7. Section B. The Expensive Customer Problem | $100M Lost Chapters Audiobook

Section B: The Expensive Customer Problem. If you can spend more than your competition to get a customer, you will get more customers than them. Lost chapter author note: The next chapters were in the final draft of $100 Million Money Models, and I cut them last minute because I thought they were too conceptual. I wanted the book to focus purely on tactics, but otherwise I love these chapters. They'll help you understand the core problem most businesses face in acquiring customers and the math to describe the problem. Pay extra attention to this section. You may have to go over it more than once. That's okay. Learning isn't about who reads the fastest or who takes the best notes. It's about who does the stuff. Big money comes from this small section. Keep coming back here until you can do the stuff. It will pay off, I promise. Customer finance to acquisition. Customers cost money. If you make that money back faster, you can get customers faster. The faster you make double that amount, the faster you can turn 1 customer into 2 more, 2 into 4, 4 into 8, and so on. If customers pay you fast enough, you can eliminate cash as a bottleneck to grow. A dollar today is worth more than a dollar tomorrow, and getting customers to spend more money faster is crucial for scaling any bootstrap business. The only reasonable alternatives are loans and investors. These are great moves when you do them right at the right time, but doing it too early will probably bite you in the butt later. For that reason, I prefer client finance acquisition. In other words, I like to be profitable day one and stay profitable on my own forever. That way, if I take out loans or get investors, I do it on my terms. Here's how I do it. Customer-financed acquisition, or CFA, is when 30 days of GP, gross profit, from a customer is greater than CAC, the cost of acquiring the customer. In plain English, it solves your cash flow problems. I express CFA like this: 30-day gross profit is greater than CAC. It costs money to get customers. You want to make the money you spent to get the customer back as profit in the first 30 days. That way you can use that money again to get another customer. Recycling money is awesome. 30-day gross profit is greater than 2 times CAC. But what if we could do one better? What if every customer injects enough cash in the first 30 days to pay for 2 new customers? And 2x is my quote, real life minimum standard. In practice, I want customers to more than just pay for themselves. I want a 2x or more. If you can do it that way, you only have to buy your first customer. Then that customer pays for every other customer and you can grow the business as fast as it can handle. That's the game of CFA, and that's what I'm going to show you how to do for yourself. You pull 3 levers to make CFA work.