Growing a DTC business isn’t for the faint of heart. Chief Revenue Officer and strategist Nick Shackelford has done it several times over and shares his advice for DTC founders on where to put your focus.
The biggest misconception about starting a DTC brand is that you don't have a brand if you don’t have money. There’s a lot of expectation around how the brand should look, but this isn’t necessarily where you should prioritise your time or spend.
“Don't sacrifice how much money you can make because of needing the branding or the colour of the website or something to be ‘perfect’ because it doesn't matter,” says Nick. “Any customer that's buying your product doesn't give a shit about what it's actually going to look like.”
What they will care about, however, is your product. Instead, invest in your product and prioritise this. In Nick’s words: “It needs to taste great, it needs to feel great, and it needs to be made well, and so those are the areas of product before brand.”
Of course, your brand can’t be thoughtless either, but ultimately, it exists to support your product. As your business matures, it’s likely your brand will change too. So, put some structure and effort into creating your branding, but don’t let it cloud your focus or become an obstacle.
“If you’re just starting out, three of the most important metrics that a DTC brand needs to be tracking are the cost of the team, cost of your inventory and the contribution margin you’re creating on a month-to-month basis,” says Nick.
“The contribution margin you’re creating is dependent on the inventory you’re ordering, and it’s also dependent on how much of your costs to acquire your customers are for that month,” says Nick. But, while this may seem straightforward, it isn’t always predictable for new businesses.
“No one’s going to tell you this, but at the beginning, when you’re starting out - you’re not going to have a good benchmark,” says Nick. “After maybe your sixth month, maybe your first year, you’ll understand what costs will be what, in what month. But that’s just an area you’re going to have to spend into it and you’ll just have to get a baseline.”
At least the amount you spend on your team is controllable and predictable. When building your team, you’ll want to mix in-house and agency. “It’s a major cost, but it’s not going to fluctuate. So
you’re at least going to understand where that’s going to be,” says Nick. One way you can cut down costs here is by optimising your spend on agencies by only buying a fraction of their time because, especially at the beginning, you won’t need all of it.
Hiring too many people is a common mistake for founders. Nick’s advice? Your team should be under five people at the beginning of your business.
The key to getting this right is knowing which roles will be owned internally and which will be hired out. Strategic use of agencies and freelancers can help you reduce costs while still filling core roles.
“Paid media, content, email marketing and customer support are the real areas you need to own internally,” says Nick. If you’re strapped for cash, paid media and content could be freelancers, and you could hire a freelancer to do a ‘one-time’ set-up on the email side, depending on your business needs. But it’s essential to keep operations lean and be intentional in your hires.
“For a brand that's starting out, if they wanted to cut through the clutter, they would need to lead with the founder story,” says Nick.
With so many brands on the market, getting early customers behind the brand is important. The founder story – why you started your brand and what makes it unique – is a great way to win customers' hearts and build your brand without making a massive investment.
If you’re not open to sharing your story or want an extra incentive to purchase, you should focus on an offer. “If you get these two correct, then growth will be a little bit faster than you anticipated,” says Nick.
“An offer is the reason why they're going to buy, not the quality of the product, not the branding of the product, but a dollar amount of value that a customer will have,” says Nick
Sales, subscribe and save, and buy-one-get-some are all options to help convince people to try your product. But you need to create a pricing strategy to get the offer right and not lose out.
Instead of taking the easy route and copying a competitor's pricing, it’s important to figure out your own pricing strategy. But, as a new brand, it can be challenging to know where to start.
“There’s no easy way of testing pricing other than just putting it as high as you can and start to see where the elasticity is, or what customers are willing to spend,” says Nick. This can give “a
little bit of room, and if we need to discount, we’ll discount that.” This approach makes sure that you can save on contribution margin.
Another piece of the product puzzle is ordering inventory without hurting your cash flow.
“What a lot of brands do is they order the smallest amount possible. It's not their fault; they don't have a partner that they're able to finance a lot of this for. It's the most expensive part,” says Nick. When he’s been in this predicament, he has found two solutions: getting a lot of credit and a partner that can finance purchasing inventory like Juni.
With Juni, customers in the EEA* can finance their inventory invoices on terms of up to 120 days with fees as low as 3%. That means you’ll get the money you spend on inventory in your pocket to invest back into your business without waiting to sell your stock.
“The unique thing about Juni's invoice financing is that it's actually made for the way our business works,” says Nick. “I think it's extremely important to know, if you need to fund your ads for three months and you need to fund inventory for two months, there's no negotiation needed, it's already built into the solution.”
Tactical investment, optimising your finances, and learning as you go are essential steps to building a strong DTC business.
You can hear more from Nick Shackelford and his highs, lows and lessons learnt from growing DTC brands in our latest episode of Unscripted Growth. If you’re a solo founder you won’t want to miss this!
*Inventory financing is available for companies registered in NL, SE, DE, ES, IT, NO & FR, upon eligibility. Fees and terms and conditions apply.
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