Playbook / Lessons / Partners and paid growth
StartupsJudge early paid spend by payback, not LTV
Tunguz argues that the LTV-to-CAC ratio is shaky for young companies because they lack long-run data on how long customers stay and what they spend. He suggests that within roughly the first year and a half a startup has enough real data to measure payback period instead. That makes payback a more usable yardstick for deciding how much to put behind a channel.
“In the early stages, payback period is a better metric to use.”— Tomasz Tunguz, The False Confidence of the LTV/CAC Ratio for Early Stage SaaS Startups, Nov 2017
Do this
Calculate, this week, how many months of gross profit it takes to win back what you spent acquiring your latest ten customers, and you write that number at the top of your channel sheet.