The theree most important fundamentals for building a business

Clear product market fit

Customer CAC v LTV

  • This is simply a game of CAC/ LTV – simplify everything down to this.
  • Getting this right allows you to flip
  • Look at Uber, here in the UK the referral fee would be: £10 credit for new user, £10 for the affiliate who referred them
  • If they used Google ads, it wouldn’t have been as trusted as a referral from a friend
  • If you end up making 3 rides and they are more than £10, then assuming they make 30%, then they will get that back in 3 trips
  • They don’t make 30% – Sales tax, driver fee…
  • So ideally, you want to pay to get a customer once and keep making revenue from them, because it’s normally cheaper than buying new customers
  • This is why when there is a new customer acquisition channel, while it’s cheap all of the savvy marketers work as hard as they can to milk it while it’s cheap to get people onto mailing lists and keep them engaged
  • Sending out an email on a mailing service like mailChimp is like £1 / 10,000 emails
  • When you look at a social media influencer, who has 10,000s followers, they are doing the same as people with a mailing list.

Flipping

  • buy for £1 and sell for £3
  • This allows you to buy 3, then make £9
  • Then you buy 9 and make 27
  • Which is not totally true, you need to set some money aside for marketing, this means you might only be taking £1 out of the deal
  • Obviously, you want to be doing this with £100s
  • So lets compare this with an eBook at £7, you might have a budget of £6 for buying customers
  • £30 a month, £360 a year, leaving £359 for customer acquisition
  • If you have a SaaS platform for £300 a month, then that’s £3,600 a year so to put a £1 in your pocket, you can spend £3,599 on customer acquisition
    • Imagine how shit you can be at marketing, how much room there is for trial and error

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