Welcome to the Ecom CFO Notebook, your weekly dose of straight-talk ecom finance and accounting – designed to help you grow more, stress less, and keep your ass solvent.
Sam here, and this week, we’re giving you an early look at some of the best insights from our upcoming Q1 benchmark report.
As one of the only firms specializing in Ecom, our position gives us unique insight into how the market is performing, and what it means for you.
We analyzed data from eighteen brands, with revenues ranging 7- to 9-figures, and pulled out trends in revenue, gross margin, contribution margin, EBITDA and more.
The full report drops soon, and as readers of this newsletter, you’ll get it first.
We’ve also got…
Biggest Mistakes I See DTC Founders Make
New AI Tools to Have Your Eye On
New: DTC Investors’ Corner
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Enough chit-chat, let's get into it…
Every month, when we sit down with clients, we hear some version of the same question:
“What are you seeing in the market”?
We see the books across dozens of $1M to $100M+ brands, and have a very unique view into how the market’s changing.
We want to share that.
So, we invest heavily in creating all sorts of content, from this newsletter, to live group calls with industry experts, and deeper-dive benchmark reports.
Our most recent report analyzed the combined financials of eighteen private DTC brands, with revenue ranging from 7- to 9-figures, to distill Q1 benchmarks for GM, CM, EBITDA, and more, along with anecdotes on how brands are (or aren’t) responding to changing market conditions.
Here are a few of the big findings…
The best brands are still growing, despite the environment. The 95th percentile of every cohort saw ~20-50% revenue lift - great companies thrive in every market
Wholesale continues to expand, growing ~9-40% across our cohorts, and representing a bigger chunk of the overall revenue pie than it did 2024
Gross margin was about even, though some are enjoying the payoff from years of discipline. Very few brands under $10M have gross margins lower than 70%
Contribution Margin was up a surprising 17% overall average, despite flat gross margins and declining ROAS. Most (but not all) of that among $50M+ brand
EBITDA was a mixed bag, falling dramatically for companies under $50M, where G&A is up ~15%. G&A is up for the $50M+ cohort too. Revenue’s just growing faster.
Below is the summary of all the numbers by cohort.
With the trade wars and declining consumer sentiment starting in late Q1/Q2, only part of what we’re seeing here can be attributed to that.
There’s a lot of red in the data but there are bright spots as we’ll unpack the findings in the full report.
The full report is 20+ pages of data and insights – too much to go into here. But one thing I wanted to zoom in on is the data around gross margins.
This was eye-opening.
Among private companies we reviewed, there weren’t any significant swings in overall gross margin.
The slight decline in companies under $50M correlates with growth in their Wholesale revenue. So, not necessarily cause for alarm.
But look at that second table below – there are very few companies in the 8- to 9-figure range that don’t have at least 70% margins.
You almost could go so far as to say, it’s a defining characteristic of brands that get to that size.
Also, the spread between best- and worst-performers in our under $10M cohort is much broader than the others, with more than 30 percentage points between 95th and 5th percentiles.
Anecdotally, few companies improved COGS in Q1, and refunds/returns generally went up or were flat, so any growth in gross margin is likely coming from price increases or offer optimization (e.g., reducing discounts).
In some rare cases, it’s due to launching high-margin products.
For the most part though, healthy gross margins today are the result of years of disciplined behavior in the past - especially in that 95th percentile.
That discipline is now paying off, as some brands are able to absorb tariffs and eat up market share while the competition struggles.
All of this helps to make one of the key points of the full report:
Founders need to be maniacal about protecting and expanding margin.
We talked about this in more detail in our last report (linked below). But the importance has only grown since then. Key levers are:
Renegotiating with suppliers
Implementing diligent SKU rationalization
Reviewing G&A, and making tough calls (no room for C-Players anymore)
It’s not easy, but it’s necessary to survive. If you want some help thinking through this for your brand, get on my calendar.
And keep an eye out here for the full report. It’s off with the designer now, putting finishing touches on, but will be in your inbox soon.
📊 Compare Your P&L to Other Private Brands
Yes, the Q1 report is coming out soon. So in the meantime, brush up on the last report, looking at a full year's performance for private and public brands.
We analyzed financials across 30+ companies to show you exactly what happened – including revenue growth, margins, ad spend, and more. The full report is free and un-gated. Use it to battle test your 2025 plans.
My team reviews industry insights every week to stay current. We curate the best, so you don't have to...
1. Navigating Financial Challenges: I joined Hal Smith of H Street Digital on his podcast the other day to talk about the most common mistakes I see DTC operators make, cash management and inventory challenges, key financial metrics for growth, and more.
2. AI Tools to Have Your Eye On: We’re always very slow to cover AI stories here in the email. Most the headlines don’t live up to the hype. But last week, I noticed that both Shopify and Amazon announced updates that are worth sharing:
Shopify Magic is an AI image editor, tailored to Ecom brands
Amazon Enhance allows you to improve your product listings with Gen AI
If you’re using either, hit reply and let me know what you think.
3. DTC Investor’s Corner: This newsletter reaches a diverse group of leaders in the space. Founders, yes. But investors too. People looking to buy brands, and people looking to sell. We play match-maker behind the scenes, but want to help get even more eyes on deals.
So whether you're on the buy- or sell-side, a few things to highlight:
A few of our larger clients are in the early stages of exploring acquisition. If you’re a buyer writing checks for $10M+, hit reply to message me privately.
Similarly, if you’re buying or selling companies in this space of any size, and want more visibility, reply to this email or grab a call with me here. Everything you say is fully confidential.
How We Can Help
Ecom CFO is one of the only fractional finance and accounting firms that specializes exclusively in 7- to 9-figure DTC clients. This email is part of our effort to share industry-best insights with founders, for free. But When you're ready, here are other ways we can help:
1. Schedule A Call: If you’re looking for a partner that can work across your teams, give you the insights you need to make faster, more confident growth decisions, and unlock all the benefits of having clean, clear, investor-ready financials, grab a spot on my calendar here.
2. Resources Clients Find Helpful: Here are a few tools we've built for clients and find ourselves sharing over and over...
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