It doesn’t matter if it’s widgets

In many cases determining a business opportunity can be quite easy.

What is the cost of customer acquisition (and what is the effect on scaling going to do to that cost)? What is the lifetime value of a customer (this would be the total revenue projected from that customer, minus the expenses used in generating that revenue with corrections for the future value of money).

If the lifetime value of a customer is significantly higher than the cost of business acquisition (and you can cash flow enough in the short term to cover costs) than continuing to fund more customer acquisition is an easy decision. If the lifetime value of a customer is lower than the cost of customer acquisition than the decision to not continue funding more customer acquisitions until you can change the numbers is an easy one.

The key to this is that the decision can be made regardless of the industry. This can be a software developer, a person selling real estate or a maker of widgets. Knowing the numbers can make the decision making much easier. If you don’t know the numbers you are at risk of growing your business into bankruptcy or losing great opportunities.

Have a great day!

Lawrence

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