Lara Guevara of Moov Supply Chain breaks down three metrics DTC founders should track: Cash Conversion Cycle (target under 45 days), Inventory Turn Rate (4-6 turns yearly), and Gross Margin per SKU (40% minimum). Most founders only watch revenue and profit, missing the supply chain signals that predict cash flow problems.
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Most DDC founders track two numbers: revenue and profit. And that's exactly why so many of them are constantly surprised by their cash flow. There are three numbers that actually tell you whether your business is healthy, and almost nobody is watching them. I check this every single Monday morning with every client we work with at Moov Supply Chain. Today I'm giving them to you. Hey, I'm Lara Guevara from Moov Supply Chain, 17 years in supply chain, and one of the most consistent things I see I see across DTC brands at every size is this: founders are making massive decisions based on incomplete data. Revenue feels good, profit looks okay, but then at the end of the month, you're staring at your bank account wondering where the money went. The answer is almost always in the supply chain, and it shows up in these 3 numbers long before it shows up in your bank account. Think of this as your early warning system, your dashboard, the 3 dials that tell you if your business engine is running well or about to overheat. So let's go. Number 1, your cash conversion cycle. I know I say this a lot, but that's because it matters more than almost any other metric in a product business. Your cash conversion cycle, or CCC, measures how many days it takes for a dollar you spend to come back to you as cash. The formula: days of inventory you're holding plus days it takes to collect payment minus days you have to pay your suppliers. So let me make that real. Say you order inventory and it sits in your warehouse for 45 days before it sells, then it takes 14 days to collect payments through your sales channel, and you pay your supplier in 30 days. Your CCC is 45 14 30, that's 29 days. That's actually pretty healthy, but I work with brands where this number is 90, 100, 120 days, meaning for every dollar they put in inventory, they don't see it back for 4 months. And they're wondering why they feel cash-strapped even when sales are growing. So here's why this matters weekly. Your CCC changes with every order cycle, and if you overstock in one month, it spikes. If a wholesale customer pays late, it spikes. If you negotiate better supplier terms, it drops. Tracking it weekly means you catch problems early before they become cash crisis. Your target's under 45 days, under 30, if you can get there. Number 2, your inventory turn rate. This one tells you how efficiently you're converting inventory into sales. The formula is simple: divide your annual cost of goods sold by your average inventory value. So if your COGS for the year is 1.2 million and your average inventory on hand is 8, your inventory turn rate is 4. That means you're turning your entire inventory 4 times a year, roughly every 90 days. Is that good? Depends on your category. For most DTC brands, you want to be between 4 and 8 turns per year. Below 4 means your cash is moving too slowly. Above 12 means you're probably running too lean and risking stockouts. Here's the thing about tracking this weekly. You don't need to recalculate the full annual number every week. What you track weekly is your sell-through rate on each SKU, which SKUs are selling fast, which ones are barely moving, because the slow movers are the ones dragging your turn rate down and trapping your cash. I had one client last year doing about $2.5 million in revenue whose turn rate was 2.8, meaning they were sitting on almost 4 months of inventory at all times. We identified the 8 SKUs pulling that number down, run targeted promotions to clear them, and within 2 quarters, their turn rate was 5.2. That freed up $140K in working capital from one metric alone. Your target is 4 to 6 turns per year for most DTC categories. Track it monthly, but watch your SKU-level sell-through weekly. Number 3, gross margin per SKU, not blended, but per product. This is the one that makes founders uncomfortable because sometimes the truth is painful. Most brands know their blended gross margin. Maybe it's 55%, maybe it's 60%, but that blended number hides what's actually happening at the product level. And I've seen brands where the top SKU by revenue has a 30% gross margin, while a smaller SKU they barely promote has a 72% margin. They're spending all their ad budget on the 30% margin product because it sells more and quietly bleeding profit. Gross margin per SKU is equal to selling price minus all direct cost divided by selling price. And when I say all direct cost, I mean COGS, yes, but also freight to warehouse, storage, cost per unit, packaging, returns rate cost, and any platform fees specific to that product. When you factor all of that in, some of your best sellers are barely profitable, and some of your quiet products are carrying the whole business. Knowing this changes everything. It changes what you promote, what you restock, what you cut, what you pitch to wholesale buyers, and what you put on sale. Practice monthly minimum, weekly if you're running promotions or launching new products. Your target SKU under 40% true gross margin in your active catalog. If it's under 40%, fix it, reprice it, or retire it. Okay, so how do you actually track these 3 numbers without spending your whole Sunday in spreadsheets? Honestly, a simple Google Sheet is enough to start. Column 1, SKU name. Column 2, units on hand. Column 3, units sold this week. Column 4, COGS per unit. Column 5, true gross margin. From that one sheet, you can calculate your sell-through rate, spot your slow movers, and update your inventory turn estimate. For your cash conversion cycle, that's a separate tab. Just 3 inputs: average days of inventory, average days to collect, average days to pay suppliers. Update it monthly. I have a free template for both of this. Link is in the description. It takes about 20 minutes to set up. Once it's set up, Your weekly updates only takes 15 minutes. 15 minutes a week to know exactly where your business stands. That's the trade. Okay, let's recap the 3 numbers. 1, cash conversion cycle. How many days your cash is trapped? Target under 45. 2, inventory return rate. How efficiently you're converting stocks to sales? Target is 4 to 6 turns a year. 3, gross margin per SKU. The real profitability of each product. Target nothing under 40% in your active line. Start tracking this week, just these 3, and promise within 30 days you will have found at least one thing in your business that you want to fix immediately. If you want to go deeper in any of this, or if you want us to do this analysis with your actual numbers, book a call at movesupplychain.com. That's literally what we do. And if this was helpful, subscribe, hit the bell. I drop supply chain content every week. That's designed specifically for DTC founders who want to build profitable, scalable businesses, not just fast-growing ones. I'll see you on the next one.
