Carla Penn-Kahn wants to bust some myths about growing a business. The big one? That revenue growth matters more than profitability. Not everyone will agree, but Carla brings a wealth of experience building, scaling, and exiting direct-to-consumer (DTC) brands to this debate. It was precisely this experience that led her to co-found ProfitPeak, an SAAS startup that has developed an operating system for retail businesses that can provide real-time insights into profitability across everything from inventory to advertising. In this episode of the Further, Faster Podcast, she joins Antler CCO Bede Moore to explain why some metrics matter more than others. 

The conversation kicks off with Carla laying out how the market has changed since Covid. Prior to that, she says, “there was a lot of capital…to allow a DTC business to grow revenue at all costs, but that's just simply not the case anymore.” There is a point, however, where profitability does start to really matter. For Carla, it starts at around the $5 million mark. Before that, “you're just trying to test product market fit. Just like we are in the SAAS world, a DTOC brand is trying to work out, you know, do customers actually love what we're putting out in market?” She adds: “What I think is really important right now more than ever is brand.”

Metrics matter – that’s what Profit Peak is all about and for Carla, focusing on the right ones is crucial. “It's amazing how many founders we still talk to that don't realize that profit doesn't equal cash flow,” she says. “So they go, ‘Oh yeah, we're running a profitable brand, but suddenly the bank account's empty.’ And that's when you have to start having conversations around cash conversion cycles and are you building healthy cash flow to continue to fund this business? How many stock turns do you do a year? A lot of those metrics are really forgotten about when you're chasing revenue at all cost.”

There are three things that trip up brands, Carla explains. Not getting a handle on their inventory, not understanding what “true profit” is per order. And finally, understanding precisely why customers are returning. Bede and Carla dive into the logistics of each of these issues – picking out some key questions business owners should be asking; and Carla makes some insightful comments relating to the ways that algorithms and online advertising can make it harder to manage inventory effectively. 

Carla’s own journey as a founder started in investment banking before she moved into e-commerce. She acquired and scaled four businesses, learning “everything about the industry” in the process. It also taught her a lot of hard lessons. “You know, there were times where I was looking at the bank account going, ‘how am I going to make payroll next week?’” she says. As a result, she knows exactly how hard it can be to run a business on tight margins. Now, she’s focused on supporting others to do the same. 

It’s a conversation full of challenging views, lightbulb moments and surprising advice. You can listen to the full episode here.

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