How Do I Project Growth for My $3M Brand?

[00:00:00] Richard Gaffin: my business has grown. Roughly 20% year over year. We're pacing towards 3 million in annual rev this year. How do you guys think about projecting growth for a brand at my stage in the upcoming year?

[00:00:12] So in 2026? So, kind of a broad question, but let's think about essentially a, a lower seven figures brand thinking about projecting growth next year. How would you go about that?

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[00:01:02] That's F-E-R-M-A t.com/ctc.

[00:01:06] Richard Gaffin: All righty. Welcome folks to the D two C hotline. This is your direct connection to Hot Takes, cold Truths, and real eComm advice from some of the best in the business. I am your host Richard. The Professor Gaffin. Alright, here's how this works. You call or text eight six six D two C 2 2 6 3 to get your Bernie eComm questions answered.

[00:01:22] Again, that's 8 6 6 3 8 2 2 2 6 3. Leave us a voicemail, shoot us a text, ask whatever's on your mind. We have the two smartest guys in e-comm on the phone with us right now, our two operators. First, Mr. Tony, the chopper Chop coming at, at us live from Newport Beach. Tony, what's going on, man?

[00:01:40] Tony Chopp: Hello, Richard. Trying, trying to take it slow with all this Halloween candy I have in

[00:01:44] Richard Gaffin: There you go.

[00:01:45] Tony Chopp: but

[00:01:45] Richard Gaffin: go. No.

[00:01:46] Tony Chopp: doing too great.

[00:01:48] Richard Gaffin: Okay, well, you know, you need a little sugar rush going into BFCM. It's November, it's hell month, man. We're gonna get there. And then of course our other Mike Mr. Luke, the weatherman Austin coming in live from CTC offices in Costa Mesa. Luke, what's going on with you?

[00:02:03] Luke Austin: Yeah, we, we do not have any Halloween candy in the office, and that's, that's a miss. The vibes. The vibes are

[00:02:08] Richard Gaffin: Really?

[00:02:09] Luke Austin: Tony, maybe when you cruise, cruise in, in a couple days, you can. You can bring Bring a stash. We

[00:02:14] Tony Chopp: I,

[00:02:14] Luke Austin: help

[00:02:14] Tony Chopp: I will, I have, I have to.

[00:02:17] Luke Austin: Yeah. Yeah, yeah, yeah. Help us. Help you.

[00:02:21] Richard Gaffin: There you go. Alright folks, well let's let's dive into it here. We only only got one question today. We're keeping 'em focused as we head into Black Friday season. Of course it is November here in Portland, Oregon. It's like 40 degrees, but in our hearts on the DDC hotline is still warm and that's why I'm wearing the Hawaiian shirt.

[00:02:37] But anyway, that not withstanding, let's get into our first question here. This is a text question that came in, which is as follows, my business has grown. Roughly 20% year over year. We're pacing towards 3 million in annual rev this year. How do you guys think about projecting growth for a brand at my stage in the upcoming year?

[00:02:56] So in 2026? So, kind of a broad question, but let's think about essentially a, a lower seven figures brand thinking about projecting growth next year. How would you go about that?

[00:03:08] Tony Chopp: Well, that sounds an awful lot like a spend A-A-M-E-R model.

[00:03:12] Richard Gaffin: What, oh my goodness. What are the odds?

[00:03:16] Tony Chopp: that sounds an awful lot like what we got.

[00:03:19] Luke Austin: it's, it's, it is interesting like the. The size of the business matters for sure. And

[00:03:26] Richard Gaffin: Mm-hmm.

[00:03:27] Luke Austin: of that in this conversation is, is helpful to have, um, because 30, the plan for the $30 million business would look different than the $3 million business in terms of approaching the forecasting exercise and then how you think about holding to those targets.

[00:03:43] And for a a $30 million business, I think there's a lot more. Weight put on the predictability and the expectation of the business. There's just, it's just a larger size. There's the more people involved, there's um, there is just likely a, a higher level of expectation, maybe a board involved, like as it relates to the outcome of the business and the predictability of the revenue that I would put more weight in, quite honestly of. Whereas for a $3 million business, the forecast and the target setting exercise, um, I think. Is the focus should less beyond the predictability of the outcome of this is what is gonna happen for the business and this is what we should manage against. It, it's less so about that. It's more so about defining what the constraints are,

[00:04:33] Richard Gaffin: Hmm.

[00:04:33] Luke Austin: for, for the business into the future.

[00:04:36] To know to then within the boundaries that you set, know how hard you can push. It's like the way I, the way I think about it is. We have our, our daughter, she's two, so if she's in the front front yard, we don't have a fence or anything, so there's like some grass within the streets down there. And so she like has to, when we're out with her in the front yard, it's like we're always checking in on her.

[00:05:01] And if she's walking too close to the sidewalk next to the street, then we're telling her to take a couple steps back. Like it's much more. Whereas in the backyard, it's all fenced in the grass back there. She's got her toys and she can just go ballistic, like you can just do whatever she wants within the boundaries of the backyard fence.

[00:05:21] So it's like, here's the fence, here's the area. Now don't have to worry about like looking over your shoulder. Is this too far for mom and dad? But like, just send it within these constraints. That's how I would think about the forecast for. A $3 million brand, which is here is my first order profitability target that I set based on my, the desired payback window.

[00:05:42] Whether it's breaking down first order or a certain percent of margin return on first order, or, um, payback within sixty, ninety, a hundred twenty days. Right. So that's gonna be your sort of core operating metric that the forecasting process is important to help align on, but it's less so about. Spend this much budget this month to here's your constraint around first order profitability.

[00:06:02] Now go and now go and blow that outta the water as much as possible in terms of the volume against it. Um, and, and so that's, that's how I think about it. I mean, we can dive into more specifics around what some of those metrics are and things that we'd hold as constraints,

[00:06:17] Richard Gaffin: Mm-hmm.

[00:06:17] Luke Austin: size of the business is important.

[00:06:19] That's how I would, that's how I would think about this exercise for a 3 million brand. Get really clear on the constraints. There shouldn't be a lot of them. It should be simple because what you're after is creating the most, the, the most clearly defined and simple backyard playground for the kids to just go run around in and, and take, take some shots.

[00:06:40] Richard Gaffin: I love it. That's a, an AP metaphor. Tony, what, what are your thoughts?

[00:06:44] Tony Chopp: Well, I, I was just curious, as, as Luke was talking, I was, I was curious what, what your thoughts are on the. The strengths and potentially the challenges of our spend in a MER models re related to this question, like a $30 million business versus a $3 million business. Because assumption is that there's gonna be more, more volatility in our, in our data science, in our modeling for, for a smaller brand.

[00:07:08] Luke Austin: Yeah, yeah, that's exactly right. Which is the main, which is the main challenge. There's a lar le smaller sample size, less order volume, less amount of time, so smaller sample size, which makes it more challenging. Um, and you, you should just expect a different sort of growth trajectory. journey at different stages of the business, expecting a $3 million business. expect, yeah. Expecting a $3 million business to be like, Hey, we want to grow seven, 8% quarter per quarter consistently. Boom, boom, boom. You, if you impose that sort of expectation, you're, you're probably limiting the upside pretty substantially in many cases. whereas for a brand, for a 30 million or $50 million business. That, that's, that is a, probably a really helpful expectation to have actually, which is this, this level of consistency and the growth outcome. Um, while, while also creating room to sort of take some, take some bigger swings and shots within that. But yeah, the, the way that we think about forecasting through yeah, tools like the span a BR model through the retention model to get to our returning customer expectation. It's a much more first principle approach, which is. I need, like, the starting point would be I need X amount of o of, of cash per month to

[00:08:28] Tony Chopp: Okay.

[00:08:28] Luke Austin: fixed expenses, right? So I have this much of opex, this much cash per month to cover my fixed expenses. How much of that am I gonna get from, from my returning customer cohort in terms of the contribution margin that they're going to give me?

[00:08:40] Okay, here's, here's sort of the heuristic I can use for that now. How much additional contribution margin for my do I need from new customers? If any, then that's where I'm setting my first sort of profitability target to make sure I get there and then I know how hard I can go while knowing sweet, I'm good, we're take take care of our fixed obligations. Um, obviously within this, the, the sort of underlay is the, the amount of cash flow you're forecasting and your inventory purchasing needs. So like, not trying to simplify it to this extent. There just are, there's, there are multiple layers, but as simple as you can get it to, based on the inventory, fixed expenses and the inventory needs, here's how much I need to generate in terms of pro profitability from my acquisition efforts and the, and the growth efforts, the new things I'm doing. Now against that, let's go and, and take as many shots and goal as we can. Um, that, that's gonna lead, I think to a, a much stronger outcome for many brands having those constraints than, than having a specific forecast and see like, okay, great. We, we landed plus 20% year over year, really close. May have, you may have, limited the upside.

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[00:10:31] Richard Gaffin: Mm-hmm. So setting the, so let's, let's talk then about like. Or unpack a little bit more like the value of forecasting for a brand that at this size, right. So building out. So, so maybe, yeah, maybe I'll just leave that at that general question. So what's the value of, let's say, building out a 12 month forecast for a brand that's at 3 million?

[00:10:50] Like what, what does that help you do and how's that different than the way it helps a 30 million brand?

[00:10:55] Luke Austin: I, I think it helps, it helps the process helps to clarify the constraints, and that should be the main, the main goal,

[00:11:02] Richard Gaffin: I see what you saying.

[00:11:02] Luke Austin: as you work through each of these things. Okay, we're gonna work through our forecast. Let's start to think about, um, let's start to think about each of the sections of our, of our business.

[00:11:13] The operating expenses. Okay, here's how many operating expenses. Here's the additional HUD count we're planning or, or needing. Here's the different additional infrastructure. Okay? This is the amount of fixed costs by a month, okay? So based on that, that creates an obligation of itself. Working from the obligation and the constraint and then up and out of that, right?

[00:11:31] Like the forecasting process helps to clarify each of these inputs and specifically related to the, the opex, the fixed, the fixed cost, the returning customer contribution, and then how, and then really getting to how aggressive can I be on new. Customer, um, to be able to drive, drive the growth. Um, 'cause, because that is the thing that needs to be solved, is for you to consist, continue to show that you can grow the business profitably, um, and and, and go from there in that way so that the value of the forecasting process is in clarifying the constraints.

[00:12:04] Richard Gaffin: Yeah. Um, okay. Tony, what do you wanna add there?

[00:12:08] Tony Chopp: I was just gonna say, I didn't, I didn't hear Luke throw in his, like, favorite piece of the puzzle around like, what, what, what time consideration are you,

[00:12:14] Richard Gaffin: Mm-hmm.

[00:12:15] Tony Chopp: about for this decision? So, And I think that's where, for me, the value of the, the forecasting process and the spend to a MER model, specifically as it as it relates to the question of how aggressive can you be on new customer acquisition is, is really a function of what are you trying to do?

[00:12:32] Is this, is this, we're trying to grow this business to a certain, um, trailing 12 months ebitda. Are we trying to are we founders who are. Paying, paying for our bills outta this business, and we need to generate a certain amount of cash flow, um, that that's a smaller amount potentially, and we can invest more in new customer acquisition.

[00:12:49] So I think the, the value of the forecasting process to, to Luke's point, really helps, helps you understand the constraints that you're operating within. Um, but it's also gonna be helpful to look at, to think about what, what timeframe you're optimizing for and ultimately what, what your end game is.

[00:13:07] Richard Gaffin: Yeah. Um, Luke, sorry. Well, I'll, I'll let you, since it's your favorite thing, Luke, jump in on talking through timeframe, like any additional thoughts there.

[00:13:16] Luke Austin: Yeah, I think the time, the timeframe, the main thing that's gonna impact is. Is how aggressive you are willing or wanting to be as it relates to your new customer acquisition efforts and the, the like, what's the right phrase? It's not the, it's not the, it's not the 3000 pound gorilla. Like the, like the thing that's like right behind you all the time, like some shadow that's following you is. The competition and com categorical, the com, the competitive landscape that's con continuing to increase in terms of its expansion on your market and on your category, right? It is just relentless. Um, the additional brands that are gonna pop up sellers on Amazon, that is always going to be there. And so every step back you take from new customer acquisition and volume. It allows someone to gain, gain a step or two on you potentially. Right. That said if you continue to just play the game of max volume possible, then you're never gonna realize an efficient profitability outcome that's actually gonna lead to the valuation of your business that you're, that you're interested in.

[00:14:24] So that's, that's the tension that's always in here, which is like, okay, the more that we pull back, we're creating space where it's like. the getting's good, you, you should probably go get those customers as long as it works within the current constraints of the business. But yeah, to Tony's point, the time horizon's everything, um, because if it's, you know, if there's a, if there's a plan to make a, to make a strategic decision around the business and. Six to nine months, that's a very different game to play than five years from now, especially when you have substantial LTB and the impact on that over, over the, over the course of time. So, um, I think that's, that's priority number one. But again, it all comes down to like, okay, how aggressive can we be a new customer acquisition?

[00:15:05] Alright, that this is where we can be now. Should we be that aggressive? Is then the next question, right? Like we, we know how aggressive we can be based on the, our, our fixed operating expectations. Now, should we be that, um, aggressive or, um, How does this play into the, the time, the time consideration for the business?

[00:15:26] Richard Gaffin: Yeah. Um, all right. Anything anything else you guys wanna hit on this?

[00:15:31] Tony Chopp: I mean, I just, it's a thought that's occurred to me as we're doing our 2026 planning process and looking at the operating expense for, for CTC. Um, it's, it's tricky. There's tricky questions to, to ask and answer and, and really. You know, Luke and I are having these conversations around, there's, there's things that we're interested in, in investing in CTC for the, for the long term. Um, but in, in many ways, they come at, at potentially the cost of short

[00:15:57] Richard Gaffin: Mm-hmm.

[00:15:58] Tony Chopp: And it's, it's the balancing act between these two things. So, um, you're doing your 2026 planning process for this $3 million business. I think you really have to ask yourself, like, do you need that fancy new office space?

[00:16:10] Um, are, are all these hires that you have planned out, um, actually critical to your growth? Or depending on your, your timeframe and, and what your objective is would that investment be better served and getting your brand out in front of more new customers?

[00:16:25] Richard Gaffin: Yeah. Um, all right, well, it makes sense. So I think we can, we can go ahead and wrap it there, but I would be remiss of course if I didn't mention by the time you guys hear this, this'll be what Friday? The seventh I think is when this comes out. By Monday the 10th, this offer will be off the table, which I'm about to mention, which is of course that for a limited time for seven figure brands included.

[00:16:45] So if you are that 3 million brand, this applies to you seven to nine figure brands. If you. Build a profit system with us. We're also gonna throw in a free BFCM hourly tracking report. Now if you listen to this week's eCommerce Playbook podcast, Luke and I talk through exactly why you need hourly planning for BFCM, why it's so, so critical that you don't leave money on the table.

[00:17:06] Um, but feel free to check that out. Common thread co.com. Hit the hire us button and we'd love to chat about it. Now, before I let you guys go, Tony and Luke, I think we need to get a hotline hot take here and, given our topic of discussion at the beginning of this favorite Halloween candies, or let's say Halloween candy Hot takes.

[00:17:24] So I'm gonna go to you first. Tony

[00:17:26] Tony Chopp: I, all of them, it's a

[00:17:31] Richard Gaffin: can't get enough.

[00:17:32] Tony Chopp: I have such, I have such a ho, I have such a terrible sweet tooth. There's no reason that I should have a ba, a basket of candy in my house. That's my hot take. Should not have,

[00:17:40] Richard Gaffin: There you go. Yeah, I shouldn't have any of it. There you go, Luke.

[00:17:44] Luke Austin: I am not a dessert person. I am

[00:17:48] Richard Gaffin: Interesting.

[00:17:48] Luke Austin: a candy person, like not, I'm not against candy. There's

[00:17:51] Richard Gaffin: Oh

[00:17:53] Luke Austin: a very long list of things I would consume, I would rather consume prior

[00:17:57] Richard Gaffin: yeah, yeah. Yeah.

[00:17:58] Luke Austin: prior to candy and, and dessert in general. Like I, if I'm like. Have some room after dinner, then I'll have some chips instead of have dessert.

[00:18:07] Or I'll have

[00:18:08] Richard Gaffin: Yeah. Yeah.

[00:18:08] Luke Austin: something. Um, but say, I'll go savory versus sweet in general. And then, and as it comes, like Halloween, Halloween evening rather than candy. I had another, had another cider. nice. Got, it's a little sweet. You know, it's like

[00:18:23] Richard Gaffin: Mm-hmm.

[00:18:23] Luke Austin: But yeah.

[00:18:25] Richard Gaffin: For my candy hot take, which is that I also like you Luke. I'm not a dessert person until somebody puts a dessert in front of me and then I'm like, wow, this is great.

[00:18:32] But my hot take is that Candy corn is. I love candy corn. It's really good. You should have more of it and we'll leave it at that folks, about the hottest steak you can imagine about Halloween candy. Alright folks, thanks for joining us. Remember, if you want your questions answered on the pod call or leave us a voicemail, 8 6 6 D two C 2 2 6 3.

[00:18:49] You can shoot us a text there as well and we might answer your question on a subsequent episode. So for Tony, the chopper chop for Luke the weatherman. Austin, I'm Richard, the Professor Gaffen. Good talk to you and we'll see you next time. Bye.

[00:19:03]