Settle x DTC Experts: Beyond Conventional Funding - Alternative Paths for DTC Brands

LearnMarch 13, 20245 min read
Caroline Lu, Product Marketing Manager

Alek Koenig, Founder and CEO of cash flow management platform Settle, recently sat down with Suze Dowling, Co-Founder and Chief Business Officer of consumer brand portfolio Pattern Brands, and Jason Goode, Founder of hair care brand Flakes. They discussed strategies for scaling e-commerce brands profitably, overcoming inventory obstacles, and financial planning.

Funding DTC brand growth with alternative financing

When looking to scale quickly, many brands run into tight cash positions due to the necessity of purchasing inventory upfront and therefore turn to alternative financing solutions that offer more flexibility than traditional loans. Flakes experienced capital constraints when it came to acquiring inventory, exacerbated by higher minimum order quantities (MOQs) imposed by sellers. Jason cautions that these high MOQs set by sellers can negatively impact margins. To meet their capital needs, Flakes initially explored Merchant Cash Advances or revenue-based financing to meet their capital needs, however encountered high APRs.

When looking for financing for their inventory purchases, Pattern Brands first explored traditional financing means including venture capital and private debt lending. However, Suze later realized their traditional line of credit had stringent requirements including requiring to pay vendors directly that ultimately restricted access to capital.

For both Pattern and Flakes, Settle provided the capital they needed to increase inventory orders and reduce costs. As Jason explained, "Settle allows you to get the capital you need to buy inventory in a structured, responsible way. Without Settle, we would not be able to scale the way we have in our first year." By financing larger inventory purchases, they improved margins by 60% in just 5 months.

Alternative financing through Settle also helped them access funding faster than traditional lenders. As Suze put it, “Settle really was the godsend that it's also helped us to scale really flexibly and nimbly." The relationship with Settle gave them confidence they had a partner invested in their success.

"We actually went from complex to more simple by pursuing alternative financing routes." - Suze Dowling, Co-Founder and Chief Business Officer of Pattern Brands

Inventory Management Challenges

For e-commerce and DTC companies, managing inventory and cash flow can be a major challenge especially with multiple SKUs and channels. Suze recalls how entering wholesale relationships has significantly increased their cash conversion cycle and complexity. Suze also recommends building trust and communicate often with both suppliers and financing partners and they are both more likely to work with brands when potential problems arise.

Jason also agrees inventory continues posing a challenge as well as negotiating terms with suppliers. When it comes to financing, he also cautions against the potential inflexibility of credit cards especially when it comes to credit limits.

Financial Planning Tips for Brands

Jason recalls not focusing on financial planning early enough until bringing on a fractional CFO to the team help with financial planning on a bi-weekly basis. He now continues to work with fractional finance employees and keeps his team's financial toolbox simple with only a few working capital tools including a credit card and Settle Working Capital. Jason also mentioned the importance of tracking contribution margin per order and keeping a lean team.

Suze emphasizes both short (weekly) and long range planning for both inventory and cash flow. As Suze explained, "You need to be as detailed as you can, because this is something where your revenue is impacting the cash that's coming in." Suze recommends bringing on a finance hire to the team as early on as possible especially if a founder does not personally have a finance background.

"If you don't personally come from a finance background, make sure whether it's full time or fractional, that Finance is a critical resource that you have sitting at the table with you. Make that FP&A process a part of your routine and your rituals" - Suze Dowling, Co-Founder and Chief Business Officer of Pattern Brands

Looking forward to the new year

Despite economic uncertainty, Suze and Jason are bullish on the opportunity for ecommerce brands focused on profitability and capital efficiency. They offered tips for founders looking to scale successfully in 2024:

  • Focus on profitable growth rather than growth at all costs
  • Build high-margin products that customers love
  • Don't forget about gross margins: keep operations lean and be scrappy
  • Negotiate supplier terms to improve cash flow
  • Develop relationships with both financing and supply partners

For Pattern, the focus is expanding their brand portfolio into new categories while boosting omnichannel distribution. Flakes is prioritizing inventory planning and availability. Both aim to scale sustainably on the path to profitability.

Conclusion

Key takeaways from the discussion include the importance of inventory and cash flow management, planning for profitability, and leveraging flexible financing options like Settle to access working capital. For founders looking to scale their e-commerce and DTC brands, Settle can help manage and optimize their cash flow with modern, intuitive AP automation and PO tools and transparent, non-dilutive financing. With the right financing partners like Settle and a focus on profitable growth, there has never been a better time to build brands that customers love. Explore more how Settle can help scale your brand at Settle.com.

SharePlatform iconPlatform iconPlatform icon

Subscribe to our newsletter


OR

Recommended Articles

What Are Net Terms?
Learn4 min read

What Are Net Terms?

Making use of net terms can enable both buyers and vendors to increase their profitability and sales dramatically. This is what net terms are.

Settle Spotlight Series: Q&A with Vividly
Learn9 min read

Settle Spotlight Series: Q&A with Vividly

We sit down to chat with Alyshah Walji from Vividly, a trade promotion management (TPM) software built by and for the consumer packaged goods industry.

What is the Cash Conversion Cycle?
Learn6 min read

What is the Cash Conversion Cycle?

A company’s cash conversion cycle can speak volumes about its operational efficiency and financial stability. It can also determine whether people get paid on time.

Accounts Receivable Factoring 101
Learn4 min read

Accounts Receivable Factoring 101

Accounts receivable factoring can help companies can improve their financial stability and cash flow. We’ll explain what it is and how it's beneficial in our guide.

How to Create an Invoice
Learn6 min read

How to Create an Invoice

Creating invoices can be tedious, especially for new businesses processing everything manually. Learn how to create invoices effectively and efficiently with this detailed guide.

Settle Spotlight Series: Q&A with SourceMedium
Learn14 min read

Settle Spotlight Series: Q&A with SourceMedium

In this month’s Settle Spotlight Series, we chatted with Will Holtz from SourceMedium about how interconnected data can be a superpower for brands in hyperscale mode.

Why Supply Chain Visibility Matters and How to Achieve It
Learn5 min read

Why Supply Chain Visibility Matters and How to Achieve It

Improving supply chain visibility is becoming a priority for many companies, as it’s essential for streamlining operations, boosting efficiency, and maintaining strong customer satisfaction for consumer brands.

Do I Need an ERP to Manage My Supply Chain?
Learn4 min read

Do I Need an ERP to Manage My Supply Chain?

Effectively managing a supply chain is essential for any consumer brand working with a network of suppliers, distributors, and partners. If you're considering an ERP for your business, here are some key factors to evaluate to ensure it meets your supply chain needs.

The 2024 Settle Staff Picks Holiday Gift Guide
Learn2 min read

The 2024 Settle Staff Picks Holiday Gift Guide

Do you really need another gift guide this time of year? Our Settle team spends so much time obsessing over our customer brands, that the right answer is obviously yes. We have compiled the inaugural Settle Staff Picks Holiday Gift Guide, with the most fire small brands out there. So read on for ideas from stocking stuffers to travel accessories – for everyone on your list. And join us in shopping small this holiday. 

Settle 2023 Product Wrap
New Feature3 min read

Settle 2023 Product Wrap

A year in review of Settle's product releases that make running CPG brands easier.

Your purchasing process. Made simple.
New Feature2 min read

Your purchasing process. Made simple.

We brought simplicity to bill pay. Now we’re bringing it to the purchasing process, with end-to-end support that takes a load off your plate.

Invoice vs. Receipt: What's the Difference?
Learn6 min read

Invoice vs. Receipt: What's the Difference?

Invoices and receipts are similar in concept, but differ in the details. Here’s what differentiates invoices from receipts, and why it’s important to understand.

What is an A/P Aging Report?
Learn6 min read

What is an A/P Aging Report?

The Accounts Payable Aging Report is an essential tool for businesses with a large number of accounts payable to track. Here’s a general breakdown of A/P Aging Reports.

What Are the Consequences of Equity Dilution?
Learn5 min read

What Are the Consequences of Equity Dilution?

Equity dilution can be a very concerning process for shareholders who are unfamiliar with its consequences. This is how to avoid equity dilution and keep stocks healthy.

What is the Accounts Payable Process?
Learn4 min read

What is the Accounts Payable Process?

Accounts payable (AP) refers to all the payments that a business owes its suppliers and creditors. Neglecting your accounts payable process can lead to production and supply issues.

Black Friday CPG Prep Checklist
Learn6 min read

Black Friday CPG Prep Checklist

Black Friday sets the tone for your business’ holiday season. Start early on forecasting demand, devising marketing strategies, and preparing your site.

How to Evaluate Accounting Firms
Learn7 min read

How to Evaluate Accounting Firms

Figuring how to find the right accounting firm for your company can be difficult. Here’s how to choose the best accounting firm for any business.

A Guide To Inventory Management for CPG
Learn6 min read

A Guide To Inventory Management for CPG

Learning to navigate inventory management can be a tricky part of growing your brand. Check out our guide to inventory management to find out more about it.

Non-Dilutive Funding Guide for CPG Brands
Learn7 min read

Non-Dilutive Funding Guide for CPG Brands

A popular source of funding is financing from angel investors and VCs. Yet many companies fail to recognise non-dilutive funding — where no ownership is lost.

Navigating Distribution And Retail Margins for CPG Brands
Learn8 min read

Navigating Distribution And Retail Margins for CPG Brands

For emerging CPG brands, navigating challenges like supply chain disruptions and retail changes underscores the critical importance of understanding and managing retailer and distributor margins, as it directly impacts profitability and success in the industry.

How to Find a CPG Distribution Partner
Learn5 min read

How to Find a CPG Distribution Partner

Partnering with the right distributor is arguably one of the most essential tasks for a retail company. Find out what to look for in distribution partners and how to source them.

Accounts Payable vs. Accounts Receivable
Learn5 min read

Accounts Payable vs. Accounts Receivable

Understanding accounts payable and accounts receivable is an essential part of business workflow. So how do they differ? Learn more about them in this guide.

An Introduction to Cash Flow Forecasting
Learn6 min read

An Introduction to Cash Flow Forecasting

A company’s ability to make a cash flow forecast is essential in the world of modern business. Here is everything you need to know about cash flow forecasting.

What Is Amazon FBA and Is It Right For You?
Learn7 min read

What Is Amazon FBA and Is It Right For You?

Using Amazon FBA is a great way for companies to expand their scalability and fulfillment abilities. Here is how it works, and how businesses can benefit from it.

How Long Does a Wire Transfer Take
Learn7 min read

How Long Does a Wire Transfer Take

Wire transfers can be the quickest method of exchanging funds. Knowing how long it takes can help determine whether wire transfer is the best solution.

Guide: The ABCs of cashflow
Learn2 min read

Guide: The ABCs of cashflow

We put our heads together with the folks at IndieCPG to create a guide to the basics of cashflow for new (and maybe even not-so-new) founders.

Settle blog

Insights in your inbox

Join our newsletter and never miss an update on Settle's latest features and industry trends.