Launching a direct-to-consumer (DTC) brand is an exhilarating and unpredictable journey, but most importantly, it’s a journey that can be navigated successfully. Drawing from my experience working with over 150 brands and collaborating with numerous DTC founders, I’ve identified common pitfalls that can hinder growth and success. Here, I’ve compiled a list of the top five mistakes early-stage DTC founders often make and provided strategies to avoid them. By being aware of these pitfalls, you can feel informed and prepared for the road ahead.
1. Lack of Focus on Sales
The number one mistake new DTC founders make is focusing on something other than sales. When I meet founders who are doing less than $500K/year in revenue, they need a repeatable sales channel to drive revenue.
Many founders, especially those starting out, often rely on unpredictable methods like ‘word of mouth’ and referrals. They might be experimenting with various strategies such as content creation, running ads, or sponsorships, but what they truly need is a reliable, repeatable sales channel. The first and foremost priority when launching a DTC brand is to establish a repeatable sales channel. By focusing on finding one channel, whether it’s paid ads, email, influencers, or affiliates, that can consistently drive revenue for your brand, you can feel guided and focused in your approach.
You don’t need 10. You need one. And for most founders getting started, that is typically paid ads on Meta or Google.
2. Overestimating Customer Lifetime Value (LTV)
Many new founders start their growth journey by acquiring customers at unprofitable and unsustainable prices. Their logic is “We’ll make it up from repeat purchases and their LTV.” 9 times out of 10, they have inflated projections that don’t translate into the reality of the business.
You want to avoid falling into the classic trap of spending $10 to make $5. Unless you have a massive capital and can afford to bleed money while you test. That will rarely work out, which is why I urge founders to work on getting as close to first-order profitability as possible – because it will also allow you the freedom to experiment more.
3. Premature Spending on Branding
One common mistake that new DTC founders often make is premature spending on branding. This involves investing a significant amount, sometimes upwards of $ 250-300 K, on branding before confirming any demand. It’s crucial to validate demand first using a simple landing page, basic ads, and standard packaging before scaling and investing further. By avoiding premature spending on branding, you can feel cautious and strategic in your business decisions.
Once demand is confirmed, then spending on a branding agency becomes smart. These clients are my favorite at Metalla Digital; we help brands scale to six-figure months with a positive return without the $250K investments. We develop successful sales channels and propel brands to the next level.
Without those sales, think of world-class sites, packaging, and ads as rewards for initial success. Aim for $500K-1M/year in revenue before investing in these “luxuries.”
4. Inefficient Ad Spend
This ties in with the previous points, but another common mistake early-stage DTC founders make is spending too much and too soon on ads.
When they finish their first landing page and round of creative, they begin cranking up the ad spend on Meta and burning capital without understanding some super basic things about their brand.
When we take on new clients, we have a cautious approach to ad spend and scalability. We prioritize developing winning elements – different LPs, copywriting, offers, imagery, ads, etc. – and getting early customer reviews before scaling up spending.
To spend efficiently on paid ads, you need to know that your product works, your funnel works, and that you have tried different copywriting, ads, angles, and positioning to know which variants perform better.
Much of this testing can be done organically or with low amounts of paid spend to test the waters and help you refine things before scaling up. If you don’t do this and you spend a bunch of paid ads inefficiently, it’s complicated to recover.
You want to avoid driving the car (run paid media) on an unpaved road (brand awareness).
5. Operational Mistakes
Choosing the wrong agencies, contractors, 3PLs, and software providers can derail progress. Vet partners carefully and ensure alignment with your business goals and values.
Simple legal oversights can be costly. Ensure all contracts, employment agreements, and PO orders are legally sound and include clauses to protect your interests.
Every client and project is unique. While it may not be easy, a crucial first step is to agree on compensation. We pride ourselves on being agile and adaptable.
No contracts, no outrageous consulting fees, and certainly no blood oaths. Let’s kick things off with a “let’s take it slow” mindset. Working together is like dating – you wouldn’t propose on the first date. We don’t believe in locking you in either.
We are always up for creative pricing. If you have ideas, you can always email me at florind@metalla.digital
This caused me to reflect a lot, so I wanted to share even more things that came to mind as creativity burns through me.
Navigating Growth Beyond $10M
Established brands making over $10M annually face challenges similar to startups, such as inefficient capital allocation and poor strategic decisions. The key is continuously auditing and optimizing ad channels, creatives, websites, landing pages, and overall strategy to maximize returns.
That’s generally the work we do at Metalla Digital. We work with companies with sales between $10M and 100k/year, telling them where they can improve and doing all the execution.
We audit their ad channels, creative, website, landing pages, general strategy, tech and tools, etc., to see where they can optimize and generate a higher return.
Acquiring the First Customer
In 2024, social media remains the most accessible channel for acquiring your first customer. Platforms like Product Hunt and Reddit are excellent for generating initial buzz and sales. Direct outreach to creators and leveraging marketplaces like Amazon and TikTok Shops can also be effective.
As a side note, Reddit wrote a case study about our success with CAP on its platform. That was cool.
The Role of AI
While AI tools like ChatGPT, Eleven Labs, and Dall-E are emerging, they have yet to be mainstream for significant brands due to concerns over copyright and usage. However, they offer promising potential for future creative and customer service applications. While online gurus are raving about AI, it is not there yet. Honestly, it’s just a great auto-correct. I’m waiting for it to prove me wrong. Fingers crossed.
Paid Media Spending
For high AOV products, allocate 50-70% of gross margin to marketing. For repeat purchase categories, 25-40% is a good benchmark. Adjust spending based on product type and business model to ensure profitability.
Encouraging Reviews and Social Media Posts
Encouraging organic reviews and social media posts is challenging. Persistently ask for reviews through plain text emails from the founder and offer incentives like discounts, gifts, or cashback. Contests can also motivate customers to leave positive feedback.
Conclusion
Avoiding these common mistakes can lead your DTC venture to success. Focus on establishing a repeatable sales channel, managing finances prudently, and making data-driven decisions. By learning from others’ experiences, you can navigate the complexities of the DTC landscape and achieve sustainable growth.
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