Thread by @barrettjoneill

How to build a profit machine:

Drive down customer acquisition cost before scaling.

5 tactics for lower CAC:

Aggressive by nature, founders often look to scale quickly after product traction.

But that's only half the equation.

New customers need to be profitable within the product or service delivery model.

Here's why it's important: ⬇️ ⬇️ ⬇️

If CAC is too high, each new customer extends losses rather than growing profits.

Without sufficient cash, accelerating losses aren't sustainable.

To make things worse, adding more customers creates more admin costs.

A money-losing flywheel that starts at acquisition.

Avoid this fate by creating strong, scale-ready customer economics:

⬇️ ⬇️ ⬇️

1. SEO

Organic web traffic converts on average 10X more than paid traffic channels.

While paid media brings traffic faster, SEO compounds over time, building a moat around high-converting visitors.

As time passes, input costs should stay flat, increasing ROI.

As a bonus, growing consumer faith in search engine rankings builds trust, similar to a referral.

SEO is the equity of the internet -- start building it now.

If you're looking to get started with SEO, check out this 🧵

https://twitter.com/barrettjoneill/status/1492859965165371394

2. AUDIENCE/ PERSONAL BRAND

In the past, people were associated with the companies/brands they worked for.

Now it's the opposite - by freely sharing value & insights, founders build their personal brands and can amass large audiences.

This shift has a huge impact on CAC.

An engaged audience can be translated into revenue.

With the trust built by adding free value to your audience, prospects come ready to buy.

Build an audience infrastructure & enjoy inbound leads for life -- the ultimate leverage for scaling profits.

3. EMAIL/SMS

With increased traffic, we can capture more data -- i.e. email and phone numbers.

Craft highly personalized messages that are guaranteed to reach the target.

Through consistent (but not overbearing) contact, prospects become warmed and ready to buy.

Work to get customer information once, and add value until they're ready.

The best part?

Both channels have high open rates & are inexpensive to operate.

I'm bullish on SMS due to preference for texting in younger generations.

4. CUSTOMER RETENTION:

Repeat customers have the lowest acquisition cost of any.

Already fans of the product, there's virtually no expense in closing.

How can you improve retention?

Brands like Gym Shark & Sephora encourage repeat purchases through community building.

Join their online communities for access to exclusive events, discounts, and early access to products.

Members communicate to share their experiences and get tips, building loyalty.

It's early for communities, but some of the best minds believe this is the future of brand loyalty.

I agree.

Passionate fans at your fingertips?

That's a recipe for profit building at scale.

5. REFERRALS

Incentivize customers to spread the good word about your products.

Referral prospects close up to 70% of the time, much higher than cold prospects.

Less selling effort = lower CAC.

Encourage referrals by giving discounts, doing something memorable to get people talking, or simply asking.

Derek Sivers of CD Baby nailed it with this order confirmation email... that resulted in thousands of sales.

Creativity pays dividends.

To build a scaled profit machine, the focus must be on acquiring customers who are adding to the bottom line.

Otherwise, new customers are a feel-good metric that can ultimately lead to your demise.

If you found this helpful...

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