Who cares about a 0.7 ROAS if reorders make you profitable before cash runs out?

🙃 Mike Beckham reveals when you can accept a first-order loss and when you can’t

😎 Sean Frank recommends a couple 20-year olds who should run your TikTok Shop

🤑 Jason Panzer wants to buy your stuff + we want to help you win on Black Friday

Mike Beckham CEO, Simple Modern

Do You Need to Be First-Order Profitable?

When I started Simple Modern, I had no choice but make and keep money on every purchase.

We were bootstrapped. We couldn’t acquire customers at a loss and wait months for repeat purchases to make us whole.

Then I co-founded Trevi, an electrolyte drink brand. It operates off a totally different equation.

Customers can use the product every day and replenish it regularly. Those repeat purchases justify paying more on acquisition, maybe even losing cash on the first order.

That’s the idea, at least.

How much can I afford to lose? How quickly should I earn it back? And what evidence do I need before scaling?

I’ve spent the last two years working through those questions at Trevi. Now we’re doing it at Winks.

1️⃣ Reorders by Cohort
2️⃣ Profit by Buyer Group
3️⃣ CAC + Payback Time
4️⃣ Volume + Overhead
5️⃣ The Offer + Pricing

 1. Reorders by Cohort 

On January 1 this year, 586 people bought Trevi on Amazon for the first time. That’s a cohort: a group defined by when and where we acquired them.

I track every cohort over time.

• Repeat purchases
• Time to reorder
• Buying frequency
• Customer retention

This chart shows the percentage of people buying again each day after their first purchase. I’m watching where the drop-off happens and how much the curve flattens over time.

We separate by channel because Amazon, Shopify, and TikTok customers behave differently. For example, Trevi’s TikTok customers buy less often and pay less per order, making them worth roughly 60% as much as our Amazon customers.

Useful signals for a new cohort start emerging around days 14-28. That’s enough time for someone to try the product and decide if they are going to buy again.

However, while a second purchase is encouraging, seeing a healthy trend of third and fourth orders a few months later are what give me confidence that my customers are forming a habit.

Then I look at profit.

 2. Profit by Buyer Group 

I took 20,000 Trevi customers and split them into deciles: ten groups ranked by how much profit each one brought in over the last 90 days.

Look at D10, my top 10% of customers generated more profit than the bottom 80% combined.

Half of our customers basically never come back. In the middle, maybe a fourth return. Almost all of our retention sits at the bottom. This is not unusual.

Every data set for subscription brands I’ve seen works this way. Success relies on the 10-15% who love the product.

It’s worth tracing where your super fans come from and how you’re attracting them:

• Acquisition channel
• Initial ad or message
• First product purchased
• Offer they bought through

But you’ll never hit 100%. The question becomes how much can you afford to spend, and how quickly will you earn it back?

 3. CAC + Payback Time 

Profit arriving “eventually” isn’t good enough.

I want to know whether a cohort’s first six months of profit will cover what we spent acquiring them and leave enough to pay operating costs (OpEx).

Start with the total order profit a cohort is expected to generate in six months: revenue minus COGS.

Divide that by the number of buyers in the cohort, and you have the average order profit per customer.

For Amazon, we project $8.69 in six-month order profit per customer based on Trevi’s historical data.

Then subtract acquisition. Our CAC on Amazon averages $4.45. That leaves $4.24 per customer before overhead.

Sounds tiny, and it is. The next step is to see if it can scale.

 4. Volume + Overhead 

At Winks, our criteria for hiring someone is that we first have to prove we can’t do it with AI.

We still have overhead costs:

• Software
• Creators
• Accounting

The great thing about these costs as opposed to CAC is that they don’t grow 1:1 with the brand. They mostly stay flat while the business can double or even triple its revenue.

That’s why scale matters.

At Trevi’s projected $4.24 profit per customer, if we acquire 64,855 new customers, our total spend will be $288,329 and our profit on that cohort after 6-months will be $275,511.

Work backwards from your operating expenses to figure out how many customers you need each month to cover costs … and when you need it.

That $275,511 doesn’t come in all at once. It trickles in for half a year after I’ve acquired the cohort.

Remember aggressive scaling can do two things:

1. Increase CAC
2. Lower quality

It’s very common when you grow that both the cost per customer goes up and the quality of your customer base goes down. More one-time purchases and fewer long-term subscribers.

What do you do if your business breaks at scale?

Test a new price and offer.

 5. The Offer + Pricing 
​
For our first year at Trevi, the numbers didn’t work.

People loved our product. Reviews were strong. A subset of customers were using it every day. We just weren’t attracting enough of them.

So we lowered the price and changed the offer. Our CAC came down, more people bought, and the business suddenly became easier to scale.

Dropping your price can feel counterintuitive when you’re trying to improve profitability. You’re giving up margin on each order.

Keep in mind, though, if your profit per customer falls by 20% and you bring in twice as many of them, you can end up with more nominal profit — real dollars.

 Can You Take a 1st-Order Loss? 

Yes. If you have the evidence and cash to support it.

I’d want to see:

• Customers come back
• 6-mo profits exceed costs
• Cash can fund the wait

That last part is why I needed first-order profitability at Simple Modern. Even if repeat purchases could eventually make the numbers work, we couldn’t fund the gap.

The goal isn’t only a lower CAC or a better margin per customer. It’s enough customers generating enough profit … soon enough.

Sean Frank CEO, Ridge

Too unc for TikTok Shop? Hire 20yr olds.

TikTok Shop will surpass $100B GMV globablly this year.

At Ridge, it does six figures a month.

too unc to be on TikTok Shop-
Just hire Tyler and Alex.

I did.

Two college kids built an agency to help brands launch and crush on TikTok Shop.

tbar finds creators. Coaches them. Run cash contests to get more videos posted. Gets the rights so we can them as ads.

We run our creator TikTok content on Meta. They eat 30% of our ad spend every day.

We are not the only big dog they work with

Gruns
HexClad
David Protein
Vita Coco

We are also using them at Winks.

Common Thread Collective saw what they were building and bought them.

TBAR is offering our readers a 30-min TikTok Shop audit for free. Directly with the founder, Tyler.

Get the playbook they run for us.
Scale before BFCM.

That is a real meeting link. It says CTC at the top because Taylor Holiday bought TBAR. Good co-sign if me and the other big dogs are not enough to convince you.

FULL EPISODE

​How to Profit While Losing Money on First Order Ad Costs​

 Jason Is Shopping! 

The always generous Mr. Panzer, announced HexClad’s Black Friday launch with an extra special offer.

He wants to buy your stuff 🎁

Drop a comment on either Twitter (X) or LinkedIn with a link to your site. Because not only is he shopping …

With thanks and anticipation,
Aaron Orendorff
🤓 Chief Executive Officer

P.S. (Disclaimer): Special thanks to TBAR Partners for sponsoring today’s newsletter.

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