19 Financial Metrics to Help Growing Beauty Brands Unlock Profitability Faster
August 22, 2023
August 21, 2023
min read

19 Financial Metrics to Help Growing Beauty Brands Unlock Profitability Faster

In the beauty and personal care sector, trends can change year by year, or even season by season. But one thing always stays the same: the key measures of your business’ financial health.

If you’re a founder or finance operator at a consumer beauty brand, there are a million financial data points that can keep you up at night. Knowing which metrics matter most can help you optimize the levers at your disposal to maximize value in your business.

From working closely with companies like Curology, Mad Rabbit, and Geologie, the Drivepoint team has zeroed in on the most critical financial metrics to track for scaling personal care and beauty brands.

So many modern beauty brands begin with a direct-to-consumer focus at their core, so the metrics below are DTC-centric. But regardless of where your brand is on its omnichannel trajectory, keeping an eye on the following 19 financial performance indicators is a great place to start to optimize growth and profitability.

Top metrics to assess overall beauty brand financial health

Together, these five metrics provide a high-level snapshot of the financial health of your beauty or wellness brand.

1. Sales Growth

What it means: Sales growth measures the rate at which your brand's sales are increasing (or decreasing) over a specific period of time across channels.

Why it matters: Sales growth is the easiest and most common way to judge your growth. It provides directional insight into your brand's market performance and appeal. A consistent positive growth indicates effective marketing and product strategies, while sudden spikes or drops can signal market shifts, seasonal trends, or the impact of specific campaigns.

2. Gross Margin

What it means: Gross margin is the percentage of revenue that you keep after paying for the cost of your products.

Why it matters: Gross margin is often used as the best proxy for your ability to be profitable overall. A higher gross margin means the company retains more from each sale, which can be used to cover operating expenses and invest in growth. It’s a measure of efficiency, and monitoring gross margin can help beauty brands ensure they're pricing products appropriately and managing production costs effectively.

3. Net Income Margin

What it means: Net income margin is the percentage of revenue left after paying all expenses, including debt payments, taxes, and other "non-operating" expenses.

Why it matters: Net income margin reflects how effectively your business is at managing its operating costs and other expenses relative to its revenue. A higher net income margin indicates that the company is more efficient at converting sales into actual profit.

4. Inventory Turnover

What it means: Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period of time.

Why it matters: Measuring inventory turnover is all about efficiency at managing your stock. A higher inventory turnover means that you’re efficiently selling products without overstocking (and consequently tying up precious capital). On the other hand, a low turnover could suggest weak sales or excessive inventory–both strains on your cash flow.

5. Cash Conversion Cycle

What it means: Cash conversion cycle is a metric expressing how many days it takes a company to convert the cash it spends on inventory back into cash by selling its product.

Why it matters: The shorter your beauty brand’s cash conversion cycle (CCC), the less time you have money tied up in accounts receivable and inventory. Measuring CCC provides insight into your operational efficiency and liquidity. With longer cash conversion cycles, you have less money available to invest in growth opportunities, from influencer marketing to retail expansion.

DTC revenue metrics

The direct-to-consumer sales channel is often the most important one for early and growth-stage brands in personal care and beauty. It’s where you have the most data and the closest connection to your customers, and where you can get key learnings to apply across other channels as you grow. These metrics help you quantify DTC performance.

6. Gross Sales Growth - DTC

What it means: Part of your overall gross sales growth calculation, this measure is the rate at which sales via your DTC commerce platform (like Shopify) are changing over time.

Why it matters: Every beauty business is different, but tracking DTC sales growth can be a strong indicator of financial performance on a critical channel for modern consumer brands. For benchmark data on the mix of DTC and non-DTC sales of big name beauty brands like Olaplex and Oddity Tech, check out the Drivepoint DTC Index.

7. Average Discount Rate

What it means: Average discount rate measures how much you're discounting from your list price.

Why it matters: As a brand operator, you have complete control over discounting on your DTC sales channels. Discounting is a valuable tool, but it must be employed strategically. It’s important to balance customer acquisition and margin considerations when setting your discount strategy.

8. Returns Rate

What it means: Your returns rate is the typical volume of returns over a period of time.

Why it matters: Measuring returns rate is often used as a proxy for evaluating the quality of your products. For DTC sales, you can get much more insight into why customers may be returning products, versus little to no insight from certain retail channels. This data can help inform new products or changes to existing ones.

9. Total Sales Margin

What it means: Total sales margin measures how well you translate sales of products into real revenue that can be used to cover expenses.

Why it matters: A higher total sales margin indicates that you’re efficiently managing your variable costs. In this case, a larger percentage of every sale can go toward covering fixed expenses and generating profits for your beauty brand.

Margin metrics

In addition to measuring gross margin, net income margin, and total sales margin (all covered above), monitoring these margin KPIs is an important part of understanding how well a beauty or personal care brand is turning sales into profits.

10. Operating Margin

What it means: Operating margin is the percentage of revenue you keep after paying all expenses associated with operating your business, including overhead and salaries.

Why it matters: Operating margin is an indicator of your brand’s core business profitability. Knowing this efficiency metric can help you make smarter decisions about cash management, profitability, and growth investments.

11. Contribution Margin

What it means: Contribution margin is the percentage of revenue you keep after paying for the products and all costs associated with getting them to your customers' doorstep.

Why it matters: Contribution margin takes into account fulfillment costs, so it brings you closer to understanding your bottom line income. It’s a key measure of what it takes to get a product from the factory to a customer’s hands.

DTC order economics metrics

Assessing your DTC unit economics on a per-order basis enables you to quantify key metrics around the revenue and costs associated with every sale your beauty brand makes. Monitoring these metrics can give you valuable insight to inform resource allocation and strategy for scaling.

12. Average Order Value

What it means: Average order value is the dollar value of an average order, after discounts.

Why it matters: Average order value (AOV) can give you directional insight on the overall effectiveness of marketing and pricing strategies for your beauty brand. Marketing promotions, product bundling, and upselling all play a contributing role to average order value, which can be a powerful lever to impact profitability.

Here’s one example of how optimizing AOV helped Geologie achieve an 18ppt increase in EBITDA margin.

“Modeling everything out in Drivepoint showed us exactly how much impact increasing AOV could have on our business. It gave us the confidence we needed to focus and execute instead of spreading our efforts too thin.”

Nick Allen, Co-founder & CEO, Geologie

13. Gross Profit per Order

What it means: Gross profit per order is the amount per order you keep after paying for the cost of your products, on average, divided by the number of orders.

Why it matters: This metric is useful for getting a granular picture of profitability for each individual sale transaction. Gross profit per order can offer clues about the success of individual products or promotional campaigns, and guide strategy around higher or lower margin products.

14. Contribution Profit per Order

What it means: Contribution profit per order is the amount per order you keep after paying for the products and all costs associated with getting them to your customers' doorstep, divided by the number of orders.

Why it matters: On a per-order basis, contribution profit takes into account a fuller picture of the costs of getting your products into the hands of paying customers. Changes to delivery methods, fulfillment processes, and production techniques can all impact contribution profit per order.

15. Contribution Profit After Marketing per Order

What it means: Contribution profit per order is what you keep after paying for the products and all costs associated with getting them to your customers' doorstep including the cost to acquire customers, divided by the number of orders.

Why it matters: By isolating the impact of marketing expenses on the profitability of each sale, you can refine your understanding of how promotional campaigns are impacting the bottom line of your business.

DTC customer value metrics

Tracking customer lifetime value in all its forms can help personal care and beauty brands shape strategy around customer acquisition, retention, and growth.

16. Fully Loaded Customer Acquisition Cost

What it means: Fully loaded customer acquisition cost (CAC) is the dollar value of your total marketing expenses divided by the number of first-time customers acquired.

Why it matters: Fully loaded CAC measures how much it costs you to acquire a new customer. A higher CAC can point to potential marketing inefficiencies, or to tough competition in the advertising markets, where many brands may be vying for the same customers. Fully loaded CAC is a key metric to balance with lifetime value.

17. Day 90 Gross LTV

What it means: Day 90 gross lifetime value (LTV) is the dollar value of your total sales (gross sales minus discounts and returns, then plus the taxes and shipping revenue) divided by the number of first-time customers acquired.

Why it matters: Day 90 gross LTV provides a snapshot of the early value a customer delivers to your beauty brand–a way to measure near-term ROI on customer acquisition spend. High AOV or repeat purchase rates play an important role in this early return metric.

18. Day 90 Gross Profit LTV

What it means: Day 90 gross profit LTV is the average amount per order you keep after paying for the products, divided by the number of unique customers acquired. It’s based on the first 90 days of customer value.

Why it matters: Day 90 gross profit LTV is an early indicator of customer profitability. The higher your day 90 gross profit LTV, the better your brand is at attracting sales and managing expenses and operations to retain a larger share of those sales as profit.

19. Day 90 Contribution Profit LTV

What it means: Day 90 contribution profit LTV is the amount per order you keep after paying for the products and all costs associated with getting them into your customers' hands, divided by the number of unique customers acquired. It only accounts for customers that have reached 90 days of maturity. 

Why it matters: Monitoring day 90 contribution profit LTV gives you a quantified real return on investment from acquisition and retention efforts early on in the customer journey with your brand.

How to measure what matters

Staying on top of your key financial metrics is the first step to scaling profitability as a business. It’s an essential starting point when fundraising as a beauty brand, expanding into new retail channels, or simply improving your bottom line. 

But calculating all the KPIs above requires disparate data from your sales platforms, marketing channels, and operations systems–which can be a massive undertaking to compile manually.

Drivepoint can deliver a unified view of where your beauty brand stands on all the financial metrics that matter most.

Plus, we can even help you benchmark your brand’s performance against your industry peers.

Consumer brands in beauty and beyond trust Drivepoint to guide their financial decisioning, and we’d love to show you why.

Book a call with our team to learn how you can start measuring what matters for smarter, faster capital allocation decisions today.

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