Tracking Acquisition Costs

W3 Studio > Education > Tracking Acquisition Costs

At this stage you have gotten your product to market and customers are paying for it. As you prepare to scale the user base, you need to ensure the unit economics are on the right side of zero. We are going to start this conversation by figuring out what it costs to acquire your customers. In my talks with founders, I tell them to track everything. You want to know as much as possible about how people find your product or service. You will want to breakdown the source of all your customers, as best you can, and then figure out the fully loaded cost of these channels. Let’s break it down.

The best way to get customers is usually organically. This might be word of mouth, where your existing customers tell their friends or post about your product on social media. This might be people finding your website on a Google search or from your social media accounts. If you are not paying anything for these things, then the cost of acquisition is truly zero for these customers. However, be careful to think about what you might be spending to help these organic customers find you. Are you running SEO campaigns? Who is managing your social accounts, and what resources or tools are they using? Are you doing email drip campaigns? All these things cost money, likely in the form of salary you are paying to employees to manage these programs. When thinking about the acquisition costs of these organic customers, attempt to think about the pro-rata salary allocation for employees driving this activity. If an unpaid founder is doing the work, it is still not “free” since that person could be doing something else with their time. What would it cost to hire a qualified candidate to do the work? These customers may not be as cheap as you think.

At this stage following Product Market Fit, it is likely you are doing some type of paid acquisition. This might be Facebook or Google paid ad campaigns. If so, then make sure you take advantage of the many tools that they make available to track your spending and calculate the cost of a new customer. You should be thinking of this as blended across all your paid ad campaigns, which means you can’t just count the good ones, they all count. Also include the cost of the person building the creative and managing the campaigns. You also might be doing some type of affiliate or referral programs where you pay an influencer or blogger for sending customers your way. These can be great since you usually don’t have to pay until a customer converts, but make sure you count all of the costs of managing these programs when thinking about the acquisition costs from this channel. Another popular early-stage strategy is public relations work. Getting your company featured in the press can lead to great traffic to your product or service but think about the cost of any third-party PR firms, and the time your team needs to put into being a guest on a show, podcast, or article in the acquisition cost from this channel.

When you pull together all these details, you should be on your way to calculating a true cost of acquisition number. You are going to want to track all of the info you can get from customers as early as possible. If you don’t have tracking or referrals codes in your sign-up process from day one, trust me it is really hard to go back and recreate the data. I lived this at a B2B FinTech lending startup I ran. You want to track everything you can think of about your customers at the earliest possible date, it is way better to have too much data than too little.

It is possible that you won’t exactly know how every customer found their way to your website or app. In those cases, you can do some survey work and make an educated guess based on the data you can track. Just don’t make a guess without doing the homework of checking with a representative sample of your unallocated customers.