Lessons Learned - Business Planning Phase
My advice to entrepreneurs developing a new business plan is to build a model similar to the above to estimate customer acquisition costs. This will show you the dependency on several key variables:
Cost per Lead
Required touch level
Then compare that to your expected profit. As a very rough rule of thumb, here are two guidelines you might find helpful:
LTV > CAC. For a viable SaaS or other form of recurring australia mobile database revenue model, LTV seems to be around 3x CAC. Most public companies like Salesforceom, ConstantContact, etc. have multiples more like 5x CAC.
The goal is to recover your CAC within 12 months, otherwise your business will require too much capital to grow. Banks and wireless phone companies ignore this rule, but they have access to plenty of capital.
In the early days of your business, you won’t be able to accurately predict your conversion rates, and the viability of your entire business may depend on it. So I recommend creating an execution plan that focuses on figuring out these numbers as soon as possible in the life of your business. Good numbers will allow you to raise funding easily, while bad numbers may indicate that this is not a viable business.