Essay · about 20 minute read

Startup Killer: the Cost of Customer Acquisition

David Skok · For Entrepreneurs Free Beginner

This is the piece almost every other CAC and LTV explainer quietly borrows from, and it is still the clearest place to actually learn the ideas. Skok walks a first time founder through what it costs to win a customer, what that customer is worth over time, and why the gap between the two quietly kills companies. It is a starting point for building your own numbers, not a formula to memorize.

  • CAC is your full sales and marketing spend over a period divided by the customers you won in it, so it is easy to under count if you forget salaries.
  • LTV is the gross margin you expect from a customer over the whole relationship, not their first payment, and a rough LTV to CAC of about 3 to 1 is the sanity check.
  • Aim to earn your CAC back in under 12 months, because a longer payback means you need a lot more cash just to grow.
Open on forentrepreneurs.com ↗

The question it answers

  1. How do I figure out my unit economics before I have real customers?

Read with it

  1. Video · about 22 minutes Consumer Startup Metrics | Startup School Tom Blomfield
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