The DTC Turnaround Playbook: How We Cut $3M and Got Profitable

In 2023, Koio was losing money. Not a little. We were roughly negative $3 million in EBITDA. The DTC playbook that worked in 2019 had stopped working. Privacy laws changed, CAC skyrocketed, interest rates climbed, and consumer spending pulled back. The math that got us here wasn't going to get us out.

My co-founder and I looked at each other. We had raised $20M over the life of the company. But the fundraising landscape had fundamentally changed. Investors weren't looking for growth anymore. They wanted unit economics and profitability. We knew we had to fix the business before we could raise again or do anything else.

We had two choices: raise more money into a terrible market, or cut our way to profitability. We chose the latter.

Over the next 18 months, we cut over $3 million in annual costs. We closed stores, let go of people we cared about, discontinued products we loved, and renegotiated every vendor contract. We went from negative $3 million in EBITDA to profitable.

Here's exactly what we did and what I learned.

The starting point

Before you can fix anything, you need to know what's broken. We started by getting brutally honest about our numbers.

I was reviewing our P&L multiple times a week. Not at the category level. At the line-item level. What are we actually paying for? What's the return on each expense? What happens if we cut it? You'd be surprised how many costs become invisible when they've been there long enough. They stop feeling like decisions and start feeling like gravity.

The cuts we made

We ended up cutting costs in three major areas: payroll, marketing, and G&A. Here's the breakdown:

Payroll: $1.1M saved

This was the hardest part. Letting people go is brutal, especially when they've done nothing wrong and the situation isn't their fault.

We made all the cuts at once. Then we communicated clearly to the remaining team: how their roles were going to change, what we needed from them, and what they could expect from us. For the people we let go, we did it as gracefully as we could.

We restructured our marketing and operations teams. Some roles we eliminated entirely. Others we moved to skilled talent overseas: customer service, certain marketing roles, operations, and ecommerce.

The overseas transition was a significant part of our savings. Talent outside of New York costs a fraction of what we were paying, and we found people who were just as capable. The tradeoff: it takes time to train them. You can't just hand someone a task and expect them to understand your business, your brand, your processes. It took about six months to get the team fully productive. We also made some wrong hires along the way and had to course correct, which meant spending more time vetting people before bringing them on.

The key was being honest about what was actually essential versus what felt essential. We had roles that existed because we'd always had them, not because we needed them at our current scale. We had processes that required headcount that could be automated or simplified.

Core operations remained stable throughout. We didn't cut muscle, just fat. But telling the difference is harder than it sounds.

Marketing: $555K saved

We didn't just spend less on marketing. We spent better.

We moved from agencies to a freelancer model. One thing we'd noticed over the years: agencies tend to work well in the beginning, then drop off in performance over time. You're paying for their attention, and as you become a stable client, that attention goes to new accounts. Freelancers gave us more control and better results at lower cost.

We also cut the channels that weren't working. We killed TikTok and focused on Meta and Google, where we could actually measure results. We reduced ad spend by over $500K year-over-year and improved our marketing efficiency ratio from 6.4x to 8.3x.

Cutting spend and cutting waste are different things. We were spending money on channels that weren't working, with partners who weren't delivering. Cutting that while doubling down on what worked meant we spent less and got more.

G&A: $1.45M saved

This is where most of the hidden bloat lives.

We closed our Soho office and went fully remote. Remote work was working fine, and the rent was not. This wasn't just about saving money on office space. It opened up our talent pool beyond expensive New York hires and gave the team flexibility they valued.

We renegotiated or canceled SaaS contracts that had crept up over the years. Every startup accumulates tools. A $200/month subscription here, a $500/month platform there. Most of them are being underutilized or not used at all. We audited every single subscription and asked: do we actually need this? Can we use something cheaper? Can we consolidate?

We closed our Venice, CA retail store that was underperforming. We shut down our wholesale dropship operations that came with hidden fees eating into margins.

We also switched our 3PL shipping from DHL to UPS and reduced per-order shipping costs from $18 to $13. That's $5 saved on every order, which adds up fast.

Beyond cutting: focusing the business

Cost cutting alone isn't a strategy. You also need to figure out what you're doubling down on.

We ran a churn survey and conducted over 100 customer interviews. The goal was simple: understand why customers were coming to Koio, and what made us different from competitors.

What we found was uncomfortable. We'd started as a dress sneaker brand. Italian-made, premium, clean designs. Customers knew exactly what Koio stood for. But over the years we'd expanded into boots, loafers, slippers, across both genders. Our SKU count had exploded. Each addition seemed rational in isolation. More products, more options, more potential sales. But combined, they diluted the brand, stretched the marketing budget, and made every dollar less efficient. Customers had stopped knowing what Koio stood for.

I felt it before the data proved it. Then the customer interviews gave us clarity. Our core customer was a working professional who wanted comfortable, versatile sneakers for their daily routine. Not fashion boots. Not beach slippers. Sneakers. That was our niche. That was what we did better than anyone else.

So we made a tough decision: we cut 40% of our SKUs. We discontinued products that didn't align with this core message. We focused on men, where the brand had the strongest pull. We stopped trying to be everything to everyone.

The clarity came back almost immediately. Marketing became more efficient because we knew exactly who we were talking to. Product development became clearer because we knew what problems we were solving. Operations became simpler because we had fewer SKUs to manage. Everything got easier once we knew what we were.

What I learned

1. Cut once, cut deep

The worst thing you can do is death by a thousand cuts. Small reductions every few months drain morale and create constant uncertainty. If you need to cut, figure out everything you need to cut and do it once. Rip the band-aid off.

2. Question everything that feels "essential"

We had expenses that had been there so long they felt like gravity. Of course we need an office. Of course we need that tool. Of course we need someone in that role. Most of those "of courses" were wrong.

3. Efficiency beats scale

We improved our marketing efficiency ratio from 6.4x to 8.3x while spending less. We cut shipping costs by 28% per order. These improvements compound. A leaner business with better unit economics is worth more than a bloated business with higher revenue.

4. Focus is a strategy

Saying no to things is just as important as the cuts. We said no to product lines, customer segments, and channels that were distracting us from what worked. I see this pattern constantly when I talk to other founders. You start focused, find traction, then expand because growth pressure tells you to. Each addition seems rational in isolation. Combined, they dilute your brand, stretch your budget, and make every marketing dollar less efficient. By the time you notice, you're running a more complex business that's less profitable than the simpler one you had before.

5. Be radically transparent with your team

The people who stay after a restructuring are watching everything. They're scared. They're wondering if they're next. They're questioning whether the company has a future.

The only way through this is transparency. Not corporate-speak transparency where you say a lot without saying anything. Real transparency. Share the numbers. Explain why the cuts happened. Show them the path to profitability and where you are on that path.

We held regular all-hands where I walked through our financials, our burn rate, our runway, and what needed to be true for us to survive. People could see we weren't hiding anything. They could see the progress we were making. They understood why their sacrifices mattered.

This built trust in a moment when trust was fragile. The people who stayed became more committed, not less. They felt like partners in the turnaround, not victims of it. When you're asking people to do more with less, to work harder through uncertainty, they need to know the full picture. They deserve that.

Silence breeds anxiety. Transparency builds trust. And trust is the only thing that holds a team together when things are hard.

Was it worth it?

Eighteen months later, the business was profitable. We weren't burning cash anymore, we'd significantly reduced the complexity of the business, and it felt like ours again. We had a sustainable model and the time to find the right exit, which we eventually did.

The turnaround also made us more attractive to buyers. They could see we'd been through the fire and made hard decisions. They weren't worried about hidden problems because we'd already found and fixed them.

If you're in this situation, the worst thing you can do is hope things turn around on their own. They probably won't. You need to take control, make the hard calls, and build a business that works at its current scale.

That's the work I do now. If you want to talk it through, reach out.