Humberto Cruz from CircleUp Credit shares need-to-know financial strategies, metrics to track success, and advice on securing credit or equity capital.
Finance: it might not be the reason you got into the consumer industry, but it’s make-or-break for turning a great idea into a household brand. Understanding the core financial metrics that measure your business’ momentum, position in the market, and options for getting funding are key to taking your business to the next level.
Our new partners at CircleUp Credit Advisors are experts on the topic, helping emerging CPG brands access resources, support, and funding with the goal to help them succeed and scale. Their proprietary data and insights platform, Helio, helps consumer brands make better business decisions with data on retailers, distribution, consumer behavior and more. We spoke with CircleUp Credit Advisors' Head of Sales, Humberto Cruz, to learn what makes a breakout brand successful, what best practices to adopt from the get-go, and what to do if you’re considering equity or credit capital.
What makes brands successful?
CircleUp gathers data from social media, reviews, points of distribution, retail sales, and web traffic to evaluate a brand’s breakout potential and help them secure funding. Based on these insights across thousands of brands, Humberto sees that the most promising companies share a few common characteristics:
- Product differentiation: Unique products that have a distinct brand can own a clear niche in the marketplace
- Momentum: Investors want to see that revenue and distribution metrics are growing at an accelerated rate
- Customer motivation: Brands who deeply understand their consumers and what they want will have a community of customer evangelists at their side
The numbers you need to know
Understanding financial metrics is the foundation for a strong business strategy. For that reason, Humberto recommends maintaining a healthy financial model from the start. An important first step is understanding your unit economics: how much profit you earn from each customer compared to how much you pay to acquire them. You’ll also want to see how this number changes and trends across customer cohorts, especially if you’re operating an online channel. Specifically, keep an eye on the financial breakdown of your online ad spend: you want to see this channel becoming more profitable over time. Regularly re-evaluate what channels are working, but also allocate some capital to try other channels so you don’t become too concentrated in case something changes (an iOS update, for example).
Then there’s the more obvious financial tracker: your budget. Staying on budget is key to maintaining longevity, so Humberto recommends knowing where your next year of capital is coming from.
How to find (the right) investors
Ready to take your business to scale? You may be considering outside funding. Humberto says the first step in the process is to think about what type of capital you’re looking for — which depends on how you want to use the funds. Debt financing is a great option for brands that need capital to fund purchase orders, whereas equity investments are a good option to invest in growth, build out the team, develop new products, or invest in your supply chain.
In either case, Humberto says you should still be choosy about your partner. Some questions to keep in mind:
- Do they understand the ups and downs of your business?
- What else does the partner bring to the table other than capital?
- Will the investment terms restrict you from running your business the way you want to?
Finally, you want to make sure you have a strong rapport with the person on the other side of the partnership. Equity investments and capital partnerships tend to be long term (5+ years), so it’s critical that the two parties are aligned on vision, strategy, and potential exit.
CircleUp offers options for both equity and credit, and has recently launched a new loan product tailored to fast-growing consumer brands. Its aim is to increase cash availability for early-stage CPG companies, with a credit line that increases as they grow and a non-dilutive capital model (capital that does not require giving equity). CircleUp Credit is focused on increasing transparency in lending, with a flat interest rate and no hidden fees.
Strong finances start with great data
CircleUp and Crisp believe in helping brands unlock their potential through better data, which is why we’re partnering to provide the retail and marketing insights brands need to grow their business. CircleUp portfolio brands receive 10% off with Crisp as part of the preferred partnership.
To get started with CircleUp capital to scale your business, you can check your eligibility here. For more information on CircleUp, check out their blog or join their free Inner Circle community for consumer brand entrepreneurs.