There are two important business metrics, that if you understood how to improve, you would never have to worry about money or growth again.
Since 2015, I’ve helped build close to 12 businesses. Every founder that got these 2 metrics right succeeded and those who got it wrong failed.
The first metric is Customer Acquisition Cost or CAC.
This is the metric that tells you how much it costs to get customers.
Here’s why it’s important. 👇🏼
Building a great product alone won’t make you money. If building a great product alone was enough, Google, Microsoft and Apple, wouldn’t be spending close to 20Billion (Billion with a ‘B’) each on advertising, sales and marketing . You need to factor in the cost of getting the attention of the market and get them to choose you over the millions of other options out there. How do you do that and how much is it going to cost you? How much time, energy, people, money do you have to get customers?
This is where having distribution channels like a YouTube Channel, email list, social media following comes in so handy. So many big youtubers literally spend 0 Dollars in CAC — that’s why they can be so profitable in their business. It’s also why they are so sought after — because their distribution channels are so effective.
Get this wrong and you’ll never have enough clients to sustain business growth. Why? because of a real world phenomenon called CHURN. Customers don’t last forever, they leave, so you need to work on getting new ones.
But you mitigate this by focussing on the second metric — Customer Life Time Value (CLTV or LTV).
It is a prediction of the net profit attributed to the entire future relationship with a customer. LTV is used to determine how much a company should spend on customer acquisition and retention.
This metric is what motivates us to create better products and customer experiences.
For example:
- Better onboarding experiences
- Value packed services
- Personalised customer service
- Build relationships with customers
- Share your plans with customers
Don’t get lost in the woods — focuss on these 2 metrics and you’ll grow your business 10X faster than your peers who are focussed on multiple metrics.
