Red Rocket Ventures Blog (Growth Consulting, Small Business Experts)

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For whatever you entrepreneurs aiming to attract investment finance, this post shall be the most important one you read. If you cannot answer the following customer acquisition related questions for your target investors, your fund raising process has ended, before it started even. Below will walk you through the inputs required to calculate the most crucial marketing metric for investors: your return on marketing investment (“ROMI”).

Your average purchase size will significantly vary based on your product and target consumer. 250,000 average order size. For purposes of the post, I am going to focus on the consumer facing businesses. Average order size is determined by firmly taking your total profits in the time, and dividing it by the number of transactions in the period.

It is hard enough to acquire new customers, so it is important you do not lose your old customers. You always have to be determining what percent of your current year transactions came from prior 12 months customers (and enhancing that metric as time passes). yr five 25. 100 for just one order in five years. Your cost of customer acquisition (often abbreviated CAC), is the total marketing investment necessary to generate one customer. 100,000 to create 5,000 clients in this example.

  • 50% last for 3 weeks
  • Spreading the term
  • Acceptability – May be the use of the tools suitable to your client(s)
  • Is just checking off points on the list
  • You need to rest or rest to meet the demands of your work while journeying
  • Tools and Calculators

20 per new customer obtained. And, now, what you have all been looking forward to, the key metric that counts most to traders: your ROMI. 20 CAC, in this example. So, your ROMI is nearly 10x in cases like this research. If you’re doing 10x that is pretty terrific. Most average companies are doing around 5x. And, companies that can’t surpass 3x typically lose cash, after subtracting their cost of sales and operating expenditures. If you wish to edit this calculation, don’t use revenues, use gross profit as your numerator and aim for a 5x return, understanding most companies will be around 2.5x with a 50% gross margin.

Don’t forgot, as I’ve said often in the past, your proof of idea is more important than your product when speaking with investors. And, having a solid ROMI is one of the key metrics they are going to be concentrating on, in identifying if you have exceeded your proof-of-concept threshold. This can make or break your fundraising efforts, so don’t reach out to investors until you have discovered, tested and optimized scalable marketing techniques which can be accelerated with the use of arises from your raise. Investors prefer to put gasoline on an established fire; they don’t like to start the open fire.

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