Expert Insights: The Hidden Financial Metrics Driving DTC Success

As competition in the DTC space intensifies, successful brands are looking beyond obvious financial indicators to find their edge. But which metrics truly matter for sustainable growth? We asked our network of DTC financial experts to share their insights on the most impactful—yet frequently overlooked—financial metrics that founders should be tracking right now - in this edition of Finaloop's DTC Finance Insider's Club.

Here's what our experts revealed about the key numbers driving DTC success:

The Power of Recurring Revenue

"With increased DTC competition, I'm urging DTC clients (where it makes sense) to explore a recurring subscription option. That's the reason VCs love SaaS so much.. compounding recurring revenue. Do you sell a food item, or beauty product, etc? Look into subscriptions. MRR or Monthly Recurring Revenue is key."

Courtney Myers, CPA | Founder at Freedom Finance

Understanding the Cash Conversion Cycle

"Cash Conversion Cycle (CCC): Think of CCC as the speed at which your cash flows back into your business after you've invested it in products. The shorter this cycle, the quicker you get your money back to reinvest in growth.

For DTC brands, it's a game-changer. Let's say you're selling skincare products. If it takes 90 days from when you pay your supplier to when customers buy the product and you get paid, that's cash locked up for three months. But if you can shave that down to, say, 60 days by tweaking your inventory or negotiating longer payment terms with suppliers, you free up that cash 30 days sooner. That's a month's worth of cash you can put right back into buying new stock or ramping up your marketing.

In short, a shorter CCC means you're getting your investment back faster, which keeps cash flowing and your business growing without having to wait on outside funding. It's about working smarter with the money you already have."

Rob te Braake | Insight Matters Financial Clarity for Online Businesses

The Critical Role of Cash Cycle Management

"Cash conversion cycle. Freeing up cash is imperative at a time when margins continue to be under pressure. If you are a growing business, you will need to improve your cash conversion cycle to deal with the cash needs of scaling. It's important to break down the components between inventory, payables and receivables and understand the drivers of each one. Don't be fooled by seasonality either. make sure you're looking at trends over time."

Jeff Lowenstein | DTC Fractional CFO, Co-Founder of Free to Grow CFO

Diving Deep into Customer Contribution Margins

"Lately I've really been diving deep into helping brands understand contribution margin dollars, segmented out between first-time customers and repeat customers. Brands don't realize how their weighted average blended contribution margin has massive insights hiding underneath the surface, and you need to go a level deeper to see how much of your contribution dollars are made up of first-time customers vs repeat customers. The insights from these metrics are massive and yield different ad spend scaling strategies depending on what is uncovered."

Jon Blair | DTC Fractional CFO, Founder of Free to Grow CFO

Finaloop's Take:

"In our experience, for successful brands, this is what you find 99% of the time:

1. Contribution margin from recurring customers is greater than Fixed Opex + Financing costs.

2. Contribution margin from new customers > 0

In other words, the contribution margin from recurring revenue is used to cover ongoing costs and the contribution margin from new customers is what is used for expansion and growth."

Jacob Becker | Head of Ecosystem Education, Finaloop

Need help tracking and optimizing these crucial metrics for your DTC brand? From real-time bookkeeping for ecommerce business to dedicated ecommerce accounting services, book a short consultancy call with one of Finaloop's ecommerce accounting experts.