Gravity Metrics: The DTC metrics that matter.

Profit is the only metric that matters.

It's that simple.

Without profit, you won't be able to sustain whatever you're doing. Either you can fund the business with cash flow. Or, you'll need to do things like give up equity or take on debt to extend your runway while trying to figure out how to not run out of money.

Getting backed into a corner because you don't have enough cash on hand isn't fun and doesn't leave many options.

All you have to worry about is profit.

Profit is what makes business possible.

But while profit is the only thing that matters, if you've just launched your business, you might not be making any yet. There's going to be a time between starting the business, when you break even, and when you start making money you can invest back into the business.

So, in the time you're not generating any profit, there are a handful of metrics you need to be tracking that will indicate whether you're heading in the right direction or not. And honestly, these are the only metrics you need to worry about once you start making a profit as well.

These are what I call Gravity Metrics. They're close to the money and illustrate how efficiently and effectively a company operates. They're not vanity metrics meant to make us feel good but distract us from what we really need to be doing. No, these are the DTC metrics that actually matter.

If you make decisions with these in mind and they're going in the right direction, everything else will work itself out.

To illustrate this, let's think about our businesses as a sailboat. It doesn't matter what size boat you're thinking of as the mechanics are all the same big or small.

Businesses should be like sailboats, elegant, sophisticated, and focused on one thing.

For fun, I like to picture my boat like this one, an elegant and sophisticated racing yacht. I mean, we all have to be working toward something, right?

Profit.

I've said this already, but I can't say it enough, profit is the most important metric for you to track. It's the money left over after you pay all of your expenses. It's Revenue, all the money you made, minus your Expenses, all the money you spend.

Now, it's ok to invest all of the money you make back into the business and not have anything left over. Tracking profit doesn't just mean stockpiling a bunch of cash you don't know what to do with. Though that can be a smart thing to do in case you ever need it.

Profit allows you to keep going if the wind ever dies down.

I also put it at the top of the list because I think it's the most important DTC metric, but it's not the first one you're going to really see. Instead, it comes from tracking all the metrics to follow.

Traffic.

Some people consider traffic a vanity metric because it's not directly related to generating revenue.

But I think that's the wrong way to think about it.

Traffic is the wind in your sails. It's the people paying attention to what you're doing and visiting your site or storefront. It's the fundamental energy that makes business possible. Without it, you don't have a business. You have an idea.

The key to traffic, though, is ensuring you're in the right place to attract the right kind of attention with the right way to capture some of it. There can be a lot of wind, but if you don't have the right boat or are trying to go in the wrong direction, the attention and traffic won't matter.

That's why we also have to care about our conversion rate once we have traffic.

Conversion Rate.

Conversion rate measures how effective you are at turning your traffic into revenue.

Conversion rate matters because it lets you know whether your marketing is working or not.

If you're able to get a lot of people visiting your site, but they don't buy anything, then you know something isn't right. Maybe your copy isn't clear, or the offer isn't compelling enough to convince them to buy. Either way, if something isn't right, conversion rate is a good place to start looking for clues into what might not be working.

For our sailboat analogy, your conversion rate is how effectively your sails capture the wind. The more wind you can harness, the faster the boat will go.

Also, it's important to know that conversion rate standards are different for every industry and niche, so there's no ideal conversion rate you should be tracking against. Instead, you need to research and find benchmarks for similar products.

Then, after achieving a solid conversion rate, you need to focus on increasing your Average Order Value.

Average Order Value.

Average Order Value, or AOV, is how strong the wind blows.

A high AOV means you're generating more revenue per order than expected. Instead of buying one product, people are buying multiple or different kinds of products. You can entice people to do this by offering volume incentives or bundling products.

The benefit of doing this is the more revenue an order generates, the less overhead it takes to service the order since there will be less to deal with than if you had many small orders.

For a newer brand, a high AOV means people like your product and are comfortable paying for it.

Customer Lifetime Value.

Now, while AOV is important, the true measure of success is Customer Lifetime Value or how much someone buys over time.

As a new brand, you probably can't calculate this just yet as you haven't been around long enough to actually know. But, what you can figure out is how many people become repeat purchasers and how long they went in between orders.

Ideally, people will buy again and buy often as this will lower your customer acquisition costs. Knowing this will also help you predict future revenue and gauge how much inventory you need to keep on hand. Because it's one thing to make a product people will buy. But it's another to create something people will buy again and tell their friends about. It's a measure of loyalty and proof you have a viable business.

Customer Lifetime value is the constant breeze that keeps your business moving toward profits.

Pay attention to what matters.

Obviously, there are more than just these five metrics.

But I don't think you need to worry about them until you have to. You don't want to get caught up optimizing for something that doesn't materially affect your business, that doesn't get you closer to profitability. Because who cares if you have an incredible Instagram CPM if the people ultimately aren't converting?

These five DTC metrics are leading indicators.

They're going to show you the overall health of your business. If things are trending in the right direction, then all good. But if one of these gravity metrics isn't trending how you think it should be, it's telling you to drop down a level or two and see what's going on.

These will help you focus on what's important and direct your attention to problems when they come up.

The trap of only focusing on profit.

And while all we need to care about is generating profit, one thing to be aware of is that profit is great, but it masks a lot of problems. So make sure you're not oblivious to or neglecting something just because there's money coming in. Because if something ever changes and the money slows down or stops altogether, you might not be able to figure out those problems quickly enough to save the business if you've ignored fundamental issues for too long.

Also, there will be times when it seems like profit doesn't matter and people are rewarding other things. Inevitably, though, people always come back to caring about profit when the market turns. So don't lose sight of it. It's your most important metric.