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Often considered an essential element of understanding your businesses profitability – working out costumer lifetime value (LTV) can offer a benchmark when assigning ad spends and target customer acquisition cost in digital marketing campaigns. Before measuring your customer lifetime it’s important to understand exactly what LTV is. Put simply, customer lifetime value is a metric

How To Prepare Your Business For Series A?Series A is undertaken for developing a scalable and sustainable business. Startups undertake series A for the purpose of financing and capital raising. Usually, it is the second stage of financing for startups.To prepare for the series, the following steps must be considered for a good outcome:Step 1: Write up a business plan, considering the financial forecasts grounded in the performance to date. This plan must be double-checked by any other founder of a startup, any investor, or accountant for the reason of checking numbers.Step 2: Search for a suitable investor for your business. An investor identified must be keen to invest in your company or industry type, having the necessary funds to invest at your required level of business.Step 3: Paperwork must be completed, related to the registration of the company, corporate structure, IP-related legal documents, liabilities of the company, shared ownership, and related to regulatory compliance. All these documents must be prepared for the purpose of due diligence for the investor.Step 4: Reach out to the investor for the purpose of initial meetings. This must be accomplished by providing an executive summary of the business to the investor. One thing to keep in mind is that emails based on persistent follow-ups may work out, but if one asks for warm introductions it is much better. It’s even better if one has created an investor network by this point, as generic emails won’t make a better pitch line to investors.Step 5: Narrow down the list of investors one wants for negotiation purposes. At least two should have options that are open, as it will help with comparing terms later on in selecting a more suitable optionStep 6: Engage with a venture capital lawyer. It is an important step, as they have the expertise you need to draw up contracts, make agreements for business valuation, negotiating i investment terms and setting up term sheets between both parties involvedBottom line: In preparing for series A, it should be kept in mind that as it is about the first time of developing a scalable business, one must have solid preparation of showing evidence about their attitude of task-oriented behavior, as well as the facts and figures to help reflect growth potential for investment return. This will all help in influencing the investor in funding your business.

Lifetime value (LTV) is the total revenue that a customer spent on a business in its lifespan. It is also known as Customer Lifetime Value (CLV). The calculation of LTV is very important to estimate the economic condition and profit of a business. Lifetime Value is a key component to determine the market value of a company. As with each new customer, the revenue increases so it can give a clear view of the value of each customer. Customer Acquisition Cost (CAC) is the amount you invest to get a new customer. If your lifetime value is greater than CAC then it means that you are getting more revenue as compared to the cost that you are spending to get new customers. So, for the establishment of your business, Customer Acquisition Value (CAC) should be less than the Customer Lifetime Value (LTV).How to measure LTV?Customer Lifetime Value is not just limited to the relationship of a customer and company until the time of purchase, but it is the long-term relationship, determined by how much revenue was curated by one customer over a number of touchpoints. There are many ways to calculate LTV but it can be calculated through this simple formula given below.Lifetime Value (LTV)= ???????????????????????????????? ???????????????????????????? O???????????? A G???????????????? P???????????????????? ÷ Churn R???????????? Of A C???????????????????????? O???????????? A G???????????????? P????????????????????‘Customer revenue over a given period’ means how much revenue you get from a customer in a specific period, such as 15 days or one month etc. Whereas, churn rate is the percentage of customers who leave you after a specific period.Suppose that if your customer revenue is $4,000K and the churn rate is 100% then the total LTV can be calculated as:Lifetime Value (LTV) = 4,000K ÷ 100Lifetime Value (LTV) = £40KIn the monthly calculation of LTV, if the values of both revenues and churn rates are greater, there will be very little variation in LTV. If your LTV is less than the CAC, then you must think about where you should put effort to avoid a loss in business. You can easily grow your business to try and keep your LTV higher than your CAC.

Customer Acquisition Cost (CAC) is the cost of acquiring a customer to purchase products. It works along with the Customer Lifetime Value (CLV). CAC is an important term for growth businesses.If a company knows the cost of bringing a customer on, it can get a clear vision of its capital requirements in reaching a specific level of growth. It is the total spend on digital marketing and other direct costs which the company has deployed to attract customers.It is a simple measure which can tell us a lot about the performance and return of investment. Once you have some parameters between which the company oscillates on a regular basis, it is easy to interpret. If the CAC is increasing, then it means that you are getting worse results flowing from the marketing efforts. It may be that a specific campaign does not resonate with the target audience or maybe it is becoming increasingly competitive to position the company through specific digital channels. It may be time to consider alternative channels, maybe a different messaging campaign.What if the CAC is decreasing?It might be a temporary advantage, a great campaign or a message that really draws the customer to your website, to your product.In time such efficiencies tend to disappear, due to competitive pressures and of new similar products in the marketplace.How to measure your CAC?If you want to measure the actual cost of customer acquisition then you must know about its formula. The formula of the customer acquisition cost is as follows:Customer Acquisition Cost = ???????????????? ???????? ???????????????????? + ???????????????? ???????? ????????????????????????????????????÷ ???????????? ???????????????????????????????? ????????????????????????????????CAC is the sum of the cost of sales and marketing per new customer acquired.What elements are considered or should be considered in CAC? Here is a list of potential elements which you may want to consider:· The total cost that you are spending on digital marketing· Total salaries that you are paying to your employees directly involved in sales and marketing activities, usually only those who have acquisition quotas· The total cost that you are spending on creating content· Publishing cost that you spent to publish your ads on TV, newspaper (above the line marketing)· The cost spent for the maintenance and software updating if used anyExampleHere is an example is given through which you can easily understand the concept of measuring Customer Acquisition Costs.If you are running a clothing brand and the total cost of sale is £400,000 and the cost of marketing is £300,000, across multiple social media channels. In the same period you gained 1000 additional customers then the total CAC can be calculated as:Customer Acquisition Cost = ???????????????? ???????? ???????????????????? + ???????????????? ???????? ???????????????????????????????????? ???????????? ???????????????????????????????? ÷ New Customers ????????????????????????????????Customer Acquisition Cost= £400,000 +£300,000 ÷ 1000Customer Acquisition Cost = £700Why Measure your CAC?By measuring CAC, you can easily understand any trends or pattens in your business you may want to profit from or protect against. Measuring dynamically, month on month is essential, always recalibrating with new types of expenses or systems you are using to reach your customer.There is an optimal level where you are able to predict and finance growth. It takes many optimisation exercises and practice to assess the best point to be more aggressive in the market and not waste your capital.