What makes a business model work at scale?

Principle of growth:

A business model works at scale when the cost to acquire a new customer is less or equal to the customer’s order value and less than the customer’s lifetime value.

2 ways to look at designing profitable growth:

1 – Focus on “order value” first and then “lifetime value”

• Order value forces you to look at your customer’s first engagement with you, typically a front-end offering.

• With a front end offer you can create opportunities to help customers at a higher level with backend offerings, increasing LTV

• This gives you flexibility in an environment of rising costs to acquire customers.

2 – Focus only on LTV (typically if your business only has 1 offering)

• You’ll have always to maintain low costs to acquire customers

• Your fulfillment will have to create ways to increase and extend LTV to maximize customer value and your CAC to LTV ration

• To maintain scale, your main goal will be to create consistent sales (high volume)

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