01Situation
A DTC brand in the $25-30M revenue band, founder-CEO and a small ops team, had built the business on a Shopify-Plus + retail-pop-up motion through 2022-2024. Then ads got expensive, channel mix scrambled, and the operating model didn't respond. Seven quarters of cash burn, two emergency-tranche capital top-ups, and a board that was running out of belief. Inventory was held to a single demand curve — DTC sell-through — while three other channels were running on different cycles. Gross margin had compressed by 11 points across eighteen months with no single explanation anyone in the company could articulate. The brief: stop the bleed, find the margin, free the cash inside the operating model.
02The work
- 01 Channel-level P&L rebuild. Re-cut the income statement into DTC, wholesale, marketplace, and pop-up retail with full-cost allocation including blended CAC, landed-cost shipping, return-and-reverse-logistics, and channel-specific OPEX. Found that two of the four channels were structurally unprofitable at any volume, and one of the two profitable channels was being starved of inventory.
- 02 Repricing the unprofitable channels. Lifted prices 8-14% on the structurally unprofitable channels with renegotiated MAP. Three months of unit-economics defence with the founder before the price moves landed. Volume held within 7% of pre-move levels; gross margin recovered 9 points blended.
- 03 Inventory restage — channel-led, not blended. Rebuilt the 13-week demand-and-supply view by channel, repositioned safety stock toward the fast channels and ran liquidation against the slow channels. Freed 38 days of operating inventory from the working-capital cycle — roughly $3.2M of cash, permanent.
- 04 13-week cash flow + weekly cadence. Installed a 13-week rolling view with weekly Friday-morning review at the founder-COO-fractional-CFO seat. First time the business had a cash-runway number it trusted week-over-week.
03Result
Returned to operating profitability in Q3 of the engagement — earlier than the founder or the board had projected at start. Gross margin recovered to 50.2% blended from 41.4% at engagement start. Operating-inventory days dropped from 187 to 149. Cash position improved by $4.6M without any new outside capital, against an engagement-start projection that called for a fourth emergency tranche by month seven. The board cancelled the standing emergency-funding agenda item at month nine. The founder still runs the weekly Friday cadence eighteen months later, and the engagement converted to an ongoing fractional-CFO retainer with quarterly business reviews.
04Lessons
- Channel-blended P&Ls hide structurally unprofitable channels for years. The first move is always to re-cut the income statement by channel, with honest cost allocation.
- Inventory restage frees more cash than vendor-term renegotiation in omnichannel businesses — usually by a factor of two or three. The 13-week demand-and-supply view is the artifact that makes it visible.
- Repricing unprofitable channels with renegotiated MAP holds volume better than founders expect. The fear of the move is bigger than the impact of the move.