Turning Around a D2C Business: An Interim CEO’s Perspective on Profitability & Growth
For PE portfolio managers assessing D2C businesses, the real challenge isn’t just driving revenue—it’s ensuring that growth is repeatable, value-accretive, and resilient at exit. Many founder-led businesses thrive on aggressive customer acquisition, but once they transition to PE ownership, cracks often emerge. Without careful discipline, unchecked marketing spending, passive budget allocation, and inflated revenue assumptions can erode EBITDA long before it becomes obvious in the financials, impacting not only cash flow but also exit multiples.
Transforming Planet X: From Loss-Making to Profitable Growth
I used this EBITDA-led approach to turn around Planet X, a specialist D2C cycling business, from a £500k loss to £2.5m EBIT, making it one of the most profitable brands in its space. Of course, its not the only approach, but in this instance it was an appropriate method of reframing the strategy.
When I took over, Planet X was chasing revenue without considering profitability. The team was fixated on marketing spend and sales volume, assuming that if they kept growing, profitability would eventually follow. But marketing discipline wasn’t the only issue—it was the root cause of a much broader set of problems. Overzealous forecasts led to excessive inventory purchases, tying up cash in unsold stock. Procurement decisions were made based on projected sales that never materialised, inflating fixed costs and operational overheads. The business wasn’t just spending too much on marketing; every operational decision had been built on flawed growth assumptions. Over-forecasted demand led to bloated procurement contracts, locking the business into supplier commitments that no longer made sense. Warehousing and logistics expanded to accommodate expected future sales that never materialised. Hiring decisions were made to scale a business model that was, in reality, burning cash. The company had built a cost structure to support growth that simply wasn’t real—and once the cycle started, it fed itself until decisive intervention was necessary.
Instead of focusing on top-line growth, I forced a shift to EBITDA as the primary KPI:
- Set a clear EBITDA target – We decided what level of profitability the business needed to achieve.
- Locked in gross margin – No wishful thinking about efficiency gains unless there was a real plan to deliver them.
- Worked backwards from EBITDA – Ensuring that every pound spent—whether in marketing, operations, or hiring—was aligned with a profitable growth strategy rather than just assumed revenue increases.
- Refined our product and sales mix – Prioritising sustainable revenue, ensuring that every sale contributed meaningfully to long-term profitability.
- Reallocated resources from underperforming areas – Investing in higher-ROI customer acquisition strategies, ensuring marketing spend was working harder and supporting long-term customer value.
Identifying the Signs of EBITDA Erosion in D2C Businesses
For PE investors, spotting early signs of EBITDA erosion is critical before structural damage sets in. Here are the key indicators that a once-profitable D2C business is heading toward inefficiency:
- Rising CAC with no corresponding increase in LTV – A telltale sign that marketing efficiency is declining.
- Inventory build-up without accelerating sell-through – Suggests that over-forecasting is inflating costs.
- Cost structure expanding ahead of revenue growth – If procurement, fulfilment, or hiring scale faster than revenue, it’s a sign that spending assumptions are misaligned.
- Marketing budget increasing but conversion rates stagnating – Indicates reliance on spend-driven growth rather than efficiency gains.
- High customer churn despite increased acquisition spend – A signal that revenue quality is deteriorating.
By the time these issues show in quarterly EBITDA figures, the underlying structural issues may already be embedded—which is why proactive intervention is crucial.
Understanding the Business’s Current Position and How It Got There
To make informed decisions, it’s essential to understand not only where the business stands today but also how it arrived at this point.
As a founder nears the sale of their business, they often bring in a commercial director, marketing director, or an entire marketing team. Many founders tell me they are no longer involved in the day-to-day running of the business, believing they have handed over control. But this is where context is crucial—because one of the most common misconceptions is that underperformance is entirely due to the new team. While that may sometimes be the case, they could just as easily be part of the solution.
The Hidden Influence of the Founder in Late-Stage Private Ownership
To the incoming PE investor, the new team appears to be fully in control—driving marketing, managing spending with discipline, and delivering performance. In fact, many investors assume the founder isn’t adding value anymore, seeing them as absent, enjoying life while the team does the hard work.
But let me challenge that—I see it often. Don’t underestimate the effect the founder still has on the discipline of the team. Even when not physically present, their influence lingers in the background, shaping how budgets are spent. The marketing manager, even if they feel autonomous, remains careful not to stray too far from the founder’s expectations, knowing that scrutiny, whether direct or indirect, is always a possibility.
When the founder is no longer in control, that influence disappears. Suddenly, the marketing team’s mindset shifts from “I’m spending my boss’s money” to “It’s in the budget.” This subtle but critical change alters decision-making. Without the founder’s instinctive, obsessive oversight, spending risks becoming mechanical rather than deliberate—a shift that can quietly erode marketing efficiency and EBITDA discipline.
At the same time, the weight of expectation from PE owners to drive growth fundamentally changes the leadership team’s approach. Without the founder’s instinctive scrutiny, leadership often feels compelled to spend aggressively to hit revenue targets, believing that increasing marketing investment will unlock scalable growth. This shift—from founder-led discipline to corporate decision-making—creates a significant change in approach. Marketing spend is no longer viewed as a personal investment, but as a tool to justify growth expectations to investors.
And with Google’s data reinforcing the belief that higher spend equals higher growth, leadership teams can easily find themselves in a cycle where ad budgets are justified by projections rather than performance. The result? A slow but steady erosion of marketing efficiency and profitability.
The real impact of this shift often isn’t immediate. In the first year or two post-founder, marketing performance may still appear solid, giving PE investors confidence that the team is fully in control. But as time passes, the compounding effect of mechanical, budget-driven decision-making begins to show. Incremental shifts—less scrutiny on ad spend, minor inefficiencies in customer acquisition, and a gradual decline in marketing discipline—stack up.
The business doesn’t collapse overnight, but over a few years, customer acquisition costs rise, marketing efficiency falls, and EBITDA margins shrink. By the time this is fully visible in the financials, the underlying issues have become embedded in the business model, making them far harder to reverse.
Beware the ‘Google Says’ Approach
Marketing professionals operate within budgets, often assuming that the gospel of Google will deliver results. The numbers, the case studies, and the platform insights all seem to confirm that spending more equals growth. But there’s a critical difference between how a professional marketer approaches ad spend and how a founder did in the early days of their business.
For the entrepreneur, every pound spent on marketing was their own money. They may have used Google Ads, but they didn’t blindly trust it. They were constantly testing, challenging assumptions, and making changes in real time—because it was their own cash on the line. Every click, every conversion, every pound spent carried an emotional weight, almost like a high-stakes bet.
For PE-backed businesses, this becomes an even bigger risk. Without a founder personally scrutinising ad spend, a business can drift into passive marketing strategies—trusting Google’s recommendations at face value rather than forcing a clear ROI analysis. This is how many high-growth D2C brands see their marketing efficiency quietly erode over time, leading to rising CAC and declining EBITDA, all while maintaining the illusion of growth.
Google, of course, is built on reinforcing this confidence. Its entire advertising model is designed to encourage incremental spend. Performance data, insights, and AI-driven recommendations all subtly nudge businesses to spend ‘just a little more.’ But this isn’t just a marketing problem—it’s a confirmation bias trap that can quietly influence an entire leadership team’s decision-making.
Once marketing starts presenting Google-backed data as proof that higher spend equals higher growth, it seeps into financial planning, sales targets, and procurement assumptions. Leadership teams—especially those without direct experience in digital marketing—can become over-reliant on these assumptions, shaping business strategies around numbers that appear well-researched but are ultimately designed to encourage more ad spend.
This is how entire cost structures start building themselves around inflated growth expectations. Warehousing, logistics, hiring, procurement—every function starts making commitments on the assumption that Google’s version of reality will hold true. And once costs are locked in, it’s extremely difficult to unwind them when the growth projections don’t materialise.
B2C businesses are, by their very nature, heavily structured around marketing teams. This isn’t a flaw—it’s how they are designed to scale. But the individuals within these teams have spent their careers immersed in digital marketing ecosystems, where Google, Meta, and AI-driven algorithms shape their entire view of performance. They trust the dashboards, the attribution models, and the data-driven recommendations presented by these platforms, because that’s what they have been trained to do.
Combine that with their presentation skills, ambition, and genuine desire to drive growth, and you have a highly persuasive team that sincerely believes in their strategy. But this conviction comes with a bias. They are heavily influenced by the very media companies whose business models are designed to encourage them to spend more—convincing them that spending their way out is the best solution.
This isn’t to undermine marketing teams—they want the best for the business. But it does mean that without a single overriding KPI to anchor decision-making, marketing can become an arms race, where spend is justified by projections rather than proven results.
Re-Energising the Team Around a Clear Plan
When a business struggles with profitability, the assumption is often that teams are underperforming or mismanaging resources. But in reality, most leadership teams already know what’s wrong—they just haven’t been able to pinpoint the root cause or agree on the right fix. Often, what’s missing isn’t effort or capability—it’s clarity and alignment.
That’s why financial discipline shouldn’t be seen as restrictive or negative—it should be an energising reset, helping teams focus on what actually moves the needle. Instead of feeling like they’re constantly chasing revenue targets that feel out of reach, management can work towards a clear, structured plan that gives them control over the outcome.
To do this successfully, teams need:
- A clear and achievable strategy – Shifting from reactive, short-term fixes to a plan that prioritises profitable, sustainable growth.
- Ownership and excitement about the process – Leadership teams should feel empowered, not micromanaged, understanding how their decisions directly contribute to EBITDA growth.
- Collaboration rather than blame – This isn’t about catching mistakes—it’s about giving teams the tools and frameworks to succeed.
- A shift from firefighting to execution – Instead of feeling like they’re constantly adjusting to external pressures, leaders should see measurable progress that builds confidence.
The good news is that most teams already have the answers—they just need a structured way to act on them. When leadership is fully engaged in the solution, EBITDA-driven decision-making isn’t just a necessity—it’s a positive step towards a stronger, more resilient business that everyone can get behind.
Final Thought—Challenging the C-Suite to Own Profitability
For PE portfolio managers, this is about more than just profitability—it’s about ensuring that the entire leadership team is aligned behind a sustainable, scalable business model. Finance leaders may set the numbers, but commercial teams, marketing, and operations all contribute to how profitability is built—or eroded. If revenue growth assumptions drive spending rather than disciplined decision-making, margins will inevitably shrink over time.
The C-suite must take collective responsibility for ensuring that financial discipline isn’t seen as restrictive but as a foundation for smarter decision-making. When leaders across the business own the solution—rather than leaving it to finance alone—the shift from revenue-chasing to value-driven growth becomes a powerful competitive advantage.
A company with clear EBITDA discipline, controlled CAC, and operational efficiency will always attract better valuations than one reliant on speculative growth. Ensuring this discipline before a downturn means your business will remain an attractive asset in any market condition—not just when growth is easy. If nothing else, this approach will force a different kind of conversation in your next board meeting.
For PE portfolio managers, this is about more than just profitability—it’s about building a business that will withstand due diligence and command a premium at exit. Investors don’t just buy revenue; they buy proven, scalable profit models. A company with clear EBITDA discipline, controlled CAC, and operational efficiency will always attract better valuations than one reliant on speculative growth.
Ensuring this discipline before a downturn means your business will remain an attractive asset in any market condition—not just when growth is easy. If nothing else, this approach will force a different kind of conversation in your next planning meeting.
