| > You might think "just crank up the growth until you hit $10k/month". Something weird happens ... you ended up losing money with high growth. Ratio of new customers showing losses vs old customers showing profits. Your ratio of new to old customers basically IS your growth rate. As that ratio increases, you could show "losses". But financially, it's more like investment than losses. You probably should, in fact, crank up the growth in this situation. Think of it as an investment and calculate your rate of return. Edit 1: I threw together a quick spreadsheet to illustrate the point (shows cash flows per customer): https://docs.google.com/spreadsheets/d/19mbsjcwlyLs_KsvPrjdt... Edit 2: On second thought, rate of return is the wrong measure because time value of money is not significant. What you care about is Customer Acquisition Cost and Customer Lifetime Value. Edit 3: FYI I'm a developer now, but was actuarial, and Excel whiz w/degrees in finance & accounting. I'm always happy to give anyone a little bit of free help with things like this. |
I had a hunch that it was something like that. "loss" isn't really the right word, but I'm focusing on cash flow for the next year. You're right though - it's an investment, but I'd like to figure out the math so I can learn how much cash I need upfront to fuel a specific % of growth.
Checkout your spreadsheet now. don't quite understand it yet, but I'll follow-up with you on twitter (saw your tweets)