Product brands fail profitable more often than they fail unprofitable. The P&L shows margin; the bank account shows the truth: the money is on the shelf.

The trap, mechanically

A growing brand pays its manufacturer months before customers pay it back. Deposit at order, balance at shipment, six weeks on the water, weeks in the warehouse, then — for DTC — cash at sale, or — for wholesale — cash 30 to 60 days after that. Every step of growth means placing bigger purchase orders against future sales, so the faster you grow, the more cash the stock cycle swallows. It is entirely possible to double revenue, hold margin, and halve your bank balance. The brands that get into genuine trouble are usually the ones whose sell-through was fine; they simply financed a stock position their cash couldn't carry.

The numbers that give early warning

Three measures do most of the work. Stock cover: weeks of forward sales held, by SKU — because averages hide the dead lines. The cash conversion cycle: days from paying for stock to being paid for it; if that's 150 days, you are funding five months of your own growth. And committed cash: not just stock on the shelf but purchase orders signed, deposits paid and freight booked — the position you've already committed to, which is the number that matters when deciding the next buy.

What good practice looks like

Buy plans built from sell-through by SKU rather than optimism; a rolling 13-week cashflow that includes purchase order commitments; discipline about depth on new lines until they've earned it; and honest, early clearance of slow stock — the first markdown is the cheapest. On the funding side, match the tool to the gap: trade or stock finance for the purchase cycle, invoice finance for wholesale debtors, and equity only for the growth the operating cycle genuinely can't fund.

The strategic point is simple: for a product business, the buying calendar is the cashflow, and stock decisions are financing decisions. Treat them that way and the trap never springs.

Ask your Practice team for the 13-week cash model with your live purchase commitments in it — it's the single most clarifying document a product founder can own.