Tell me what the cost of the products are and the churn rate and I'll give you a pretty pretty good idea.
Let's say a customer spends $100/yr. and on average, they stick around for 3 years. You'll make $300 which is called your Lifetime Value.
Most will tell you, you shouldn't spend more than $100 to acquire that customer.
Let's say you didn't listen and spent $300 to acquire them and you thought you could justify by saying they will be around for 20 years and your LTV would be $2000. But you don't know that. If you spent $300 and you only got $300 out of them, you would lose money.
Red, $300 - $300 = 0, right? You would break even right?
No, you would be spending $300 upfront and recouping that money over 3 years. You would be in debt. Some debt is fine when you know you'll catch up in a year or two. Not fine if you never can catch up.
Now let's scale that up...
I want 1M customers and I want to make $100M a year on them and I feel good they will stick around for at least, 3 years.
With the 3:1 model you would be OK spending $100M
Now you are starting to see why I mentioned VERB should go out and get $100M, but a few choked when I said that.
So red, are we screwed since we don't have $100M
Nope, VERB will grow smartly instead of the start-ups that have $100M that throw marketing dollars at a wall and sees what sticks (think superbowl commercials). Most startups down't have $100M laying around.
A couple of other things to consider
#1. There is no rule that says 3:1 Longterm Value : Customer Acquisition Cost is the only rule
If you can do it at 100:1, you are doing pretty, pretty, pretty good.
Take $5M of that funding and bring in $500M of LTV. I like the sound of that.
#2. VERB as Rory said in the Q update. VERB isn't starting from scratch. They already have a lot of enterprise customers and users. The cost to market to that existing user base is very, very low. It's a matter of creating the marketing material and pushing it out there.
I thought I read in general 1/2 of SaaS sales are from existing customers. Think about that. VERB has a lot of existing users.
Another inexpensive way, is using social media like they have. Inbound sales is much more successful than outbound meaning cold calling. Customer comes to your, your success rate is much higher. Those Master Series classes are pure marketing genius, but you have to be very smart to be able to do them. They are. I've never seen anything come close to that.
In App purchasing is going to allow increasing the ARPU without spending a lot of market dollars
#3 VERB has a product that sells itself much more than most SaaS products. Think about if you were a SaaS company that sold security or back office solutions. Who is going to see how that works in a social media post?
But you can with VERB. You can watch a video or soon Live stream and think, "that is cool and effective, how do I get that?"
Even better, "that is cool and effective, how do I invest in that?"
Heck, just do a webinar to 100 people and say, look at what you are using.
#4 VERB has a product that could go Viral. All it would take is some celeb or famous public figure to start using it. Other product do and before you know it, you have a ton of free publicity. Same thing if a big brand started using. They are already in Direct Sales, but imagine if it was Coke, Ford, etc. That will happen.
Let's say a customer spends $100/yr. and on average, they stick around for 3 years. You'll make $300 which is called your Lifetime Value.
Most will tell you, you shouldn't spend more than $100 to acquire that customer.
Let's say you didn't listen and spent $300 to acquire them and you thought you could justify by saying they will be around for 20 years and your LTV would be $2000. But you don't know that. If you spent $300 and you only got $300 out of them, you would lose money.
Red, $300 - $300 = 0, right? You would break even right?
No, you would be spending $300 upfront and recouping that money over 3 years. You would be in debt. Some debt is fine when you know you'll catch up in a year or two. Not fine if you never can catch up.
Now let's scale that up...
I want 1M customers and I want to make $100M a year on them and I feel good they will stick around for at least, 3 years.
With the 3:1 model you would be OK spending $100M
Now you are starting to see why I mentioned VERB should go out and get $100M, but a few choked when I said that.
So red, are we screwed since we don't have $100M
Nope, VERB will grow smartly instead of the start-ups that have $100M that throw marketing dollars at a wall and sees what sticks (think superbowl commercials). Most startups down't have $100M laying around.
A couple of other things to consider
#1. There is no rule that says 3:1 Longterm Value : Customer Acquisition Cost is the only rule
If you can do it at 100:1, you are doing pretty, pretty, pretty good.
Take $5M of that funding and bring in $500M of LTV. I like the sound of that.
#2. VERB as Rory said in the Q update. VERB isn't starting from scratch. They already have a lot of enterprise customers and users. The cost to market to that existing user base is very, very low. It's a matter of creating the marketing material and pushing it out there.
I thought I read in general 1/2 of SaaS sales are from existing customers. Think about that. VERB has a lot of existing users.
Another inexpensive way, is using social media like they have. Inbound sales is much more successful than outbound meaning cold calling. Customer comes to your, your success rate is much higher. Those Master Series classes are pure marketing genius, but you have to be very smart to be able to do them. They are. I've never seen anything come close to that.
In App purchasing is going to allow increasing the ARPU without spending a lot of market dollars
#3 VERB has a product that sells itself much more than most SaaS products. Think about if you were a SaaS company that sold security or back office solutions. Who is going to see how that works in a social media post?
But you can with VERB. You can watch a video or soon Live stream and think, "that is cool and effective, how do I get that?"
Even better, "that is cool and effective, how do I invest in that?"
Heck, just do a webinar to 100 people and say, look at what you are using.
#4 VERB has a product that could go Viral. All it would take is some celeb or famous public figure to start using it. Other product do and before you know it, you have a ton of free publicity. Same thing if a big brand started using. They are already in Direct Sales, but imagine if it was Coke, Ford, etc. That will happen.
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