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Most DTC brands that fail don't die from lack of sales.

They die from thinking sales were enough.

When you’re starting out, all you want is that beautiful Shopify Gross Revenue number to keep going up.

You tell yourself: “If I can hit $100k MRR, I’ll figure out the rest.”

And that might feel true at first, because it kind of is.

…Until you're burning cash, can’t pay suppliers, and realizing gross revenue has been lying to you.

⚠️ Remember:

• You can be profitable on paper, but still run out of cash.

• You can double revenue and lose money doing it.

• Most operators don’t even know what’s profitable — until it’s too late.

At Snappad, we nearly feel for the Gross Revenue Trap.

Read on to avoid it + get a little 🎁 at the bottom.

🚨 Why You’re Falling for The Gross Revenue Trap

1. It’s The Most Intuitive (and Misleading) Metric

Gross revenue is:

• Easy to track (it updates in real time!)

• Easy to benchmark (“We’re up 15% MoM!”)

• Easy to compare (“Brand X does $10M a year!”)

• Tied to our emotions (“That number = my success.”)

See:

→ To sell more stuff.

(Unless you’re from a finance background, which slightly increases the chances you’re thinking contribution margin, cash cycles, or P&L structures).

2. The Trap Gets Worse as You Grow

The danger isn’t just that gross revenue is a vanity metric.

It’s that it gives you a false sense of control — until complexity creeps in, and suddenly…

• You’re running “bestsellers” that actually lose money

• You’re stuck with inventory you can’t move

• You can’t answer basic questions like:

  • “What does it cost to fulfill an order?”

  • “Which channel is actually profitable?”

  • “How long until we’re broke?”

…Ask me how I know.

3. Our $1M Wake-Up Call

💥 Founder Flashback: At SnapPad, we grew about 170% YoY for the first three years. All we cared about was making the Shopify numbers go BRRR. Marketing, sales, branding, site design, all the fun stuff.

To get by, we had a part-time bookkeeper come in once a month and log receipts into QuickBooks.

That was it.

No financial forecasts.
No channel-level tracking.
No usable chart of accounts.

We just made sure our accountant could file our taxes.

Then, we crossed $1M in annual revenue. And everything started to crack.

We had:

• New sales channels (Amazon, B2B)

• Custom packaging to buy and keep track

• A rapidly expanding catalog

The business got more complex and our basic books got exposed for what they were.

• Our P&L was useless.

• We couldn’t benchmark or forecast.

• Everything was vague and inconsistent.

It took us 2 full years to untangle it (during COVID, fun!) when we could barely afford the distraction or the cleanup.

But we were lucky.

Our first manufacturer was so slow to invoice us that it basically acted like a line of credit.

That gave us a cash buffer we didn’t earn. 

It’s also why we didn’t get on top of things earlier.

Eventually, that supplier went out of business, and we almost went with them.

4. Don’t Make Our Mistake

You don’t need a CFO on day one.

But you need to understand that your Shopify dashboard is NOT a source of financial truth.

Don’t wait for a $1M wake-up call.

Build financial clarity early.

It’s the only thing that scales.

🧾 How to Build a P&L That Actually Works for DTC

DTC P&Ls are different. Unlike restaurants, dentists and the like, they need to:

• Understand margins by channel

• Track true costs to fulfill an order

• Benchmark key ratios over time

• Spot cash bleeds early

Here’s how you do it 👇️ Stick with me till the end and I’ve got a surprise for you.

1️⃣ Start With Revenue (But Do It Right)

Your P&L begins with gross revenue 😱 , but don’t lump everything into one “Sales” line.

Break it down:

• By channel (Shopify, Amazon, B2B)

• By region (e.g. Shopify US vs. Shopify CA)

• Include other revenue (shipping fees, warranties)

Then deduct:

• Returns and refunds

• Discounts

• Platform/merchant fees (Shopify, Amazon, Stripe, etc.)

That gives you net revenue (your actual top line).

💡 Pro Tip: Discounts and returns should always be recorded as negative revenue, not expenses. Keep your top line honest.

2️⃣ Cost of Sales (aka “Cost to Ship”)

Include:

• Product cost (COGS)

• Packaging

• Inbound freight

• Outbound shipping

• Warehousing / pick & pack

This gives you gross profit, and all of it belongs above the line in your P&L.

🧠 Above the line = costs tied directly to delivering your product. Below the line = everything else.

3️⃣ Below the Line (Operating Expenses)

Once you have gross profit, add:

• Labor and staffing (with taxes/benefits)

• Advertising (broken out: Meta, Google, Influencer, Amazon, B2B)

• Software and tools

• Professional services

• Office ops (rent, insurance, professional services, etc.)

💡 Pro Tip: Use catch-all accounts (like “office supplies”) sparingly.
Break out anything critical to your bottom line, like ad spend. 

4️⃣ Add Ratios to Track Performance

Numbers are nice. Ratios are better. They give you a clearer ongoing view of your business. 

Consider: 

🤔 “Last month our COGS were $75,000”

VS

🧐 “Last month, COGS were 28% of revenue”

These are the ones we track monthly at SnapPad:

• COGS % of Revenue = COGS ÷ Revenue

• Gross Profit % = Gross Profit ÷ Revenue

• Shipping % = Shipping ÷ Revenue

• Discount % = Discounts ÷ Revenue

• Labor % = Total Payroll ÷ Revenue

• Ad Spend % = Ad Spend ÷ Revenue (by channel too)

• SG&A % = Operating Expenses ÷ Revenue

• Net Income % = Net Income ÷ Revenue

Amazon Fees % = Amazon Fees ÷ Amazon Revenue

Oh, The Insights You’ll Get 🤩 

Once we cleaned up our P&L, it was like flipping on a light.

We saw:

• Which channels actually made money

• Expenses quietly eating our cash

• Out-of-whack labor ratio

• Return rates wrecking margins

• A real cost of sales that shocked us

💡 Pro Tip: Review your P&L at least monthly, because it will give a real sense of your business. How healthy it is, and when something is way out of whack. 

Tools We Like for Financial Visibility

• QBO (QuickBooks Online) – Necessary but not sufficient. 

• Sellerboard – Great Business Intelligence dashboard for topline sales and net profit

• Finaloop – Ecommerce-native, real-time books

• Iris Finance – Daily P&L + forecasting built for founders

• UpCounting – Fractional CFO + DTC bookkeeping done right

—Kent

PS — I occasionally work with founders/operators on strategy, growth, and ops. If you think I might be able to help, tell me a bit about your business here. 

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