Customer Acquisition Cost (CAC): Cost to acquire a new customer, including marketing and sales expenses.

Lifetime Value (LTV): Total expected revenue from a customer over their expected relationship with the company.

LTV/CAC Ratio: Lifetime Value divided by Customer Acquisition Cost.

CAC Payback: Customer Acquisition Cost divided by monthly gross margin per customer.

Average Revenue Per User (ARPU): Average revenue from each customer, calculated monthly or annually.

Payback Period: Time for a customer to generate revenue covering the CAC.

Churn Rate: Percentage of customers ending subscriptions in a period

CAC Payback tells how quickly a company recovers the cost it incurs to acquire a new customer.

LTV/CAC tells the long-term value a customer brings to the company compared to the cost of acquiring them.

In earlier-stage businesses, it may be difficult to estimate LTV therefore CAC Payback is a more relevant metric

CAC Payback and LTV/CAC offer similar insights when monthly gross margin and customer revenue remain steady from the very beginning. However, in situations with prolonged customer onboarding or revenue increases tied to product adoption, the insights derived from these metrics will vary.

For meaningful insights and informed decision-making, break down metrics by customer segment/region/type

By Customer Segment: SMB (Small and Medium Businesses) vs. ENT (Enterprise) accounts

By Channel: Inbound, outbound, and partnership channels

By Geography: Different regions or countries

Identify Efficient revenue segments: Healthy segment-specific LTV/CAC (3:1 is good, 5:1 is great), suggests your customer acquisition channels are effective. Allocate more capital to accelerate growth.

Reassess Underperforming Channels: Low LTV/CAC ratio indicates channel is not sustainable in the long run. Consider either reducing investment or focusing on turning around the channel

Full Allocation: Ensure that each customer is fully allocated to a single segment, channel, or region

Use Assumptions Where Necessary: For CAC, use assumptions, particularly when direct allocation is challenging (e.g., share of time Account Partners spend on each channel.

Business-Specific Nature: Understand that these breakdowns are highly specific to each business and should be tailored to reflect your unique operations and market dynamics.

Understand customer segments and value that your product delivers to each segment

Think Value-Based Pricing, not cost-based

Establish a clear tiered pricing Strategy

Structure bundles if any

Embed CPI in your contracts

Set up approval process to avoid pricing leakages

Understand customer segments and types of buyers

Extreme clarity on specific pain points that your product(s) solve(s) for each segment and type of buyer

Sharp value messaging (often including business case) for each segment and type of buyer

Key metrics: Unit economics (CAC payback, LTV/CAC), Monthly Recurring revenues, Churn

Sales funnel efficiency: conversion rate, win/loss ratio, ramp-up time, deal cycle, deal size

Ongoing metrics to track the efficiency of each revenue generation team (Sales Teams, Inbound Marketing, and Customer Success) need to be aligned with their incentive structure and company strategy. Examples: for SDR performance track tactical metrics (# demos, #calls) and outcome metrics (% deals won), for AE performance - pipeline created, % deals won, for CSMs - churn and upsell

Bottom-up planning with account partners flagging deals one by one

Historical growth and conversion are less relevant. The current pipeline is a much better predictor.

If the pipeline is not strong enough, identify the root causes and address those (e.g., product-market fit needs to evolve, go-to-market motion isn't working, value messaging has to improve).

Attrition/churn can be forecasted top-down and is not necessarily an operational metric

Quarterly process (can occasionally be less frequent)

A much more frequent process than for low-frequency sales process (could even be weekly), historical trends are a better predictor of the future, elevated role of line sales leaders in adjusting top-down predictions

Set up a clear tiering to prioritize leads and monitor lead movement between tiers

Tiering criteria to include potential lead value and their likelihood to convert

Likelihood to convert can be based on just a few criteria or defined through a more complex scoring process - the best approach depends on the market size and compexity

To get a quick proxy to the likelihood to convert, define an ideal customer profile that is a great fit with your product

Monitor lead movement between tiers by factoring in additional info as you get more insights from the sales team

Allocate top leads to your best people

Inbound lead generation is largely a marketing activity (except referrals) and includes SEO, content marketing, social media, online ads, website efficiency and many more

Many inbound lead generation initiatives are longer-term (e.g., SEO takes time) and require niche expertise

As for the referral programs, while they are more common in B2C, it is another channel to consider - program effectiveness requires structure

Continuous tracking of unit economics for this channel is critical

A well-structured partnership program can deliver substantial value in some contexts, e.g., when it unlocks new geographies, or you can tap into a partner's customer base

Hire a person who has done this before. It requires a great deal of expertise and a clear structure.

Ensure you track performance and watch out for 'big deals' and promises.

For SMB segment, initial outreach is done by SDR team

Multiple touch points with an SDR are normal. It is critical to standardize this process and have a hands-on SDR leader who continuously trains, upskills and monitors team efficiency

High-level ops considerations: in-person team, daily or real-time progress tracking, continuous evaluation and upskilling, standard processes

KPIs immediately impact behaviors. Tracking just activity will generate more activity and not necessarily better outcomes. KPIs should be a mix of activity and outcomes (e.g, number of demos generated and/or deals closed)

SDRs hand over leads to account partners/executives that will drive the lead through the sales cycle

Each large enterprise customer matters not only because of the potential income it can bring, but also because it can become a great logo and a reference customer

Decision makers in these organizations are likely already receiving a lot of attention from your competitors now hence sharp value messages and extra effort to unlock access to them will pay back

For consultative/strategic sales, it is critical to establish a scalable standard process to drive senior engagement at scale and initiate product(s) sales cycle

Tactics for an effective outreach process include: creating a standardized decision makers & influencers map for major leads, holding dedicated discussions to determine the best approach and value messaging for these decision makers, sending outreach emails from senior leaders' inbox, exploring introductions, attending industry events while armed with a clear list of targets and objectives

The lead nurturing process can make or break it

Just having a strong account executive team is not enough. An in-depth understanding of target buyer priorities, clear go-to-market motion, and having the right experts in the room to drive sales conversation are critical.

There are various standard tactics for lead nurturing (e.g., sharing relevant articles, and webinars), but nothing surpasses effective reference sales.

Creating an environment for effective reference sales by building local communities can be particularly impactful in unlocking cold leads, a method often overlooked but crucial. This should be led by senior sales executives

The concept of lead nurturing is very simple, but the quality and win rate will vary dramatically depending on the salesperson capability.

Key factors to scale operating model are top-down product value messaging (and/or setting up a strategy team to personalize value messaging), dedicated and experienced resources for strategic/complex demos, deal teams, structured deal strategy discussions

Coming soon

Define team structure (see below), target compensation levels, and base vs variable for each level

Define which business outcomes you want to drive, e.g., sale of a specific product

Keep in mind that a high variable share will drive more aggressive sales behaviors. While it works in many contexts, in some industries such behavior may hurt company brand and reputation.

Define time horizon, e.g., weekly vs monthly, vs quarterly - will depend on your sales cycle

Keep it simple

SDRs: Initial reach out and lead qualification. SMB segment, low average deal size

Remote/Inside sales: Relevant for customers that are responsive to digital sales tactics. SMB segment, relatively simple sales process

Field teams: High-value deals with personalized high-touch sales process

Account Partners: Strategic engagement to drive upsell for large high-priority accounts. Large deal size.

Customer Success: while typically a separate organization, they could have a revenue target (in addition to churn prevention) and drive upsell

Product team builds products that solve high-priority customers' pain points to make their lives better and unlock sales to large leads (i.e., not just cool exciting features)

CSMs' role is to help customers get the most out of technology specifically to drive product adoption, cross-sell, and upsell (i.e., not just making customers happy)

Marketing creates content for better funnel conversion, website conversion, customer engagement, and more effective reference sales (i.e., not beautiful designs)

Strategy teams for large accounts articulate value messaging and partner with sales teams to deliver on strategic engagement and drive recurrent revenues (i.e, no creative slides)