The Hidden Profitability Trap in Scaling DTC Brands

I recently spoke with a couple DTC brand founders who felt like they were on top of the world.

They both had grown their brands from $1M to $10M in annualized revenue in just 12 months.

Even better they were both generating millions in bottom-line profit.

On the surface, everything looked amazing.

𝗕𝘂𝘁 𝗜 𝘀𝗮𝘄 𝗮 𝗺𝗮𝗷𝗼𝗿 𝗽𝗿𝗼𝗯𝗹𝗲𝗺.

Their customer acquisition cost (CAC) had skyrocketed as they scaled ad spend.

And if that trend continued as they pushed from $10M to $20M, they'd eventually hit negative contribution margin per order—a death spiral for profitability.

So, what were their options?

💡 1. Increase repeat purchase velocity
If a customer buys from you multiple times, that initial CAC gets spread across multiple orders. A higher lifetime value (LTV) means you can afford to spend more upfront to acquire new customers without sacrificing profitability. Subscription models, loyalty programs, and post-purchase email/SMS flows can help drive repeat orders and subsidize rising CAC.

💡 2. Boost first-order AOV & margin dollars
Upsells and bundling can drive more pre-CAC margin dollars, improving contribution margin on new customer orders.

💡 3. Diversify sales channels
Platforms like Amazon often have lower CAC and provide a fresh audience to scale into. Expanding beyond paid social can help offset the rising cost of customer acquisition.

Scaling isn’t just about revenue—it’s about profitable growth.

Is increasing CAC stressing you out?

Don't worry - I've got someone who can help.

An expert DTC Fractional CFO from Free to Grow CFO can help you track, assess, and improve CAC as you scale.

The result?

A fast growing, profit-rich DTC brand for you :)