Scaling DTC Smart & Quickly | With Daniel Tejada & Jon Blair
John discusses when a business should consider hiring a CFO. For service businesses, he suggests that they typically need a CFO when they reach around two to three million in revenue and have about 20 employees. In the case of consumer brands, the threshold is around five million in revenue, although some brands may require a CFO before reaching that point, depending on the complexity of their cash flow equation.
The conversation then moves on to the topic of cash flow and inventory management. John explains that inventory management is often the biggest cash flow issue for DTC brands. He discusses the common mistake of over-ordering due to fear of missing out on sales, which can lead to cash flow problems if the sales projections are not met. He advises finding a balance by ordering conservatively but also having the option to place smaller orders if needed.
The conversation concludes with a discussion on forecasting and the importance of building models that connect cause and effect to guide revenue growth. John emphasizes that forecasts are not meant to be entirely accurate but rather provide directional guidance and help determine the actions needed to achieve growth targets. He suggests analyzing drivers such as ad spend, return on ad spend (ROAS), conversion rates, and historical data to assess the reasonableness of growth targets and plan actions accordingly.
Overall, the video provides insights into the role of a CFO in scaling DTC brands, the timing for hiring a CFO, and the importance of effective cash flow management and forecasting.