A common mistake that business owners make is using somebody else's playbook and expecting it to fit perfect. One key to success in entrepreneurship is setting clear and achievable goals for your business, which will have its own unique elements. Those goals will determine how you finance your growth.
Why it matters: Business success requires careful planning, strategic thinking, and a whole lot of hard work. Planning and strategy can follow a simple roadmap that you make your own, and the hard work is usually up to you.
Here's how we suggest setting goals and key metrics to secure your bag and grow.
Wondering what this really looks like? Example:
Let's paint this picture: A business called Daniel's Sauce has three men's skincare products. The products primarily sell online DTC, but the brand also has a few retail accounts. It costs $12.75 to create a product and get it to its endpoint (DTC delivery or retail delivery). Each product sells for $35 DTC and $24.50 retail/wholesale. The brand is selling $31,500/month in DTC and $36,750/month to retail. That's a gross profit margin of $20,025 in DTC and $17, 625 in retail wholesale (not including sales and marketing expenses). Let's say the marketing budget is $25,000 per month. So profit profit $13,000 something.
The SMART goal: Daniel's Sauce wants to increase DTC sales across the three products (The Marinade, The Dry Rub, and The Sauce) by 15% in the next 30 days using a package-deal subscription promo with a 10% discount. Factoring in the discount, that means an additional $4,252 in monthly DTC revenue. About 130 new orders. The brand is willing to spend $10k on marketing justified by the recurring monthly subscription revenue.
Aligning Resources: The brand needs a Shopify app for subscriptions, which reduces margins by about 1.5% and costs $99 per month. This is acceptable as DTC gross profit margins remain well above 50%, even after the 10% package-deal discount. In order to add cash flow flexibility for marketing spend, the brand wants some external funding.
@ The Bodega: Daniel's Sauce gets a Bodega plan that includes a financial overview, loan product descriptions, and an outline for funding business growth. The plan includes an Inventory Financing option for $75,000 over 90 days at 10% interest and a separate Purchase Order Financing and AR Factoring partner to improve the cash conversion cycle on retail, meaning a capital injection and less out-of-pocket spending to fulfill orders. The Bodega Crew manages the process to get the bag secured.
Time To Grow: Now, Daniel's Sauce redirects budget to marketing, activates the campaign, adjusts creative, and realizes that the campaign is over-delivering. The brand is on track to increase revenues by 25%. Should they raise prices? Increase the spend to capitalize on good creative? These are key adaptability questions. The good news: Daniel's Sauce hits the goal and in the process establishes a profitable recurring revenue channel. Even with loan repayments, margins stay good, and nobody got to take a piece of equity in the business in exchange for funding a short-term campaign.
Let's Celebrate: The team invites the community out for a bbq (with lots of brand representation).
That's a dream scenario. It won't always be that clean. With the right prep and partners, though, you can get this done for your brand, too.
We hope you found this guide helpful. If you have any questions or additional insights to share, please leave a comment below.