Understanding the economics of a business
At what rate am I acquiring my customers?
Example: www.quarterly.co vs. www.dropbox.com
Not all customers are created equal. Segment into:
How should your sale cycles match your offering cycles?
Differentiate your type of customer:
How much does it cost to get a paying customer?
Marketing Campaign: $2000
Unique views: 100
% of unique views that purchase your product: 25%
What is the cost per customer (CPC)?
How many conversions (new customers) did you get?
What is the CAC?
At what rate am I retaining my customers? How does this influence:
An relative over absolute perspective: How are customers staying relative to what they signed up for:
Length of renewed contract and the overall value of the customer (e.g., customer signs up for a annual contract after a pricing discount. How does that customer relate to others who paid the full price?)
Counting what matters:
How valuable is a customer?
Gross Margin = (Revenue - Cost of Goods Sold)/ Revenue
Potential standards to hold yourself up to:
LTV > 3x CAC
CAC < 12 months to recover
Lifetime Value of the Customer
Customer Acquisition Cost
= Contribution Margin
Total Available Market (TAM)
Serviceable Available Market (SAM)
Serviceable Obtainable Market (SOM)