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What's going everyone? If you've ever struggled to figure out all the different numbers in marketing and figure out what's important

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What's not important? What's good? What's bad?

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And you just can't get your stuff to convert or you can't make you can't make sense of all this stuff

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Then this video is for you

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Welcome to the game where we talk about how to get more customers how to make more

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Procustomer how to keep them longer and the many failures and lessons we have learned along the way

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I hope you enjoy and subscribe

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So when I got into marketing there were so many different numbers KPIs CPL CPC like CTRs

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I was like I was I had no idea my head was spinning I was trying to figure it out

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And over time it's kind of like you start to distill down what are the big buckets of things that matter

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And then once you discovered those three are then you can open up the drawer and look for more details and whatnot

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And so what I want to do is outline the three numbers that I'm looking at at a high level in any business that I'm looking to invest in

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Or I'm looking to partner with or whatever all right, and I'll show you the relationship between them that I am looking for and hopefully that will help you

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For your own business so the first number is what my cost of acquisition is which I call a cack all right

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It's not I call it. That's what people call it right cost of acquisition or cack right so how much does it cost me to acquire customer now

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This number should include everything so that means your sales commission that means your ad spend it means the marketing team that created the increase

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Whatever your software that's associated with it. It's all of the costs of acquisition put together. That is cack all right number two

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Is LTV now I define this a little bit differently

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Because I think it's important so LTV is not the total revenue that I'm going to get over the life spend of a customer

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But for me it's the total gross profit that I'm going to get over the life spend of a customer

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So let me give you a simple example

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So if I were selling meals for example or selling food and my cost of

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Delivering food let's say was

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Nine bucks all right and I know that someone's going to order $700 a month of food and it cost me $9 and I'm selling it for 10

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All right, that means only of a 10% margin on gross profit right gross profit on the meal sold and so $700

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Of food over the life span of a customer might sound like a huge LTV

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But the reality is it's actually only 70 which is what I'm going to make on that customer

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Right, and so the reason I use gross profit is that if I were doing marketing for food for example and

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You know my marketing was like hey man. We're spending $200 to acquire customer who's gonna pay $700

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I would be like that's horrible because we only make $70 on the 700 which means that we're spending 200 to make 70

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Right, and that's why it's so important to understand the gross margin of your business, right?

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Because this is where all of your decisions should be based off of all right, it's on that margin the third number

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Is what I call 30 day cash all right now in the formal business world the fancy world they call this they they use a different

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metric they call it payback period, which is how long does it take you to pay back your cost of acquisition right because

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inherently whenever you're getting a customer

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There's usually a cost that's put into it and that cost might there's always a cost you're either paying in time

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or you're paying in money or you're paying in someone else's time

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Which is then pay while I was but there's always a cost right there's a cost of acquiring customer and then you have

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The payback period I use 30 day cash for this reason I

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Think that virtually every business can gain access to a credit line, which means a credit card or an MX or even a bank can

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loan you whatever

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Where over 30 days they can they can use that money and then pay it back

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Virtually interest free credit cards are all interest free for the first 30 days all right or at least all the ones I'm aware of right

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And so what that means is that if I can if I can know what my 30 day cash value is and if I can get that to be at least

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Equal to my hack then it means that I can use other people's money

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To acquire customers and this is why we've had such big growth in the companies that I've had is that I don't actually need to use my own money to acquire customers

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I can use someone else's money acquire them get the money in the first 30 days to pay back the debt

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And now I'm left over with customers and ideally customers and profit that I can still continually upsell into continuity

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If you can understand the words that I'm saying right now you'll understand how big of a deal this is all right

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So what are the relationships that I'm looking for

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so for me

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For LTV like if I'm looking at it because there's there's different relationships that I need to draw here and what I'm looking about how the marketing is working

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all right, so my LTV

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To cack ratio

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I want to always have greater

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Greater than three to one all right three to one is the number that I'm looking for which means that I need to be able to generate

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more than three times

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The cost of acquisition in gross profit

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We'll click wise you guys already know that I don't run any ads on this and I don't sell anything

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And so the only ask that I can ever have are you guys that you help me spread the words we cannot more entrepreneurs

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Make more money feed their families make better products and have better

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Experiences for their employees and customers and the only way we do that is if you can rate and review and share this podcast

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So the single thing that I have to do is you can just leave review but take 10 seconds or one type of the thumb

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It means the absolute world to me and more importantly it may change the world for someone else

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All right, so that means let's say my gross profit. I'll give it a number another number

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Let's say that my gross profit on a service that I sell

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Uh is is 80% all right. We use that as a number and

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So it's 80% is my gross profit and I have a thousand dollar

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Lifetime all right. That's how much they're going to spend with me over the lifetime which means

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800 dollars is what I am going to use as my number now if 800 dollars is what I make then I have to three to one be able to acquire customers

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For less than two hundred and seventy or two hundred and sixty five sixty six dollars, right

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So my cost of acquisition has to be less than

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two hundred and sixty six dollars. All right. That's the total thing now. That's the first

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uh

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relationship that I'm going to look at

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The next relationship that I'm going to look at

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Is the 30-day cash

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Requirement compared to my cac and so for me if I have a one-to-one relationship between

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My 30-day cash

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and

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My cac

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Then that means that I am breaking even

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On getting customers all right and I'm breaking even within a window that I can use other people's money to finance the acquisition

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And that's where this gets super cool. All right, and so using the example that we just had

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If 260 dollars is what it it has to be under right for me to get three to one

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Then let's say that if I can just get my ah if I can get my 30-day cash to be greater than

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260

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Then it means that in the first 30 days

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I'm breaking even in my acquisition for free and then I'm still going to collect the other

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five hundred and whatever dollars

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That's remaining from this process and so those are the two biggest relationships that I'm looking at

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What's my LTV to cac ratio and what's my 30-day cash to cac ratio?

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All right, I want this to be greater than three times what it cost me to acquire a customer

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And that is how I know I'll have sufficient profit to grow the business

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I want my 30-day cash in my cac to be at least greater than one so that I know that I can use other people's money

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OPM

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To acquire customers all right, this is what it looks like visually

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So

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Person comes in the business. Let's say I pay

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Let's say I pay two hundred dollars

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In cac all right

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So I'm now negative two hundred dollars

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This person now comes into my business

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Did to do you know they've got their their little money

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They come into my business

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They decide to give me money

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right

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Now at this point this could be you know day one

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And this could be day

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Seven whatever because it depends how long it takes them to give me money right and so maybe the first time

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They give me money. They only give me 50 bucks right. I'm still negative

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But by day

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30 let's say I have another upsell or two and at this point now I've made two hundred dollars

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On this customer

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With this means is that now

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I've covered my cost of acquisition

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And then at the end of this point

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I'm going to continue to sell them or they'll continue to buy let's say it's on recurring

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Day 60 day 90 day 120 etc

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And I was able to break even to then get all of this money that happens on the back end for free

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That is the power of this concept

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And so to summarize this the three numbers that you need to always know when your marketing is going to be your cack

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So you're LTV

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Important point is that it's the gross profit not the total revenue and the 30 day cash

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That you can make per customer

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And you need to break even on 30 day cash to cack and you want this to be at least three times greater

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Then your cost of acquisition for you to have a viable business and that is the game

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Um

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That I try to play. So anyways, I hope that was valuable for you

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I hope when you're looking at your business monitor looking at your marketing and you have these metrics

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You can make decisions empirically quantitatively and the nice thing is if something's below these metrics

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Then you just know that you have to fix it. Is there an upsell or is there is there some sort of liquidation thing

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Can we give them some sort of special offer in their first week or two?

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Can we sell them and sell their products and we have an affiliate relation can we refer stuff out in order to increase this 30 day cash number

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The reason this is important is if I can make this really really big

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Then it means I can spend more to acquire on customers

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Which means I can even open up further my acquisition net

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And still make more money and obviously the amount that you add your 30 to cash is still going to add into your total lifetime value of the customer

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So hope that was a while before you hope this makes sense for your business

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This is how I think through these things and I hope

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Hope you do too. So anyways, have an amazing day. Enjoy and I'll see you next video

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You