📉 When ROAS Lies: The Real Numbers DTC Operators Should Obsess Over

Hey everyone,

Welcome back for another bite to chew on.

This is part 2 of our finance series. Last time, we covered cash flow systems, but today, we’re digging into metrics that matter.

Not just ROAS or CPA. We’re talking about the numbers that expose whether your brand is truly profitable, liquid, or bleeding cash.

At Obvi, we didn’t get this right at first.

We chased revenue and ROAS, assuming growth meant success. But once we passed 8 figures, we realized: a topline focus can hide a weak foundation.

So we partnered with UpCounting to share some of the advanced metrics we wish we’d tracked from day one. 

On the Menu

• Evolving Beyond Basic ROAS

• New Customer Contribution Margin: The Holy Grail Metric

• Other Financial Metrics That Actually Matter

• BONUS: Building Your Ultimate Metrics Dashboard

**Note: everything you see in this edition is from UpCounting’s custom dashboards and their Ultimate DTC Metrics Playbook.

Check out the whole thing 👉🏽 HERE.

Evolving Beyond Basic ROAS

Let’s start with a metric we all know (and many of us overvalue): Blended ROAS (or Media Efficiency Ratio).

Formula: Blended ROAS = Total Revenue ÷ Total Ad Spend

It’s easy to calculate. Easy to report. And sometimes…dangerously misleading.

Why? Because it compares total revenue (which includes both new and repeat customers) to ad spend that’s mostly focused on new customer acquisition.

So…If 50% of your revenue comes from existing customers, through email, SMS, or organic traffic, your blended ROAS might look strong. But that number is hiding the real cost of acquiring new customers.

Don’t get us wrong, MER is useful. You can calibrate the broad strokes with it. But you need to drive deeper…

That’s why we shifted to a more accurate lens: New Customer ROAS (ncROAS)

Formula: ncROAS = New Customer Revenue ÷ Total Ad Spend

This gives us a much clearer view of how well our ad dollars are performing when it comes to bringing in net-new customers.

Across the DTC space, ncROAS typically falls between 0.5x and 2.5x.

If you’re not hitting your break-even point here, your paid acquisition strategy is burning cash, and your growth may not be as healthy as it looks.

Now, some brands run below break-even intentionally, banking on strong LTV and retention. 

But unless you have:

• Solid cohort data showing high repeat rates, or

• Deep enough capital reserves to float the gap

…it’s a dangerous position to scale from.

💸 Other Financial Metrics That Actually Matter 

Beyond top-line KPIs, there are core financial metrics that give you a clearer view of your brand’s operational health. 

These are the ones we believe every DTC operator should track consistently:

1. Days Inventory On Hand (DIO)

DIO = (Average Inventory ÷ COGS) × Number of Days

This shows how long inventory sits before it sells. If you have $300K in inventory and $100K in monthly COGS, your DIO is 90 days (three months of stock).

🧠 Why it matters: Inventory is often your biggest working capital drain. The longer it sits, the more cash is tied up, and the higher the risk of spoilage, breakage, or obsolescence.

Key variables:

• Product type: Fashion turns faster than pantry staples

• Supply chain: Longer lead times require more stock

• Seasonality: High-demand periods need buildup

• Storage costs: Expensive warehousing pushes DIO lower

Learn more → ACC | DTC Metrics | Days Inventory on Hand - Watch Video

2. Current Ratio & Quick Ratio

Current Ratio = Current Assets ÷ Current Liabilities

Quick Ratio = (Current Assets - Inventory) ÷ Current Liabilities

(where current assets = everything you expect to turn into cash in the next 12 months.)

These both measure short-term liquidity. Quick Ratio excludes inventory, which can be hard to move in a crunch.

Benchmarks:

• Current Ratio: 1.5+ = healthy buffer

• Quick Ratio: 1.0+ = you can meet obligations without selling product

If your Quick Ratio dips below 1.0, you're relying too heavily on inventory to stay afloat.

Learn more → ACC | DTC Metrics | Current Ratio + Quick Ratio - Watch Video

3. Contribution Margin by Channel

Reminder: Contribution Margin = Net Revenue - Variable Expenses

Knowing your overall contribution margin is helpful. But knowing it by channel is game-changing when you’re omnichannel like we are.

To calculate:

1. Break out revenue by channel (DTC, Amazon, Wholesale)

2. Assign variable expenses:

   • COGS & shipping by channel

   • Channel-specific fees (Amazon, wholesale cuts, etc.)

   • Channel-specific marketing (Meta to DTC, Amazon PPC to Amazon, related agencies, etc.)

🧠 Why it matters: Your top revenue channel might not be your most profitable. 

DTC often shows strong gross margin but thin contribution after CAC. Wholesale can look weak on gross but win on contribution due to low marketing costs.

This metric helps you:

• Reallocate budget where it drives real profit

• Understand true channel economics

• Set smarter growth targets

Track both dollars and % contribution per channel, and watch trends monthly. If margin % is falling while revenue climbs, something needs fixing.

Learn more → ACC | DTC Metrics | Contribution Margin by Channel - Watch Video

Building Your Ultimate Metrics Dashboard

Knowing what to track is step one. But to make these metrics useful, they need to be real-time, visual, and team-accessible.

At Obvi, spreadsheets weren’t cutting it. By the time we reviewed them, they were outdated. So we built a live dashboard with UpCounting (like the one above).

🔓 Here’s what it unlocked → 

1. Automation & Visualization
Data pulls from Shopify, Amazon, 3PL, and our accounting tools. Dashboards like ncROAS vs Blended ROAS make trends obvious and actionable.

2. Channel-Level Context
Every key metric is segmented by DTC, Amazon, and Wholesale and tracked over time. Seasonal swings and problem areas become obvious. 

3. Full Team Visibility
Everyone sees the same numbers. Marketing can see CAC’s impact on contribution margin. Ops can track how restocks affect DIO. It aligns the whole org.

4. Strategic Prioritization
Each month, we meet with Upcounting to focus on what matters most:

• During growth: ncROAS and new customer margin

• During inventory shifts: DIO and turnover

• During cash flow stress: liquidity and working capital

The result: We now operate with a shared language around financial performance. Metrics aren’t buried in finance spreadsheets, they’re embedded in how every team makes decisions.

The dashboard shown above is just an example snapshot. Ours includes dozens of custom views built for our business. 

It’s the clearest picture of how Obvi is truly performing.

🧰 Operator Toolbox - Finance Pack

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⭐️ Agency & Vendor Recommendations! We’re introducing brands to our top vendors and partners, including the team that helped us execute our advertorial LP. Just fill out the linked form and let us know what you’re looking for. Quick connect →

🔹 Upcounting - As you can tell, we work with the team at Upcounting to constantly evolve and optimize our finance ops. Learn how they can take your business to the next level →

🔹 Chargeflow - We lost 5 figures monthly from chargebacks before signing up with Chargeflow. Now it’s basically zero. Check them out to cure your chargeback headaches →

🔹 Obvi’s Google Sheets Cash Flow Template - Need help forecasting cash flow? Save this free template and apply it to your biz →

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