A lot of business owners are trapped in playing this game of “who can get the lowest CPA” which ultimately has limited upside and also faces diminishing marginal returns (I’ll explain further below).

If your CPA is $2K and your LTV is $8K…

Sure you can try to take your CPA down to $0.

But it’s a lot easier to take your LTV to $10K instead.

Also you have the potential to take your LTV WAY beyond $10K as well (because there’s no cap to your LTV).

There’s a few key issues to keep in mind when it comes to CPA reduction that are important:

A) Diminishing marginal returns set in

If you run a business that only makes $80K/mo and brings in 10 deals per month...

Reducing your CPA from $2K to $1K is pretty straightforward (better funnel, higher close rates...etc).

Taking it to $0 would be a lot tougher but if you are an organic driven company then it's doable.

You're looking at a drastically different situation for a big company though.

Reducing CPA from $2K to $1K for a company at scale that’s doing over $10M/yr is VERY difficult.

But reducing CPA from $2K to $0 is damn near impossible.

I have a handful of friends who are doing something along these lines and have a really solid front end low ticket offer that they’ve scaled to the moon.

But these people are unicorn marketers and are few and far between.

99% of business owners are not going to be able to build and sustain a breakeven low ticket front end at $1M/mo+.

Even if they were able to crack it, it also brings up the issue of “opportunity cost on time” and whether it could be allocated to something with higher upside.

Especially if you’re in an aggressive growth phase, you’re ramping adspend, and scaling the sales team…

Keeping your CPA in check isn’t easy.

Costs go up as you scale adspend…

Entropy sets in as you scale the team and inevitably have some non A-players.

You’ve chosen a near impossible task to focus on which also has limited upside.

That leads me to my second point…

B) The absolute max reduction you can attain in CPA reduction is your current CPA

If your CPA is $2K, then you can’t take CPA any lower than zero…

That's a MAX CPA reduction of $2K.

(unless you count being profitable on the front end as a negative CPA but I’m not going to go down a rabbithole on the definitions of CPA).

What does reducing CPA by $2K actually do for the business?

At its core…

You’re basically inserting an extra $2K in profit per unit (that’s all you’re doing).

Back to my initial point…

It’s a lot easier to ADD $2K to your LTV than it is to reduce your CPA from $2K to $0.

There are a multitude of ways that you can do this:

Easiest one in my opinion?

1) Find a way to increase your prices

If you collect $8K upfront on every deal…

Increase your prices to $12K, give your reps a bit of flexibility, and hopefully you land in some sort of middle ground.

Or better yet…

2) Add on to your offer

Instead of just randomly jacking prices up 50%, add something else on to justify the increase.

If you mainly sell a 6 month package, make it 12 months…

If you don’t offer 1 on 1 options…

Hire an extra CSM to offer 1 on 1 options (if adding $6K/mo to your payroll increases your LTV by 50% then that pays for itself many times over).

If you have multiple options already, push the more expensive package harder and incentivize the sales team for closes on it.

3) Introduce a backend offer

If you sell an $8K front end…

Throw on a $30K backend ascension offer.

If you do 100 units per month at an average cost per unit of $8K…

Assuming there’s no backend and that average cost per unit = LTV…

A 10% ascension rate on 100 clients per month into a $30K backend increases topline revenue from $800K to $1.1M.

It also increases LTV from $8K to $11K without any extra incurred costs (other than maybe an extra hire or two to payroll).

Assuming you spend $200K/mo on ads…

Your ROAS shifts from a 4X ROAS to a 5.5x ROAS.

This has ENORMOUS implications if you cracked it.

4) Find a way to get solid recurring rev

I haven’t really figured this one out yet (working on it)…

But in theory…

If you spend $200K/mo on ads…

If you find a way to get $200K/mo in recurring revenue, then you have effectively liquidated 100% of adspend.

At a high level…

It’s much easier to take your LTV from $8K to $10K than it is to reduce your CPA from $2K to $0.

Plus…

There’s no limit to how high you can get your LTV.

You can take your LTV from $8K to $100K if you cracked some ultra high ticket backend.

BUT

You can’t take your CPA any lower than $0.

If you get your backend super dialed in…

Then you can afford to pay more on the front end to acquire a customer.