Published: 05/12/2026
Last updated: 05/12/2026
Most DTC brands that run into cash flow problems aren’t short on revenue. They’re short on visibility – into their margins, their cash cycle, and what peak season actually cost them.
Dan Major is a fractional CFO working exclusively with D2C fashion, footwear, and apparel brands – a corner of the market where SKU fragmentation, long supplier lead times, and seasonal demand swings make the cash cycle problem uniquely difficult to manage. He shares weekly insights with DTC brand owners through his newsletter, including a unit economics profit margin calculator with channel benchmarks.
We sat down with Dan to talk about contribution margin, revenue-based lending, TikTok Shop economics, and the financial advice that’s quietly killing DTC brands.
💡 Key takeaways
Your P&L tells you what you made. Your cash cycle tells you when you can use it – and most founders only ever learn to read one of them.
A profitable business can run out of cash. An unprofitable business can have plenty. Revenue is not the number to watch.
Not every product belongs in a Black Friday discount. A-products just need to be in stock. Dead stock and split sizes are what the discount is for.
Before reaching for financing, answer two questions: do you understand your cash cycle, and do your unit economics work? If yes to both and you’re still short — that’s a capital problem. If not, sort visibility first.
Below ~£2M revenue you need a bookkeeper, not a fractional CFO. The sweet spot for proper financial input is above ~£3M, when inventory decisions get big enough that wrong calls cost more than the advice.
Q&A with Dan Major
Everyone in DTC is obsessed with contribution margin right now. Is it overrated?
No, but most brands are calculating it wrong, which makes it dangerous rather than overrated. Contribution margin is the most important number in a DTC brand, but it’s only useful if the number is right. Most brands I see are missing costs in it – they’re not including all their fulfillment fees, their platform costs, or even agency fees. That’s often the difference between scaling and losing money.
Most founders assume their cash flow problem is a capital problem. Why are they usually wrong – and what should they be looking at instead?
Most brands’ cash flow problems are visibility problems, not capital problems. Founders assume they need more money to grow. They usually need a clearer picture of the money they already have. Once you know your CCC and your real margins, you stop reacting to fires and start making deliberate financing decisions.
Clean monthly financials are the foundation of everything. Without them you can’t see your margins, you can’t access better funding, and you’re making decisions in the dark. But you also don’t want to build a cottage industry in your finance function too early – that’s expensive overhead a 7-figure brand can’t justify yet.
The answer is a hybrid approach. Get the visibility that matters for decisions – key margins, stock position, cash cycle – without building a finance department that costs more than the insights are worth at that stage.
You’ve said revenue-based lending gets a bad rap. Make the case for it – when is it genuinely the right tool?
Revenue-based lending gets criticized because of how it’s misused, not what it actually is. When you’re early stage, with no trading history, no assets to borrow against, and you need cash to buy your first inventory runs, it’s often the only option available that can provide significant funding. That’s fine. The problem isn’t the product. It’s using it when you don’t need to and staying on it longer than you should. If your CCC is 90 days and the advance repays in 60, you’ve got a problem that no amount of revenue growth fixes. Use it to get started, but have a plan to move off it.
What’s the most dangerous piece of financial advice that gets repeated as gospel in the DTC world?
Focus on revenue growth and the profits will follow. If your contribution margin is thin, your cash conversion cycle is too long, and your unit economics don’t work at your current size, then scaling up revenue just scales up the problem. You can grow your way into insolvency. The brands that get to 8 figures get their economics right first, before adding an accelerant. Not the other way around.
If a brand is growing fast and the founder is happy – what’s the thing they almost certainly don’t know yet?
What their peak season actually cost them. Most founders look at November and December revenue and feel good. Very few have looked at November, December, and January together as a single quarter – which is the only honest way to see it. When you do, a lot of peak seasons that felt profitable turn out to be break-even at best. The VAT bill, the Meta bill, the supplier reorder, and the post-Christmas returns all come due for payment in January. Meanwhile brand founders are too busy high-fiving in December to spot what will happen six weeks later.
Black Friday: necessary evil, margin-destroying ritual, or something brands actually have wrong in how they think about it?
Neither necessary evil nor ritual. It’s a slow-moving/dead stock clearance event that most brands accidentally turn into a margin disaster. The mistake is applying the discount to everything. Your A products – the ones customers would have bought anyway – don’t need 30% off. They just need to be in stock. The discount belongs on the products you’re never reordering. The bets that didn’t land. The split sizes sitting in the corner of the warehouse. For those SKUs, the cost of goods is already sunk. All that matters is turning it back into cash. Run Black Friday right and it’s your most efficient stock clearance of the year. Run it wrong and you’ve just guaranteed you won’t sleep much in January.
TikTok Shop economics – be honest. What does the P&L actually look like for most brands running it?
Most brands running TikTok Shop are growing revenue and losing margin without knowing it. I work with a brand doing around $5M a year on the channel, up to $1M a month during some peak months. The top line looks extraordinary. The margin took serious work to get right. Two things catch brands off guard. First, AOV on TikTok Shop tends to run lower than the same product on Shopify, as the platform attracts different buying behavior. Second, TikTok heavily incentivizes discounting. It’s very easy to find yourself promoting aggressively just to stay visible, and suddenly your contribution margin is gone. The other issue is visibility. The full fee structure is hard to understand. I had to build a custom TikTok margin calculator just to see the true economics for this brand, because the hidden costs are significant. It can be made profitable. We’ve done it. But it came at the cost of slowing the growth down to fix the margins first. If your base product margin isn’t strong going in, TikTok Shop will be painful.
Is there a revenue stage where hiring a fractional CFO is actually the wrong move?
Yes. Below about $2.5M revenue, depending on the complexity of your brand, you probably don’t need high-level support. You need a good industry-specific bookkeeper and a clear contribution margin calculation. A fractional CFO is too expensive at that revenue level. The financials at that stage aren’t complex enough to justify the cost, and the best thing you can do is keep your margins clean and your costs lean. The initial sweet spot is usually somewhere above $4M, when the cash cycle starts to create real pressure, inventory decisions get bigger, and the cost of a wrong call starts to outweigh the cost of getting proper financial input. Before that, keep the business model as simple as possible and spend the money on stock or ads.
You work with fashion and apparel specifically. What does that industry get catastrophically wrong about inventory that other product categories have figured out?
Size and color SKU fragmentation. A food brand or a supplements brand has one SKU. A fashion brand has one style that can run across 6 sizes and 4 colors. That’s 24 SKUs before you’ve bought a second product. Getting that right across a full range is tough, and most brands don’t do it properly. They buy on instinct and last season’s rough memory. The result is they’re often out of stock on their best sizes and overstocked on the ones that don’t move – both mean the cash doesn’t arrive. The brands that have figured this out test newness with small runs and do size ratio analysis before they buy.
What’s a number founders watch obsessively that’s basically meaningless?
Gross revenue. Founders talk about revenue like it’s the end game. It’s actually just the start. A brand doing $10M revenue with a 12% contribution margin is in a worse position than a brand doing $5M at 28%. The larger number just means the problem is bigger and moving faster. I’ve sat with founders who’ve hit mid-7 figures and they’re happy. I’m looking at the P&L thinking the margin structure doesn’t support the growth they’re about to try to fund. Revenue is good to tell people at a dinner party. Contribution margin tells you whether the brand’s operations are trading efficiently.
A lot of founders think their cash flow problem is a financing problem. You disagree. But at what point are they actually right – when is it a capital problem?
They’re right when the unit economics are proven and the cash cycle is understood but growth itself is outpacing the cash the business generates. A brand growing 50% year over year with solid contribution margins is a genuine capital problem. The inventory required to support next month’s revenue is bigger than the profit from last month’s sales. That gap doesn’t fix itself. Same applies when you have a long but well-managed cash cycle. You know exactly where the cash is, you’ve optimized what you can, and growth still requires more working capital than the business can self-fund. That’s when financing starts being the right tool.
Do you understand your cash cycle and do your unit economics work? If yes to both and you’re still short, that’s a capital problem. If you can’t answer those two questions, sort visibility first before adding debt.
What does a brand look like at $6M that’s genuinely well-run – not just "doing okay"? What’s different?
In my experience, a well-run $6M brand doesn’t stay at $6M for long. The right conditions make it create its own momentum. A simple business model with ideally one core repeatable pathway. Minimal extra complexity in the supply chain, product listings, and sales channels. Great margins: product margin (80%), gross margin (60%+), OPEX costs (below 10%). Keeping 10% back for net profits, that leaves 40% available for ad spend – and the business can outbid almost anyone in its category profitably. The cash cycle would be close to zero days, so growth is largely self-funding. That combination turns $6M into $18M faster than most founders realize.
If you could change one thing about how founders are taught to think about money, what would it be?
Stop focusing on revenue and profit, and start thinking about cash timing. A profitable business can run out of cash. An unprofitable business can have plenty of it. The P&L tells you what you made. The cash cycle tells you when you can use it. Most founders only ever learn the first one.
What’s something you believed early in your career that you now think is completely wrong?
That a high customer acquisition ROAS was something to be proud of. I used to see a 5x or 6x ROAS and think the brand was winning. Now I see it differently. Cherry-picking only the most profitable customers protects short-term margins but starves long-term growth. The brands that scale fastest have margins lean enough to profitably acquire customers their competitors can’t afford to touch. A lower ROAS at higher volume, within a contribution margin that works, beats a high ROAS at low volume every time.
Hear more from Dan Major
Before closing this tab – remember two things: trust your cash cycle more than your P&L, plus get visibility before you start comparing financing options. Want to hear more from Dan? Tune in to our recent Treyd Secrets episode with Dan Major and Treyd CEO Peter Beckman.
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💜 Want to hear the full conversation? This episode of Treyd Secrets is available on Spotify and Apple Podcasts.
→ Curious how brands manage the cash gap between paying suppliers and getting paid? That’s exactly what Treyd is built for. Learn more about Treyd’s inventory financing.
