Growth Shorts

Every week, we send you a 3 min no noise newsletter
that will push you to become the top 1% growth leader.

27

How much money should I spend to get a new customer?

Most founders struggle with this question 💰

How much money should I spend to get a new customer?


Approach 1️⃣

Assume you are a fin-tech product.


1. Imagine if your competitor is a bank 🏦

  • The bank makes a lifetime revenue of $100 on a savings account. - This by selling insurance, mutual funds, loan & credit cards.

  • The bank spends $20 to acquire a savings account holder.


2. Think about what could be your optimistic lifetime revenue per customer, let's say it is $20. Take the ratio of your lifetime revenue to the cost of acquiring a customer. In this case, your cost of getting a new customer should not be more than $4.


Approach 2️⃣

Take a Grammarly example.

Assume indicative numbers.

  1. Grammarly spends $10 to acquire a customer.

  2. A typical user pays $5 a month as a subscription.

  3. A typical user retains for 12 months.

  4. LTV (lifetime value) = $60

But the $60 comes in stages.

Month 1: $5

Month 2: $5 (the breakeven point)

.

.

.

Month 12: $60 (can reinvest the excess $60-$10=$50)

Do this math for your own product.