This episode explores common cash flow mistakes that can negatively impact DTC businesses, particularly when expanding into wholesale, featuring Abir, the founder of UpCounting, who shares insights on managing finances in the eCommerce space. The discussion begins by highlighting the importance of treating each sales channel (DTC, B2B, Amazon) as a separate business with its own cost profile, cash conversion cycle, and ROI timeline, noting that wholesale requires more fixed costs and longer ROI periods compared to DTC. Against the backdrop of channel strategies, the conversation pivots to accounts receivable, emphasizing the administrative burden of collecting payments from wholesale clients and the potential for delays and errors, as illustrated by Obvi's experience with Walmart's complex EDI system. More significantly, the speakers address the miscalculation of cost of goods sold (COGS), urging brands to regularly update their calculations to account for changing costs and avoid unprofitable sales, referencing Obvi's improved gross margins after recalculating Walmart product costs. As the discussion pivoted to, the illusion of profit versus cash flow, Abir uses a story to explain how balance sheet items like inventory, advertising payables, and loans can create discrepancies between reported profit and actual cash availability, advocating for weekly cash flow forecasting to better understand and prepare for future financial needs. The episode concludes by examining debt versus equity financing options, with Abir recommending debt for short-term, concrete plans and equity for long-term, riskier ventures, and emphasizing the importance of lean financial planning and inventory management in today's uncertain economic climate.
