Tubegraph

Marketing and customer acquisition strategies

7 min read

From: alexhormozi

Understanding and implementing effective marketing and customer acquisition strategies is crucial for business growth and increasing enterprise value [00:01:56]. A key objective for any business seeking to become an asset is to increase the number of customers and their lifetime gross profit, while simultaneously decreasing overall business risk [00:01:56].

Key Principles of Customer Acquisition

To build a “masterpiece business,” it’s essential to address imperfections like lacking a diverse customer base or multiple reliable acquisition channels [00:00:08]. The Value Acceleration Method developed by Acquisition.com focuses on increasing value through three main variables:

  1. Increasing the number of customers [00:02:02]
  2. Increasing Lifetime Gross Profit per customer [00:02:09]
  3. Decreasing risk (how likely the business will continue in the future) [00:02:30]

Marketing Without the Founder

A significant imperfection for many businesses is the founder’s central role in marketing [00:13:00]. If the founder is in every ad or making all content, it’s considered a job, not a sellable asset [00:13:08]. An investor wants to know that customer acquisition will continue even if the founder leaves [00:13:27].

Strategies to transition marketing away from the founder:

  • Gradual Handover
    • Begin by filming ads or creating content with a general manager or designated marketing lead [00:13:36].
    • Initially, the founder’s content may perform better, but running both trains the new person [00:14:03].
    • Transition from “Founder only” to “Founder + New Person” to “New Person only” for marketing efforts [00:14:18]. This process can take around 12 months [00:14:52].
  • Brand Association Transfer
    • Shift the brand’s association from the founder to the new marketing lead [00:14:36].
    • Separating the personal brand from the business’s primary revenue source is crucial for salability [00:15:02].

Multiple Reliable Acquisition Channels

Relying on a single customer acquisition channel poses significant risk [00:19:54]. If that channel fails (e.g., Facebook ad bans, YouTube cancellations, email domain shutdowns), the business could collapse [00:20:33]. Multiple reliable acquisition channels decrease this risk, making the business more valuable [00:23:20].

Example from Gym Launch: The company initially relied solely on Instagram and Facebook paid ads [00:21:29]. When these channels underperformed during COVID, an outbound sales system (cold calling, emailing) was introduced [00:21:40]. Within 12 months, outbound accounted for 50% of the revenue [00:22:43]. Having these diverse and robust channels made the company appear more stable to potential acquirers [00:23:06].

Tactics for Developing Acquisition Channels

NOTE

Developing a new acquisition channel is one of the most time-consuming and focus-draining activities for a business owner [00:23:40].

  1. **Focus on One-to-One-to-One (1:1:1) until 1 million per year, focus on one offer, one customer avatar, and one primary channel [00:23:47]. Until this milestone, the goal is income creation, not necessarily maximizing enterprise value [00:23:59].
  2. More and Better: Once a channel is working, prioritize doing “more and better” of that channel [00:24:35].
    • More: Increase ad spend, create more ads, make more calls, hire more setters [00:24:41].
    • Better: Improve ad copy/hooks, refine sales scripts, enhance training, optimize offers [00:24:44]. This is the lowest-risk way to grow, as it builds on what’s already proven [00:25:01].
  3. Don’t Kill Your Business Trying to Save It: When introducing a second channel, understand it takes time and resources. Don’t let focus on the new channel cause the primary channel to drop [00:25:09].
    • Be patient: It can take months for a new channel to generate its first sale [00:26:01].
    • Look at progress, not just outcome: Track intermediate metrics (clicks, opt-ins, scheduled calls, show rates) to ensure the funnel is progressing, even before final sales occur [00:25:28].
    • Use others: Ideally, bring in someone else to own the new channel’s development, with the founder providing consultation and feedback, to avoid creating another bottleneck for the founder [00:26:45].
  4. Look at Industry Leaders: Research where profitable companies of similar size in your industry acquire customers [00:27:22]. If they can acquire customers profitably on a given channel, it’s likely your business can too [00:27:50].

Diverse Customer Base

A business with a highly concentrated customer base (e.g., one “whale” client accounting for a large percentage of revenue) is riskier [00:37:31]. If that single large customer leaves, it can decimate profits [00:39:43].

  • Ideal Scenario: A diverse school of smaller clients rather than a single large one [00:38:16].
  • Revenue Concentration Rule: Ideally, no single customer should account for more than 20% of total revenue; some prefer under 5% [00:39:06].
  • Strategic Whale Hunting: If pursuing large clients (whales), commit to it and build a diverse base of multiple large clients, rather than just one [00:38:31]. This requires significant infrastructure changes that could sink the business if the single whale leaves [00:40:40].
  • Focus is Key: Taking on a “shiny whale” that doesn’t fit the core avatar can distract from overall growth [00:40:51].

Automated Metric Tracking

Data is essential for making informed decisions and proving value to potential investors [00:41:17]. Businesses often collect too little data, leading to guessing when making decisions [00:42:50].

  • Importance: Knowing key metrics (e.g., registrations, affiliate numbers) in real-time allows for quick, data-driven decisions [00:42:25].
  • Impact: Automated metric tracking affects the number of customers acquired, lifetime gross profit per customer, and overall business risk [00:43:27]. Without it, understanding basics like cost per lead, customer value, or revenue sources is impossible [00:43:50].
  • Implementation Steps:
    1. Pick a Platform: Transition from manual spreadsheets to a CRM system (e.g., Salesforce, HubSpot) [00:43:02].
    2. Pick the Data to Track (KPIs): Identify key metrics relevant to sales, marketing, and product delivery [00:43:12].
    3. Assign Ownership: Designate a person to own the implementation and oversight of the tracking system [00:47:18].
    4. Game Plan (Theory of Constraints): Identify the weakest point in the sales/acquisition funnel (the “bottleneck”) by calculating which incremental improvement yields the greatest throughput [00:47:29]. Focus efforts on improving that constraint [00:48:11].
  • Skill Indicator: The number and quality of metrics an individual or company tracks can indicate their level of skill and sophistication [00:44:01]. A well-tracked business understands both acquisition (cost per lead, conversion rate) and product/delivery (time to value, churn rate) metrics [00:44:26].

High Cash Flow, Profitable, and Growing with a Good Story

Investors prefer businesses that are already in motion (growing) because they are more likely to continue growing [00:48:45].

  • Key Characteristics:
    • High Cash Flow: The business generates cash in excess of what’s needed for reinvestment and competitiveness [00:48:57].
    • Profitable: The business earns more than it spends [00:49:04]. Profitability on paper doesn’t always equal cash flow (e.g., long payment terms) [00:49:09].
    • Growing: The business consistently expands in size month-over-month or year-over-year [00:49:22].
    • Good Story: A compelling narrative, often linked to industry trends (e.g., AI integration, market defensibility), helps investors envision future growth [00:49:27].
  • Prioritize Founder De-risking: For self-funded businesses, it is often recommended for founders to take a fixed amount of cash out monthly, even if it sacrifices some growth, to de-risk their personal financial situation [00:51:07].
  • Analyze Product Suite for Profitability: Examine the absolute gross profit and gross margin of each product or service offered [00:54:22]. Reorganize sales processes to emphasize higher-profit, higher-margin offerings that may not currently be the top sellers [00:54:56].

Audit-Ready Financials

Having audit-ready financials significantly reduces investor risk and increases a business’s valuation [00:55:47]. It means a third party can validate the stated profit, unlike founder-reported numbers which might be inflated [00:55:57].

  • Levels of Financial Sophistication:
    1. Basic Financials: Having any financials, often outsourced to a bookkeeper or accountant [00:56:33].
    2. GAAP Accounting: Transitioning from cash-based accounting (money in/out) to Generally Accepted Accounting Principles (GAAP), which recognizes revenue and costs over time [00:56:53]. This provides a smoother, more accurate view of financial performance [00:57:20].
    3. Audit-Ready Financials: Books are prepared to be easily audited by a third party, providing verifiable financial data [00:57:34].

Minimum Profitability for Institutional Investors

Most institutional investors seek companies with at least $5 million in EBITDA (earnings before interest, taxes, depreciation, and amortization, often used as a proxy for profit) [00:59:33]. This size typically indicates the presence of a professional management team and robust infrastructure that can operate without the founder [00:59:51].

  • Investment Efficiency: It takes roughly the same effort to grow a 20 million business, making larger companies more attractive to institutional investors [01:00:07].
  • Founder Overestimation: Many small business owners overestimate their business’s value, confusing their personal effort with transferable asset value [01:00:31].

By systematically addressing these areas, a business can significantly increase its value, become a true asset, and unlock generational wealth [01:03:31].

Graph View

Backlinks