Welcome to The Dish, the only newsletter that simplifies finance for CPG people.

This time, we've got our sights set on the financial profile of an ideal exit!

The Main Course

What should my P&L look like at exit to obtain a 15% EBITDA Margin. Lets dive in!

Key Attributes

1. Product Margins - Need to be above 60%

2. Trade Spend - Sub 20% and closer to 15% as you aren’t driving as much trial.

3. Direct Costs  3PL and Warehousing should be sub 10%. Full truck load should be around 5% of revenue and 3PL/Warehousing can be 2-3 points.

4. Marketing - 15% or less but this goes hand in hand with trade

5. Payroll - Target 6-7% inclusive of contractors

6. Broker - Can negotiate a lower rate when posting large numbers. Target 3%.

Tips on how to Become Profitable and Exit:

1. Supply Chain Readiness Ensure your supply chain is agile and able to scale with tiered pricing. A roadmap to 60+ margins is essential.

2. Creative Marketing Be thoughtful and creative in your marketing approach without breaking the bank. Getting brand awareness is expensive, but once you are a true recognized CPG player, ensure there is a plan to bring down marketing and trade.

3. Category Expansion - In order to hit enough revenue to be meaningful to sell for 3-5x Revenue or 15-20x EBITDA, you need to be in the $50M+ range but this varies by category. Ensure you have a roadmap of new SKU categories and line extensions. Gaining economies of scale is essential for margins and to build revenue to cover overhead.

Desserts

• Build your financial model to show $4-5M in burn in the first 24 months or so.

• Ensure your model shows 15% EBITDA in year 5 using the above targets.

• Make sure you have a path to profitability sooner then later.

Thanks for reading through today’s Dish.

Have a great week.

— Adam Siskin