Although consumer demand remains strong, the economic outlook has changed dramatically since early 2022. In particular, we are seeing a dramatic shift in the Equity Markets.
In this post, we’ll share some trends we are seeing in the market as well as some recommendations we are making to our customers in this environment.
What are investors looking for?
The highest drop we see is coming in the A/B rounds (early stage) as folks are finding returns earlier in a lifecycle, or large mega-rounds, which provide sustainability. Gone are the days of growth at all costs in early stage deals, as more investors are looking for efficient growth (Fast Company Article).
Alongside this trend, we are noticing a move toward the levered return (Private Equity) and alternative capital (like Brightflow.ai).
In this environment, our recommendation for all companies is: do not plan for equity as “guaranteed.”
This is different from the 2010-2021 time frame, when raising capital based on growth expectations was normal. The new game is:
Efficient Growth + Operational Excellence = Value Creation
Shift your focus to efficient marketing
The focus for brands today should be on gaining growth with efficient marketing. Attaining 80% growth with marketing spend at 30% of revenue is better than 120% growth with marketing at 60% of revenue. Chasing a higher growth number will not necessarily pay off in the longer term.
Expanding into a new channel may help mitigate rising acquisition costs on other channels. Overall revenue on Amazon is outpacing Shopify through the first seven months of the year on our platform. We expect brands to seek even more distribution channels over the coming 6-12 months.
How to manage supply chain volatility
Supply chains continue to be volatile, which impacts margin, lead times and revenue. Negotiate payment terms with your suppliers and focus on managing with a long-term view to increase optionality in a challenging market.
Evaluate and manage your fixed costs. Metrics like Revenue/Employee and Fixed Costs/Revenue will become barometers for success outside of profitability.
Overall, the brands that can reduce overhead and risk while growing their business will be best positioned for success.
To learn about how Brightflow.ai can help your business grow, schedule a call with us today. We’d love to hear from you — please feel free to leave a comment in the section below!