A good question to ask yourself in business and in life is “what are you optimizing for?”

When it comes to running a successful marketing team that makes millions of dollars, I believe the answer to that is CPA (cost per acquisition).

CPA is basically “how much does it cost to acquire a client.”

In this email I’m going to discuss this in depth since I think it’s super important and also a topic that not enough business owners think about.

How To Look at CPA

Ideally you want your CPA to be as low as possible. The lower, the better.

However…

You also want to think about your CPA in relation to your LTV (lifetime value).

This effectively determines your profitability.

If you pay a $2,000 CPA then that may sound expensive…

But if your LTV is $10,000, then you are making $5 for every $1 you spend overtime.

5X ROAS.

That is extremely profitable and I’ll take that any day of the week.

If you pay a $2,000 CPA and you’re a clothing brand with an LTV of $200, then you’re deep in the red (and extremely unprofitable).

My general rule is that if something is profitable, I keep scaling it until it stops being profitable.

Super important to keep close tabs on this and also measure it from the beginning.

A common issue I see among my target clientele (businesses in the $3M-$5M/year range) is that they grow super fast but they let their CPA completely spiral out of control.

Sure they’re making good money…

But they’re also spending an ENORMOUS amount.

You want to avoid this and the best way to do it is by keeping close tabs on your CPA and not letting it rise too much.

How to Measure CPA

The easiest way to do it is adspend/new customers.

If my client spends $50,000/mo on ads and we acquire 25 clients per month…

$50,000/25 = $2,000 CPA.

If we want to get a bit more granular…

You should also add in other fees associated with your acquisition process.

This includes marketing overhead costs (mainly payroll).

This also includes closer commission fees.

But if you stick with adspend/new customers, honestly I see that as good enough.

We’re mainly looking for trends here. Is CPA going up or down?

How To Get CPA Under Control

There’s a few factors to consider when looking at controlling your CPA.

In order to do this effectively, you need to take a big picture look at your overall client acquisition ecosystem and find the areas where it breaks:

• how many leads do you normally bring in on a monthly basis (and how much are you paying per lead) - is this number going up or down?

• how many leads convert into a booked call - break this down by direct to VSL booking, setter bookings, and email - are each of these numbers going up or down?

  How many leads are needed to convert into a booked call (and what is the cost per lead)?

• What percentage of booked calls show up?

• What is the close rate on those booked calls?

• What is the average upfront cash collection?

• What is the average lifetime value?

You should be tracking all of these numbers over time so that when costs rise, you can see which area specifically is rising and focus in on that.

I’m not going to break down each of these in this email (I’ll probably shoot a YouTube video on that) but let’s look at a few main ones.

1. Rising cost per lead

If your lead cost rises and everything else remains consistent, you will inevitably be much less profitable.

Lead costs fluctuate over time.

Right now in May 2024, Facebook has gotten completely fucked this month. Not sure what’s going on but CPL’s have basically tripled for several of my clients.

I highly doubt this will sustain and don’t believe it’s a reason for panic.

You don’t need to change the entire offer…

You don’t need to write a brand new VSL…

The main thing I would focus on would be:

A) New ad creatives

B) New hooks in ad copy

If you do those two things and stay patient, eventually it will turn around.

2) Show Rate

If show rate plummets…most of the time this is a mix of lead quality and setter phone skills.

Did you recently onboard a new setter?

Are your setters who have been around a while not following their SOP’s?

What does their discovery call process look like?

Are they doing double tie-downs on call confirmations?

Are they calling day of to confirm appointments?

You need to go overtime on setter call reviews and setter process if your show rate plummets because chances are they’re doing something wrong.

As I’m writing this email…

I’m realizing that this should just be a super long YouTube video because this is way too much for one email.

So I’ll probably film that sometime over the next week or two (click here to subscribe now).

• Damon