Using hedgehogs to shortlist your start-up options
If you're in the research phase - tabs open, spreadsheets half-built, weighing up which business to actually start - this one's for you.
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How much should you spend to win a client?
Hint: It’s probably more than you think. This week we’ve been updating our Go To Market Playbook – the strategy and tactics our partners use to build awareness and interest in what we do, how we do it, and the benefits GoodOaks provides. It has led to an interesting discussion about what is an acceptable CAC (Customer Acquisition Cost, or how much you have to spend on marketing to get one client signed up).
I won’t share what ours is here, but the lifetime value of a customer should be at least three times the cost of acquiring them. Aim for a 3:1 ratio, knowing that start-ups can have a higher CAC as they invest in market penetration and brand awareness. A lower CAC indicates more efficient marketing and sales processes.
Think about how you can lower your CAC. This might be through:
- Increasing the LTV (Lifetime Value) of your clients
- Converting a greater % of leads into clients
- Tracking CAC per channel and optimising for that
- Focus on free sources of clients
- Reactivate old clients and use your existing network
I’ll try to give some practical insights around how to achieve some of those ideas in future posts and Found This emails. 👀
Best wishes, Ben.