Mini Episode: What an Elite DTC CFO Can Do For You
Episode Summary
In this mini episode of the Free to Grow CFO podcast, Jon Blair breaks down the critical role of an elite DTC CFO in helping brands scale profit and cash flow. He emphasizes the importance of understanding the specific 'game' a brand is playing—whether it's high LTV, new customer dominant, or high SKU count—and how this influences financial strategies. Jon outlines the different requirements for profitability in each game and stresses that an elite CFO should provide strategic insights rather than just basic accounting services.
Key Takeaways:
An elite DTC CFO goes beyond basic accounting tasks.
Identifying the game you're playing is crucial for strategy.
Each game has unique CAC targets and profitability requirements.
Episode Links
Jon Blair - https://www.linkedin.com/in/jonathon-albert-blair/
Free to Grow CFO - https://freetogrowcfo.com/
Transcript
00:00 Introduction to Elite D2C CFOs
00:20 Understanding the Role of an Elite CFO
01:17 Identifying the Game You're Playing
01:58 Strategies for Different Games
04:29 The Importance of Strategic Thinking in CFOs
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Jon Blair (00:01)
Hey everyone, welcome back 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 cashflow 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.
everyone, I'm excited for today's topic. Today we're gonna talk about what an elite DTC CFO can do for your brand. What do I mean by this? Look, there's plenty of mediocre CFOs out there who can help you clean up the books or produce a P&L and say, hey, we made money or we lost money. That's all basic stuff. Elite CFOs help you determine the game that you are playing and based on that game,
hand you a playbook which can be customized to meet your profit and cash flow goals as you scale your brand. Okay, so here's the process that an Elite DTC CFO can help you with. One, determine which game you're playing. Two, based on that game, determine if you need to be first order profitable. Three, align CAC targets, product launches, and sales channel expansion with the game that you're playing. So what's all this talk about game?
What do I even mean? I mean, are you playing the high LTV game, the new customer dominant or durable goods game, or are you playing the high SKU count slash apparel game?
Knowing which game you're playing is incredibly important because each of those three games has different requirements on the need to be first order profitable, which means that your CAC targets are gonna be different for each game. And then as you continue to scale and your CAC increases, you're gonna have to leverage product launches and sales channel expansion tactics in a different order and to a different degree within each of those games. So,
This is a mini pod episode, so I can't go super deep on this. If you want to go deeper, check out the episode on this on my other podcast called the Ecom Scaling Show. But let me give you some examples. So the high LTV game is a game that can be determined by your CFO by looking at your margin data and the Shopify cohort model. Marrying those two things up can help a CFO determine, do you have meaningful LTV over a three to six month period? If the answer is yes,
You might be able to play the high LTV game and that game scaling new customer acquisition, aggressively increasing CAC, losing money on new customers, but making, your money back in a three to six month payback period as consumers repeat purchase. The second,
is the new customer dominant durable goods game. That's a game where you have no meaningful LTV over a three to six month period and probably not even meaningful LTV over a 12 month period. That means all your profit has to come from new customers, from first orders. That means you have to manage your CAC to ensure that you always turn a profit on new customers as you continue to scale ad spend and CAC goes up.
So some of the strategies in this playbook are making sure that you have sufficient gross margin dollars per order to cover CAC as you scale, to launch new products to manage CAC, and to expand into other sales channels like Amazon and physical retail to manage your CAC as you scale. This game works best when you have high gross margin dollars per order to cover CAC and turn a profit on new customers, and there's a very large TAM.
you're pretty far away from hitting the ceiling of that tam. the third game is the high SKU count or apparel game. This game typically, especially in apparel, you do have meaningful LTV, but it takes a long time to get it. People aren't repeat purchasing repeatedly in a supplements brand over a three to six month period. Instead, there's a long tail. You're getting repeat purchase coming back 12, 24 months.
from the month in which you acquire a cohort. That means you still generally have to manage your CAC and be profitable or break even on new customer acquisition, but you gotta keep driving that repeat purchase in order to really generate sufficient profitability. So this is a game of always launching new products, but having the right products in stock at the right time to capture returning customer sales. And there's a real art here, especially in the apparel world, to make sure you don't get
too long on inventory, too overstocked. what's the takeaway that I want you to leave from here? you haven't heard me talk at all about debits and credits, accounting, closing the books, or even just weekly cash planning. What we're talking about here is strategy. An elite DTC CFO will look at your brand, pull various data sets,
various analyses and say, hey, brand founder, listen, you're playing this game and here are the playbook options for that game. That is called strategy. And strategy is what you should be getting from your CFO. If you're not, you're working with a mediocre one and you need to make a change to someone elite so that you can reach your profit and cashflow goals.
