January 15, 2024
Solving the Return on Capital Riddle
Of course that’s not how you view your brand. You have awesome products, a big market, great customers and a hard-working team. You are changing the world!
Note
Your company is a machine to deliver returns from capital inputs.
Of course that’s not how you view your brand. You have awesome products, a big market, great customers and a hard-working team. You are changing the world!
But investors, particularly acquirers, are ultimately trying to figure out ‘how good a machine is this company?’ ‘How well will this machine work for me?’
High margins are great. Contribution Profit is great. But they are not enough. You need to understand the relationship between those profits and the capital required to generate them.
I find this relationship, this return on capital, endlessly fascinating. For one, there are many ways to solve for the right balance and create a machine investors and acquirers find irresistible. But more importantly, I find it fascinating because with omnichannel brands, it’s so damn hard. It’s the hardest operational finance challenge there is because it is so insanely complex!
I have a bunch of ideas on how to navigate that complexity and find success and my goal with my blog and social posts is to share these ideas, test them, get feedback and improve them in order to create a playbook so founders and leaders achieve the success and payoff they have worked so hard to earn.
