Love is in the air and I bring you math, and events. I’m sorry (not really)

Hey! Andres here,

Welcome to the networking desk!

You heard that right. This week I will be diving into some numbers that I’ve been personally playing around with and has given me a better understanding of business.

Here’s what we got this week:

• 2 Important Business numbers to know

• Events from the community

Alright, let’s do this.

“Lean forward moment” of the week - 🧮 2 important numbers to LOVE 💕

If I came to you and said: “hey for each $1 you give me I will give you $10 back tomorrow guaranteed”. How much money would you give me?

Ok, assuming that I would not run away to a tropical beach somewhere in the Caribbean…

You will probably give me a ton of money.

Now, a lot of business owners, and non-profits have a similar situation to this and not realize it because they avoid this ugly word:

MATH ✨

Well, I need you to trust me on this one. These 2 numbers are going to let you see the game differently.

First we need to understand CAC - or the cost to acquire a customer. I talked about this on a previous newsletter but didn’t pair it up with the second number (as it takes time to really understand the value of these numbers)

The formula is simple:

CAC = Total Marketing + Sales Cost / Number of New Customers Acquired

Your CAC will tell you exactly how much money you spend to get a new customer. This number itself can help you determine how much you could pay affiliates if they get you customers, referral bonuses, or simply identify and work towards lowering it.

Now, let’s talk about LTV. The Lifetime Value of a customer is how much you get on average per each customer/donor you acquire. Formula:

LTV= Price / churn rate

Churn is the rate at which customers stop subscribing to a service. To get this number simply grab a period of time, let’s say 6 months, count how many people left and how many people are still using paying customers, then divide people who left by the total amount of clients.

Alright. So what do we do now that we have both numbers? Well we do the following:

LTV:CAC = CAC/LTV

Then the number we get is how many dollars we make for every dollar spent.

For example, if you got 8 that means that for every 1 dollar you spend you get 8 back. your LTV to CAC ratio is 8 : 1 (the right is always 1 unless acquiring the customer costs nothing) the bigger your number, the more optimized the machine and the better your systems are.

This is the language of business and after a WHILE it is starting to make more sense.

Also, you may have noticed, I also mention some non-profit terms in there, this is because it applies to everyone, both business and non-profits.

Think of this way even as a non-profit you have a cost to get discovered or stay top of mind, you have marketing spend, events, galas, and more.

LTV is figuring out how much a donor brings in on average.

Final thoughts:

You have to be doing one of 2 things with every business/organization activity:

1. Getting customers cheaper (lower CAC) / Acquiring more donors cheaper

2. Making customers worth more / finding ways to entice bigger donations

If not, it is likely a waste of time.

And you are likely procrastinating doing something you like but doesn’t grow the business. HEY like me writing this! I should get back to work…

OK BYE.

🖥️ Convert more website users into clients

🗓️ Now, the events…

⭐️ = Week favorites

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Thank you for reading! Quick thing before I go:

1. If you are new or would like to read older posts, check out this page. There is a backlog of previous weeks of “The Networking Desk”

2. Know someone who would benefit from this newsletter? Be sure to share it with them! 📩 (just copy the link or forward this email) I will keep putting out great newsletters for them and for you. That’s a promise.

See you next week.

- Andres Inciarte