Your Business's
Diagnostic Report

Your Growth Quotient is:

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  • Strength

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  • Weakness

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  • Industry

    DTC Ecommerce

How is the brand doing overall?

Good news — you’re in a great position to grow. Several metrics are above target, and you’ve got the GQ score to match.

Remember, however, that there’s theoretically no upper limit to your growth potential, which means that there are some key next steps to take your business even higher.

Some of your metrics are below target, resulting in a suboptimal GQ score and hindering your ability to grow your ecommerce business.

However, the good news is that the next steps to rebuilding your growth potential are clear.

Detailed Results

Metric Your Score BenchmarkTarget Average GQ +/-
Cost of Delivery (COD) as a Percent of RevenueCOD Error!% <30% 47.37% Error!
Operating Expenses as a Percent of RevenueOPEX Error!% <25% 24.26% Error!
Cash Conversion CycleCCC Error! <0 80 Error!
60-Day Incremental Revenue Growth Percent60D LTV % + Error!% ≥30% 20.90% Error!
1-Year Incremental Revenue Growth Percent1Y LTV % + Error!% ≥100% 49.43% Error!
First Order Value to New Customer Acquisition Cost Ratio (FOV:nCAC)FOV:nCAC Error! >0 0.66 Error!
Number of Distribution Channels# Dist. Channels Error! ≥3 2.67 Error!
Percent Organic Traffic% Organic Error!% ≥50% 41% Error!
1-Year LTV to New Customer Acquisition Cost Ratio1Y LTV:nCAC Error! >0.5 1.83 Error!
Number of Revenue Peaks#Rev Peaks Error! ≥4 2.56 Error!

Key Issues

Key issues and recommendations will be detailed on the following pages.

Cost of Delivery (COD) as a Percent of Revenue
Issue:

High Variable Costs

Your Cost of Delivery exceeds 30% of revenue, which means that your product costs are taking a sizable chunk out of your first-order margin.

While we would certainly recommend looking at ways to reduce those costs, we also understand that may not be the easiest lever to pull.

Recommendation:

Focus on Efficient Acquisition

If cutting costs isn’t feasible, efficiency becomes paramount to preserving your first-order profitability.

We’d recommend: 

  1. Shoring up your campaign structure to let the algorithm do what it does best.
    Use this resource to build better campaign structures.
  2. Focusing on developing more-effective creative.
    Use this 5-step process to ideate better ad creative and messaging.

The other route is to increase AOV — click here for tactics to affect this number and increase your overall contribution margin.

Operating Expenses as a Percent of Revenue
Issue:

High Fixed Costs

Your OPEX percentage suggests that your overhead costs are affecting your ability to scale your business quickly.

Recommendation:

Cut Overhead

Consider finding and eliminating inefficiencies — review agency fees, payroll, tech expenses and office costs to find breathing room and get your OPEX closer to 25% or less of revenue.

For more on our approach to managing hard costs, read our tactical guide to building an antifragile ecommerce operation.

Cash Conversion Cycle
Issue:

Non-Negative Cash Conversion Cycle

A Cash Conversion Cycle 0 or above means that your brand may have issues with inventory management.

This can lead to issues with capitalization, which in turn leads to an understandable, but near-sighted, focus on short-term profitability over building long-term revenue.

Recommendation:

Improve Supplier Terms and Lead Times

The two key factors that go into Cash Conversion Cycle: lead times and supplier terms.

Depending on your industry, you may not be able to do much about lead times. But consider finding better supplier terms — the closer you can get to payment on delivery, the better.

For more on our approach to managing Supplier Terms and Lead Times, read our tactical guide to building an antifragile ecommerce operation.

60-Day Incremental Revenue Growth Percent
Issue:

Poor Short-term Retention

Your 60-day LTV increase percentage suggests that there’s an opportunity for you to tighten up your retention efforts.

The more per-customer revenue you can get in the first 60 days after purchase, the more opportunity there is for you to acquire customers at breakeven — which in turn gives you the opportunity to spend more on acquisition, which is the best accelerant for growth.

Recommendation:

Optimize Basic Email Flows

The best way to re-engage customers over that 60-day window?

Tightening up your core email flows, particularly your post-purchase flow.

Are you addressing objections to repurchase? Are you hitting cohorts in their repurchase window?

Use this resource to improve your email retention immediately.

1-Year Incremental Revenue Growth Percent
Issue:

Poor Long-term Retention

Your 1-year LTV increase percentage suggests there’s an opportunity to build more long-term re-engagement for customers.

Of course, if you sell a product that doesn’t lend itself to subscription or replacement, you may be limited in your ability to affect this variable.

Recommendation:

Focus on Your MVP Customers

If customers aren’t coming back to purchase, that’s because:

  1. The product is a disappointment, or
  2. There’s no reason to buy more from you.

However, that doesn’t mean that nobody is coming back to buy long-term.

We’d recommend segmenting out your biggest-spending customers and trying to find more of them. Just because most don’t have a reason to repurchase doesn’t mean there’s nobody out there who does.

Use this resource for more on stacking your most-profitable customers.

First Order Value to New Customer Acquisition Cost Ratio (FOV:nCAC)
Issue:

Losing Money on First Purchase

Your sub-zero FOV:nCAC ratio means that you’re losing money on your first order, which puts you in a hole every time someone purchases your product.

Recommendation:

Focus on Efficiency

Fixing this problem usually looks like:

  1. Bringing your COD down,
  2. Bringing your First Order Revenue up, or
  3. Bringing your nCAC down.

If your brand has a relatively low First Order Revenue, we’d recommend looking there first, because it’s the easiest lever to control.

Run through this checklist:

  • Can I simply raise the price of my hero product(s)? 
  • Is there a way to create bundles that make sense for the consumer?
  • Are there any clear upsell/cross-sell opportunities?
  • Am I pushing the right product in my advertising?

This last point is perhaps the most important — people will purchase what you show them. Consider rebuilding your ad account to push a set of products that result in more first-order revenue.

Use this resource to help you rebuild your ad account and push a set of products that result in more first-order revenue.

Use this resource for more on bringing your First Order Revenue up.

Number of Distribution Channels
Issue:

Limited Distribution Channels

Put simply, you may have too many eggs in one basket.

Diversifying your distribution channels decreases the overall risk to your business.

Recommendation:

Expand If You Can

Consider opening another line of distribution if possible — whether that’s Amazon, wholesale, retail, or something else, selling in more channels increases the downside protection of all your channels.

For more on our approach to managing distribution channels, read our tactical guide to building an antifragile ecommerce operation.

Percent Organic Traffic
Issue:

Over-reliance on Paid Channels

A sub-50% organic traffic score usually means one thing:

You’re relying on your most-volatile channel to carry the bulk of your new-customer acquisition.

Recommendation:

Expand If You Can

The inconsistency of paid acquisition usually leads to a short-sighted focus on platform ROAS, and that, in turn, leads to what we call the Upside-Down Layer Cake problem.

Use this resource to begin building a foundation of both existing-customer and owned-channel revenue.

1-Year LTV to New Customer Acquisition Cost Ratio
Issue:

Limited 1 Year LTV:nCAC

Another way of thinking about this:

Your brand could have a better ROI. In fact, brands that grow explosively produce at least a 150% or greater return on investment after a year.

Some businesses lend themselves to this better than others (think subscriptions).

Recommendation:

Focus on Your MVP Customers

Our recommendation here is the same for those with a low 1-Year CAC growth percentage —

Segment out your biggest-spending customers and find more of them. Just because most don’t have a reason to repurchase doesn’t mean there’s nobody out there who does.

Use this resource for more on stacking your most-profitable customers.

Number of Revenue Peaks
Issue:

Limited Revenue Peaks

Your score here indicates that there's an opportunity to create more sales “moments” throughout the year.

Recommendation:

Create More Seasonal Events

While most brands peak over the holidays (and possibly one other gifting occasion, like Father’s Day or Back-to-School), this is a great opportunity for you to fill in the “valleys” in your marketing calendar with product drops, seasonal releases, or special “event” discounts.

Learn more about building a four-peaks calendar here.

Share your Ecommerce Diagnostic Report Internally:

Not sure where to start? Need more guidance from our experts?

Book a call for further recommendations and review from our team of ecommerce strategists.

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