Playbook / Lessons / Sales and advertising
Cash-flow businessA customer must pay more than they cost
Rob Walling adds a fourth requirement to Paul Graham's three for a successful startup: customers must give you more money than it costs to acquire them. He says to estimate customer lifetime value and acquisition cost before building, and he walks through example numbers for AdWords, Facebook, SEO, cold calling and word of mouth.
“Customers must give you more money than what you spend to acquire them.”— Rob Walling, Why Making Something Customers Want Isn't Enough, Jul 2011
Do this
Estimate what one customer pays you over their whole time with you and what one sale costs in your cheapest channel, and spend on ads only if the first number is clearly bigger.