7 Essential business terms to know if you're serious about scaling:
1. Customer Acquisition Cost (CAC)
How much it costs to get a new customer.
Total $ spent / new clients = CAC
How much it costs to get a new customer.
Total $ spent / new clients = CAC
2. Cost Of Goods Sold (COGS)
How much it costs to fulfill once a product/service is sold.
This is especially important and more complex to calculate for service providers.
How much it costs to fulfill once a product/service is sold.
This is especially important and more complex to calculate for service providers.
3. Gross Profit
Total profit after deducting the CAC and COGS from your revenue.
Revenue - CAC - COGS = Gross Profit
Total profit after deducting the CAC and COGS from your revenue.
Revenue - CAC - COGS = Gross Profit
4. Payback Period
How long it takes to achieve Gross Profit in excess of your CAC.
How long it takes to achieve Gross Profit in excess of your CAC.
5. 30 Days Cash
How much money you can earn from a new customer in 30 days.
How much money you can earn from a new customer in 30 days.
6. Lifetime Value (LTV)
How much each customer is worth on average.
Total $ of sales / total # of customers = LTV
How much each customer is worth on average.
Total $ of sales / total # of customers = LTV
7. Churn Rate
The % of clients you lose every month.
(Starting # of clients - ending # of clients) / starting # of clients = Churn Rate
The % of clients you lose every month.
(Starting # of clients - ending # of clients) / starting # of clients = Churn Rate
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