A lot of entrepreneurs think they can ramp up on marketing to accelerate growth and just see how it goes. They make the mistaken assumption that they can always switch off and go back to the nice organically drive growth they were enjoying before. That’s a mistake. The below example illustrates it in simple math. (and I speak from experience here as we witnessed this at my company PeoplePerHour)
Let’s assume you have a business that’s generating nice continued linear organic growth (defined here as new customers you acquire from word of mouth and referral).
Then one day you start spending – either you raised money or from retained profits. You do your math and you see that Customer Lifetime Value (LTV) is way in excess of your Cost of Acquisition, so you are acquiring profitably. You get excited and start spending more each month.continue reading »