Thread by @digitallynativ

1/ It is fairly obvious that profitability at the unit (per transaction) level is critical to becoming profitable as a business

What's not obvious is that the majority of unprofitable DTC brands have positive unit economics as they grow

2/ The reasons brands like these haven't become profitable is that they're building for the next tier of growth, not the one they're on

In order to get there, investments are required: Talent, infrastructure, technology, etc

These investments add Fixed Costs to the business

3/ Fixed costs investments are typically ROI driven, much like units economics

However, the ROI of these investments usually cannot be measure in a matter of days, weeks or months...but years

These are investments that occur in advance of, and to drive sales growth

4/ Real profitability (not just the 'fun' marketing unit profitability) happens when you can grow fast enough and long enough via positive unit economics that the Contribution Margin $ generated from revenue begin to eclipse the Fixed Costs of the business

5/ In order to achieve this, marketers must be able to accurately forecast their ability to scale their unit economics all the way to the point at which these CM $ exceed fixed costs - without visibility to how much-fixed costs will be added in the future

6/ Profitable businesses with strong unit economics are not necessarily superior to unprofitable businesses with the same or better unit economics

It could be argued that the former is poorly positioned to sustain future growth relative to their competition