about brutality... was the definition of brutality! I'm sure we weren't the only ones that felt that way, but yeah, it was tough because we were one of those industries that pretty much got shut down so the vast majority of our revenue stream, overnight - poof, gone. So we got assistance...as did other businesses...and took rapid action. We...had a ton of support from our team who made all kinds of sacrifices...we pivoted into other areas of revenue generation that we had already been working on before the pandemic hit so it was a good combination of reacting and adjusting and pivoting."
Yuval: "The saving grace for us was the fact that we got into trade promotion and deduction management as a service so that allowed us to get in touch with the brands and really help them through the difficulties of 2020, while still staying in business. Demos will come back but now we're really entrenched in trade and deduction management as a service and that's what's really kind of pushing the company forward."
On How Promomash is Taking on Deductions [8:04]
Alex: "Talk about [brutality]...deductions are brutal. Coming from this business - and there's a lot of entrepreneurs watching...the KEHEs, the UNFIs, there's deductions for everything...like if you're a brand, every time you take a breath they they do a deduction for you. Every time someone opens a bottle at
store level they do a deduction for you. So how are you guys actually dialing in and being the watchdog to make sure that these deductions are actually correct and [valid] because we've caught deductions all the time that are not valid, and eventually they give us a refund, but it's a full-time job to try to catch these so
what do you guys do on that front?"
Yuval: "What we decided to do is we wanted to take all the responsibility away from the brand or from the brokers or from their accounting team [so they can focus on] other aspects of their business...so we're doing deduction management as a service. [We digitize] every single one of those invoices that come in...then we're going to reconcile them and validate those invalid deductions. We're looking at 6 to 15 percent of the deductions that are coming in as invalid. And then we're going out to dispute and recover those deductions from the distributors or the retailers. We have a 75% or so success rate in getting the deductions back once we dispute, so...if we do the the service for you top to bottom you're looking at probably gaining back - and Chris can correct me if I'm wrong - somewhere between 1% to 1.5% of top line revenue after it's all done. Pure profit. So we do everything, we do the entirety of deduction management. You do nothing except for see the graphs, the charts, the dashboards, and get data that you can upload into into your ERP system...so we take all the headaches...we have the experts and we have a database of all the charges and we can match it up to all the promotions. It just gets loaded into the accrual side of things so now you can see planned versus