In the fast-paced CPG world, it’s tempting to focus on big wins — a new retail partner, a buzzworthy product launch or a jump in store count. Lasting brands look beyond top-line growth, tracking the financial metrics that protect cash, attract investors and fuel sustainable scaling. These numbers aren’t just accounting entries; they’re decision-making tools to position your brand for long-term success. Let’s take a closer look.
1. Burn Rate: Managing the Runway
Burn rate, or cash burn, measures the monthly cash decrease from a company’s net activity. For venture-backed or pre-profit CPG brands, this number directly determines runway, the time available before additional funding is needed. Runway is generally measured in months as a function of burn rate. Monitoring burn rate closely and aligning it with fundraising timelines ensures the business stays ahead of capital needs rather than scrambling when reserves run low.
2. Forecasting: Planning Ahead and Visualizing Impact
A business can be profitable on paper, yet still run into trouble if strapped for cash. Cash flow forecasting becomes invaluable when looking to the future. A well-built forecast allows founders to anticipate shortfalls, plan inventory purchases and determine the right time to hire or raise capital.
Building multiple forecasts highlights how potential scenarios affect cash flows and needs, as well as profitability. You can mix and match multiple scenarios, such as:
- Stretching your payables and aggressively collecting receivables to improve cash flow.
- Changes in sales volume from marketing efforts or new products.
- Shifting material costs due to market volatility.
- Capital expenditures: what happens if you buy that new piece of equipment?
- Hiring, both operationally and strategically. A proactive approach gives founders the flexibility to visualize the short-term to mid-term effects of various strategic decisions and adjust strategy before issues become urgent.
3. Gross Margin: Your First Line of Defense
Gross margin, the percentage of revenue left after subtracting the cost of goods sold (COGS), is one of the most telling measures of a CPG brand’s financial health. COGS includes manufacturing, packaging and distributor/retailer cuts. For growth-minded CPG brands, a gross margin of 40–50% is a healthy benchmark.
Margins in this range provide the breathing room needed to invest in marketing, innovation and operations. If margins are thin, even small cost increases or heavy promotional activity can quickly erode profitability and increase cash burn, shortening the runway. Regularly reviewing gross margin by SKU and sales channel can reveal products or relationships that are over/under performing and distorting overall results. Inventory turnover measures how quickly a company sells through its stock. It’s directly tied to cash flow; too much inventory can tie up valuable capital, while too little can result in costly stockouts and missed sales. Tracking turnover by product line and SKU helps founders spot trends and respond before issues arise. Demand forecasting tools can further align production with actual sales cycles, ensuring that working capital is invested in the right inventory at the right time.
4. Customer Acquisition Cost and Lifetime Value: Is the Juice Worth the Squeeze?
Customer Acquisition Cost (CAC) reflects the total spend to win a new customer, factoring in everything from paid ads to influencer partnerships to product sampling. However, CAC doesn’t tell the whole story. It needs to be evaluated alongside Customer Lifetime Value (CLV), which measures the total revenue generated from a customer over time.
When CLV significantly outweighs CAC, acquisition efforts are sustainable. When the reverse is true, brands risk spending heavily for short-term gains that don’t translate into long-term profitability. Segmenting CAC by channel can reveal where marketing dollars work hardest, while strategies like subscriptions, cross-sells and loyalty programs can help extend CLV.
5. Break-Even Point: Knowing When Growth Pays Off
The break-even point marks the sales volume needed to cover all fixed and variable costs. It’s a crucial milestone for founders because it sets the baseline for profitability.
Revisiting break-even calculations regularly is essential as costs, pricing and overhead shift. Factoring in marketing and administrative expenses alongside production costs ensures the number reflects the true operational reality, not just what’s happening in the warehouse.
Why These Metrics Matter More Than Ever
In a competitive CPG market, relying solely on top-line sales data can create a false sense of security and doesn’t tell the whole story. A brand can post strong revenue growth while quietly draining cash or losing profitability. By tracking key financial metrics, including burn rate, cash flow, gross margin, inventory turnover, CAC/CLV and break-even point, founders gain a clear, comprehensive view of business health.
Withum’s Outsourced Accounting Systems and Services (OASyS) Team works with CPG founders to handle any and all accounting functions, from accounts payable to fractional CFO services. From day-to-day support to preparing for board and investor conversations, we’ve got you covered as a strategic partner and trusted advisor.
Author: Dan Kretzenger | [email protected]
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