Mini Episode: The E-commerce Gold Rush is Over

Episode Summary

In this mini episode of the Free to Grow CFO podcast, Jon Blair discusses the end of the e-commerce gold rush and the shift towards sustainable business practices for DTC brands. He emphasizes the importance of profitability, the role of a great CFO in executing wealth-building strategies, and the need for control over business operations and personal wealth creation. The conversation highlights the transition from a speculative market to one that rewards discipline and effective execution.

Key Takeaways:

• Profitability is essential for survival in the current market.

• Brands must focus on sustainable growth rather than rapid scaling.

• The era of easy money has passed, but disciplined wealth creation is possible.

Episode Links

Jon Blair - https://www.linkedin.com/in/jonathon-albert-blair/

Free to Grow CFO - https://freetogrowcfo.com/

Transcript

00:00 The End of the E-Commerce Gold Rush

02:17 Building Sustainable DTC Brands

03:58 The Role of a CFO in Modern Business

05:45 Strategic Wealth Creation for Founders

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Jon Blair (00:00)

Hey everyone, welcome to another mini episode of the Free to Grow CFO podcast, where I break down one key concept that will help your DTC brand increase profit and cash flow as you scale. I'm your host, Jon Blair, founder of Free to Grow CFO.

We are the go-to outsource finance and accounting firm for eight and nine figure DTC brands. All right, so today I'm talking about the e-commerce gold rush being over. That's right, the e-comm gold rush is over. And let's face it, that's a good thing. Here's the thing, from 2020 to 2022, e-comm lived through a market anomaly. Ad costs were cheap, demand was artificially inflated.

Capital was abundant and forgiving. Valuations were detached from profit and cash flow fundamentals. Brands were basically rewarded for speed and not durability, for top line growth and not profitability, for financial storytelling, not cash flow generation. In that environment, I saw a dangerous belief take hold and that was, hey, let's launch fast, let's scale hard, and let's exit at a 10X EBITDA multiple or even worse, I saw 10X revenue multiples, not even need to generate EBITDA. And let's do that before reality catches up. For a small percentage of founders that worked, but for most it didn’t.

And now, post-COVID, post-zero interest rate policy, post-easy money, we're back in a very different era. One where the rules that governed wealth creation before the bubble are once again the rules that matter. Here's the thing. The COVID ecomm boom was an asset bubble. That doesn't make it evil, but it does make it temporary.

Asset bubbles reward timing and luck. Enduring businesses that withstand the test of time reward discipline and execution. Building a DTC brand today is no longer about finding the next arbitrage. It's about mastering a proven, boring, highly effective formula, which is the way that great businesses have been built for thousands of years. What is that formula?

It's one, building a business on a foundation of profitable unit economics.

Two, scaling that unit level profitability to create company level profitability.

Three, optimizing your balance sheet to create distributable cash flow.

Four, distributing cash flow to owners.

And five, taking that cash flow and investing it in buying assets, things like stocks, real estate, and other businesses.

This is not a Vegas gambling strategy. This is not rolling the dice on an exit. This is how business owners have built wealth for hundreds, even thousands of years, long before Shopify, long before Facebook ads, and long before private equity roll-ups existed.

So post-COVID, why are so many brands struggling? Brands are struggling not necessarily because they're bad operators. They're struggling because they optimized for the wrong scorecard during COVID. When capital was cheap, brands could lose money on new customer acquisition, over-invest on inventory, and ignore cashflow. They could also assume that future scale would just fix today's losses.

That only works when someone is willing to subsidize your mistakes, which the private capital markets were willing to do during the COVID era. Today, no one is willing to do that.

Rising CAC, tighter capital availability, slower consumer demand, and consumers that are much more rational in their purchasing online, that means that profitability is no longer optional, it's the price of admission. And not just profitable someday, profitable at the order level, profitable at the contribution margin level, profitable in cash, not just on paper.

So in the post-COVID era, how do you execute on building a financially stable business? Well, one way is by bringing in a great CFO. A great CFO is not brought in to clean up the books or prepare for an great CFO helps you execute the wealth building trade. Things like turning marketing into a predictable profit engine, understanding true new versus returning customer profitability, making inventory a cashflow accelerator instead of a risk, structuring growth so as you scale, margins actually improve, and ensuring the business funds the owner, not the other way around. So important. When this is done correctly with the help of an expert DTC CFO, this approach increases your optionality. And yes, it often leads to a healthier exit at a stronger multiple later on.

But here's what it does not do. It does not bet the entire future of the business on a single outcome. You win either way.

Final point I wanna make is why hoping for an exit is not a strategy. Building a brand solely to exit is basically gambling, it's speculation. Building a brand that throws off cash flow, compounds profits as it scales, and strengthens over time, that's strategic investing.

And ironically, it's this second approach that's far more attractive to buyers.

But that's not even the real point. The point is running your business this way gives you control. Control over your destiny, control over your cash, control over your risk, control over your timelines, and most importantly, control over your personal wealth creation.

So the last thing I'll leave you with is how does Free to Grow CFO fit into this equation? At Free to Grow CFO, we don't sell financial hype. We don't sell shortcuts. And we don't sell exit prep as a substitute for building a business with profitable economics. We help DTC founders see their business clearly, fix what's actually broken financially, build their profit intentionally, build a cashflow generating machine and use their brand as a long-term wealth vehicle. If an exit happens one day, it's a byproduct of doing these fundamentals right, not the reason you exist.

The era of easy money is over, but the era of disciplined, profitable, founder-owned wealth creation is very much alive, and Free to Grow CFO would love to help you on that journey.