Holy grail of every startup: balanced business-model
Alexander Sergeevwrote this on Апр 16, 2015
In a previous article I’ve written about how it’s important to make product market fit. Most of startups perish because of missing users’ needs, i.e. they don’t make product market fit. It’s not enough to make a quality product with a cool team on the existing market. It’s necessary that a product solves real problems of the users.
David Skok goes further in his global and super useful article and states that many startups die even after they make product market fit. The most widespread reason for it is after successful product market fit - a startup couldn’t find its cheap acquisition channel.
David introduces a 4th startup element: a team, a product, a market and business model viability.
A balanced business-model is a model where LTV > 3*CAC. LTV is lifetime customer value and CAC is cost to acquire customers.
Ada Chen Rekhi, a sister of a famous growth hacker Andrew Chen, has described a mathematical model of a balanced business-model.
David describes how to balance a business-model of your startup in a systematic and detailed way:
- by decreasing the cost of acquiring customers.
- by increasing income from users.
To my mind, building a balanced business-model is the most essential challenge for any startup. After successful product market fit, surely.
Read David’s article in order to learn how to balance your business-model.
May each and every startup has LTV many times more than CAC! Let it be LTV > 10*CAC!
