Episode Summary

In this episode of the Free to Grow CFO podcast, Jon Blair and Keith Kohler discuss the intricacies of financing for DTC brands, focusing on the importance of understanding good versus bad debt, the journey of K2 Financing, and the common reasons consumer goods brands require debt. They explore risk assessment between inventory and accounts receivable, the nuances of revenue-based financing, and the critical factors beyond just cost of capital that founders should consider. The conversation also delves into maturity matching in debt financing, multi-layered debt strategies, and the essential diligence items needed for successful lender conversations.

Key Takeaways

-Capital is essential for scaling DTC brands.

-Availability of capital can be more important than the cost of capital.

-Multi-layered debt strategies can provide flexibility and growth opportunities.

-Maturity matching is key to ensuring debt aligns with asset consumption.

Episode Links

Jon Blair - https://www.linkedin.com/in/jonathon-albert-blair/

Keith Kohler - https://www.linkedin.com/in/keithkohler1/

Free to Grow CFO - https://freetogrowcfo.com/

K2 Financing - https://www.k2financing.com/

Meet Keith Kohler

Keith Kohler is the Founder of The K2 Group LLC, a finance consultancy specializing in helping CPG founders secure the right financing at the right time™. He has originated and closed over $100 million in financing and authored the CPG Financing Guide, covering debt financing options for CPG companies at every stage. Keith also offers a 30-minute strategy call to help founders develop a 2-3 year financing plan.

A sought-after speaker, Keith has led financing webinars for the Specialty Food Association, Hirshberg Entrepreneurship Institute, and Emerging Brands Summit. He created both CPG Financing Month, a series of conversations exploring the financing and mindset journeys of CPG companies, and the Making the Numbers Work® for You retreat (www.makingthenumbersworkforyou.com) where he helps founders overcome anything holding them back from the successful management of their business finances.

Keith supports CPG founders in several other roles, including as a member of the selection committee of Nutrition Capital Network and a Wharton Venture Lab Expert in Residence and Mentor.

Transcript

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00:00 Introduction to DTC Financing Challenges

03:10 Understanding Good Debt vs Bad Debt

05:57 The Journey of Keith Kohler and K2 Financing

08:49 Common Reasons for Debt in Consumer Goods Brands

11:44 Risk Assessment: Inventory vs Accounts Receivable

14:58 Revenue-Based Financing and Its Implications

18:06 Factors Beyond Cost of Capital

21:11 Maturity Matching in Financing Strategies

23:41 Navigating Multi-Layered Debt Strategies

26:02 Understanding Debt Financing Options

28:27 Capital Efficiency and Profitability

29:20 The Role of Lenders in Growth

32:51 Crafting the Perfect Pitch to Lenders

38:54 Preparing for Debt Conversations

42:48 Fun Facts and Closing Thoughts

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