Know the cost of acquiring customers. Don’t overspend and kill your startup

Much has been written about what entrepreneurs should concentrate on to make their startups successful and a lot of emphasis has been laid on three key factors: team, product and market, with specific impetus on the significance of product/market fit.

Failure to get product/market fit right is likely the number 1 reason for a startup’s failure. However, not many discuss about the second greatest reason for startup failure, which is ‘the cost of acquiring customers’ that ends up being higher than expected, and surpasses the ability to monetize those customers.

The question is, “What should be the cost of user acquisition? And how will it sustain the competition”

While acquiring new customers is a happy feat, it doesn't mean, in any case, that you lose out on common sense in accounting time and human resource efforts in acquiring them, normally alluded to as your CAC (customer acquisition cost).

It doesn't take a genius to comprehend that plan of action failure comes when CAC (the cost to gain customers) surpasses LTV (the ability to monetize those customers).

A well-balanced plan of action requires that CAC is significantly less than LTV.

To be a business person requires incredible positive thinking, and an extremely solid belief in how much customers will love your product. Sadly this same property can likewise lead entrepreneurs to believe that customers will beat a path to their way to buy the product. This as often as possible causes them to terribly belittle the cost it will take to get customers.