Manage episode 35962198 series 30645
Knowing How To Increase Your Revenue Starts With Knowing Where To Look…
Many startups know to track Cost Per Click (CPC), but not what to do with that knowledge. CPC really isn't that important until a startup needs to optimize their costs. What is really important is how much a new customer costs to acquire (CAC) from that ad spend and whether the company can afford it.
If an average customer has a high lifetime value (LTVC) then a company can afford to spend a lot to acquire a customer.
That pesky thing called cash flow gets in the way. A self-funded startup can't afford to wait years or even months to get its money back where a funded startup may have enough cash in the bank to keep running until the high lifetime value pays off.
How Much Can You Afford To Acquire And Keep A Customer?
- What is your cost of acquisition?
- What is your churn rate and churn points?
- Lifetime value of a customer is an estimate, but a critical one.
- Do you know your cost of goods sold?
- How much and when you charge a customer is critical to startups.
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