What you measure determines what you optimize for.
If your dashboard shows revenue first, you’ll optimize for revenue. If it shows cash in the bank, gross margin, and owner pay, you’ll optimize for those instead.
That single shift, from revenue focus to profit and cash focus, is the biggest mindset change I see in ecommerce owners.
Taylor Holiday at Common Thread Collective has tracked this across the industry too. Before COVID, everything was about top-line revenue. Then it shifted to bottom-line profit. Now, in this era of expensive capital, the focus has moved to cash.
Whether you call yourself an Amazon seller or a DTC brand owner doesn’t change this. The businesses that thrive are the ones that grow profitably, not just bigger.
Here’s where I’d start:
- Implement Profit First so you’re literally taking profit first, before anything else touches the cash.
- Build a cash forecast so you can see reality every week instead of guessing at it.
- Make your decisions based on contribution margin by product, not total revenue.
Whatever you call yourself when you introduce your business to someone new, what your dashboard shows you every morning is what’s actually shaping your decisions.
Make sure it’s showing you the right thing.
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One question before you go I am revising my current book, Profit First for Ecommerce Sellers, and I don’t want to write it from research alone. I want to write it from what is actually happening in your business. Could you help me out by answering the below question?
How would you describe yourself? (If not one of the answers below, please reply to this email with what you would use instead.) |
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Quick Summary
- What you track shapes what you optimize for — revenue-first dashboards produce revenue-first decisions.
- The industry has shifted focus over time: from top-line revenue, to bottom-line profit, to cash in this era of expensive capital.
- Sustainable growth comes from three habits: taking profit first, forecasting cash weekly, and evaluating decisions by contribution margin rather than total revenue.
FAQ
Why is revenue a misleading metric for ecommerce businesses?
Revenue tells you how much came in, not how much you actually keep. A business can grow revenue every year and still run out of cash if margins, expenses, and owner pay aren’t tracked alongside it.
What is Profit First and how does it help with profitability?
Profit First is a cash management method where profit is allocated before expenses are paid, rather than treated as whatever is left over. This forces spending decisions to fit within what the business can actually afford.
How often should an ecommerce business review its cash forecast?
Weekly is ideal. Cash position can shift quickly with inventory purchases, ad spend, and payment terms, so a forecast reviewed only monthly or quarterly often misses problems until they’ve already become urgent.
What is contribution margin and why does it matter more than total revenue?
Contribution margin shows how much profit each product actually generates after direct costs. Reviewing decisions at this level, rather than by total revenue, helps identify which products are truly driving profitability versus which are just adding volume.
If you’d like help figuring out what to measure and how to build a dashboard around it, reach out and get on our waiting list.
Cyndi
