Growth Through Paid Acquisition

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At this point you have hopefully reached the point where you have happy customers and have achieved that blissful state where your unit profitability is on the right side of zero. Congratulations! It is finally time to apply fuel to the fire and grow your business. You will need to figure out where you are going to get the cash you need to rapidly acquire new customers. Venture capital is an option, but it is certainly not the only option. Once you have the money, you will need to decipher the best acquisition channels for your business. Experimenting and thinking outside the box might be necessary to find the right options for you. Let’s get to it.

Different businesses and pricing models will have different payback periods for new customers. Some businesses, mainly in D2C retail and subscription, get paid back quickly for each new customer acquired, either through a large first sale or a prepaid annual subscription. Other businesses will take much longer, especially marketplace companies that share a large portion of each customer dollar with a supply partner. You will need to understand the cash-on-cash return for money spent to acquire a customer. For longer term payback periods, you will likely need to bring in cash as equity through venture capital or a similar type of investor. If you are lucky enough to have shorter term horizons, you can consider venture debt or other types of borrowings. You may even be in the envious position of being able to fund your growth through profits on sales, this does happen in some of the fastest growth unicorn startups.

Your job as a founder is to be able to effectively community to potential funding partners that you understand these unit economics and that you will be able to grow with new cash. This responsibility exists whether you utilize equity, debt, or customer cash. Make sure you deeply understand your numbers, track everything, and be on the lookout for what might change in the future. When your business is small, you will be able to hyper target potential customers and might find someone that is ready to buy immediately. As you grow, you will likely be less targeted and could see the cost per new customer rise. Similarly, the early, more targeted, customers might buy more from your business or stay as customers longer. You might see these numbers get worse as fewer perfect customers sign up. Be on guard for this, and make sure that you continuously monitor the elements of unit profitability so you can respond accordingly.

Once you have the cash in the bank, you will need to explore the best methods of paid customer acquisition. While the obvious channels of Facebook and Google ads can make sense, you will want to explore a wide range of options. If you like digital ads, you can try TikTok, Snap, Pinterest, LinkedIn, and tons of other platforms. Check out affiliate or influencer marketing, try some podcast or newsletter ads, maybe even something old school like print ads or event marketing. Take a look at what other companies in related sectors are doing and see if you can learn any new approaches. Too many of the startups I talk to focus only on Facebook and Google ads, but it is hard to get good conversion rates and pricing unless you have substantial money to iterate on the targeting audience and creative. Find what is right for your business and press hard on the channels that work for you.