As business owners and entrepreneurs, we often find ourselves obsessed with reducing Customer Acquisition Cost (CAC). The logic seems sound: the less it costs to acquire a customer, the better for our bottom line. But what if this fixation on lowering CAC is actually hindering our growth and profitability?

After listening to the Chief Marketing Officer of Revolut, Antoine Le Nel, it occurred to me instead of relentlessly chasing a lower CAC, it’s time to shift our focus to Return on Investment (ROI) and Customer Lifetime Value (LTV). By doing so, we not only consider the cost of acquiring a customer but also the revenue and profit they bring over time.

Obsessing Over CAC – The Downside

Reducing CAC can indeed bring in more customers at a lower upfront cost. However, a sole focus on CAC can lead to unintended consequences:

• Attracting the Wrong Customers: Lowering CAC might mean targeting a broader audience that isn’t the ideal fit for your product or service. These customers may not stay long or engage deeply with your offerings.
• Compromising on Quality: Cutting costs in acquisition efforts can reduce the effectiveness of your marketing strategies, leading to lower-quality leads.
• Short-Term Gains, Long-Term Losses: A low CAC doesn’t guarantee profitability if the customers acquired don’t contribute significantly over time.

Why ROI and LTV Matter More

• Quality Over Quantity: Focusing on ROI ensures that your marketing efforts generate profitable returns. It’s not just about how many customers you acquire, but how valuable they are to your business.
• Sustainable Growth: LTV measures the total revenue a customer is expected to generate over their lifetime with your company. By maximizing LTV, you foster long-term relationships that contribute to sustained profitability.
• Informed Decision-Making: Prioritizing ROI and LTV provides a more comprehensive view of your business health, allowing for smarter investments in marketing and customer retention strategies.

Balancing CAC with ROI and LTV

This isn’t to say that CAC should be ignored. Instead, it should be balanced with ROI and LTV:

• Calculate the Ratio: Use the LTVratio to assess the efficiency of your acquisition strategies. A higher ratio indicates that the value of customers outweighs the cost of acquiring them.
• Segment Your Customers: Identify which customer segments have the highest LTV and focus your acquisition efforts there, even if the CAC is higher.
• Invest in Retention: Allocate resources not just to acquire new customers but to retain existing ones, thereby increasing LTV.

Action Steps

1. Analyze Your Metrics: Start by thoroughly understanding your current CAC, ROI, and LTV. Identify trends and areas for improvement.
2. Refine Your Target Audience: Focus on attracting customers who are the best fit for your product or service, even if it means a higher CAC.
3. Enhance Customer Experience: Invest in quality customer service and support to increase satisfaction and loyalty.
4. Leverage Upselling and Cross-Selling: Introduce complementary products or services to increase the value each customer brings.
5. Monitor and Adjust: Continuously track these metrics and adjust your strategies accordingly.

Quick 3 Questions

1. Are you attracting the right customers who will provide the highest LTV, even if it means a higher CAC?
2. How can you enhance your product or service to increase customer satisfaction and ROI?
3. What strategies can you implement today to balance CAC with a stronger focus on ROI and LTV?

—Rickard

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In 2023 I had the feeling that my business was on a good path but I also knew I had to figure out what the future vision for the business should be.

As business owners, we often get caught up in the day-to-day operations, making it challenging to step back and see the bigger picture. And I was a bit stuck in my current state and needed to widen my view. So I used this question:

“What would someone change on the first day or within the first year if they took over my business?”

This question forces you to view your business through fresh eyes, identifying areas that may have been overlooked or deemed “good enough” under your leadership. A new owner would likely scrutinize every aspect, from operations and finances to marketing and team dynamics, seeking immediate improvements to maximise success. It is of course similar to the principles that many use when a business wants to scale or sell, as written in the book “Build to Sell”.

Why This Question Matters

• Identifying Blind Spots: We all have biases and blind spots. A new perspective can highlight inefficiencies or outdated practices that you’ve grown accustomed to.
• Challenging the Status Quo: Complacency is the enemy of growth. Questioning existing processes can lead to innovative solutions and improvements.
• Focusing on High-Impact Areas: A new owner would prioritize changes that offer the greatest return on investment. This can help you realign your efforts toward what truly drives your business forward. For me I quickly made the decision to cut out some of the events we were doing that were not replicable and did not show any benefit to the majority of our customers.

Implementing the Insight

1. Conduct an Internal Audit: Objectively assess each area of your business. Where are the bottlenecks? What feedback have you been ignoring?
2. Seek External Opinions: Sometimes, an outsider’s perspective can provide invaluable insights. Consider hiring a consultant or discussing with a mentor which I do on a weekly basis on small or big matters.
3. Develop an Action Plan: Identify the top changes that could have the most significant impact and create a strategic plan to implement them over the next year.

The Most Important Strategy for Next Year

By adopting the mindset of a new owner, you’re positioning yourself to do the things you might be procrastinating that would lead to impactful changes. This approach could very well be the most important strategy you implement next year. It encourages continuous improvement, adaptability, and a focus on what is most important which leads to growth. Stephen Covey wrote in his book “7 Habits of highly successful people” about the principle of putting first things first and I like this quote:
“Never let something that is of less importance come in front of the most important things”

Quick 3 Questions

1. What immediate changes would a new owner prioritize in your business, and why haven’t you addressed them yet?
2. How can you objectively evaluate your business operations to uncover hidden inefficiencies or opportunities for growth?
3. Who can provide you with an unbiased perspective on your business, and how soon can you engage with them to start this transformative process?

—Rickard

How can a business with no sales department expand to more locations and grow faster than Starbucks?

Greg Glassman, the founder of CrossFit, often said they never had a marketing or sales department. People came to them because they wanted to be part of what CrossFit offered. Instead of traditional sales tactics, they had a committee to review applications from prospective affiliates.

The selection process was simple yet profound. Applicants who expressed a genuine mission to help people got the green light. Those who touted their MBA degrees or claimed to have a unique business model were often declined. Glassman knew that the only way to succeed with a small gym was to be entirely client-centric starting and ending with the client’s needs.

The success of CrossFit boiled down to two key elements:

1. A Great Product: CrossFit delivered results like no other. The workouts were effective, the community was supportive, and the transformations were real. This made people naturally enthusiastic about sharing their experiences.
2. Authentic Storytelling: CrossFit produced media that shared genuine stories from clients, gyms, and athletes. These videos garnered millions of views because they showcased real proof of the product’s impact. They were rough. They did not look like commercials. The stories resonated because they were honest and relatable.

Most affiliate buyers were individuals who had experienced their own transformation through CrossFit. The product was so compelling that it inspired people to become part of the mission themselves.

The Takeaway

Marketing doesn’t always require a massive budget or a dedicated department. Sometimes, it simply requires an exceptional product and authentic stories that resonate with people. When your service genuinely helps others, they will become your most powerful advocates.

Quick 3 Questions

1. Is your product or service so good that people can’t help but talk about it?
2. Is it so authentic and impactful that you could bring in a camera at any time and capture compelling stories?
3. Are you genuinely starting from the client’s perspective and focusing on their needs?

As entrepreneurs and business owners, we often find ourselves trapped in cycles of self-sabotage. We dream big, set ambitious goals, but somewhere along the way, we hit a wall, not because of external obstacles, but because of the barriers we create for ourselves.

I’ve been there, and I often catch myself being there. I’ve blamed taxes, the market, even my own team for the lack of growth in my business. But the hard truth is, the biggest obstacle was me.

The Ego Trap

Our ego can be a double-edged sword. On one hand, it drives us to achieve; on the other, it can blind us to our own shortcomings. Admitting that we don’t have all the answers is tough. It feels vulnerable. But acknowledging our limitations is the first step toward growth. If you’re constantly telling yourself that everything is fine when it’s not, you’re letting your ego hinder your progress.

Fear: The Silent Killer of Dreams

Fear manifests in many ways—fear of failure, fear of rejection, fear of the unknown. It can paralyze us, making us stick to what’s comfortable rather than what’s necessary. I remember hesitating to implement new strategies because I was afraid they wouldn’t work. That fear cost me time and opportunities. If you’re scared, consider seeking guidance from a coach or mentor who can help you navigate through the uncertainty.

Blame Game

It’s easy to point fingers when things go wrong. Taxes are too high. The team isn’t performing. The economy is sluggish. While these factors can impact your business, fixating on them diverts attention from what you can control. If taxes are eating into your profits, revisit your pricing strategy. If your team isn’t meeting expectations, perhaps it’s time to improve your delegation skills or invest in training.

The Game of Business

Think of business as a game with established rules. These rules include market dynamics, customer behavior, financial principles, and yes, taxes. You can’t change the rules, but you can change how you play the game. Learn the rules inside out, and strategize accordingly. If you’re unsure how to proceed, don’t try to reinvent the wheel. Reach out to someone who has walked the path before you.

Ownership and Responsibility

One of the most empowering realizations I’ve had is that I am responsible for everything that happens in my business. If I don’t have enough time, it’s because I haven’t prioritized effectively. If there are problems, it’s because I’ve allowed them to persist. Taking full ownership isn’t about self-blame; it’s about recognizing the power you have to effect change.

Breaking Free

To break the cycle of self-sabotage, we must first recognize it. Be honest with yourself about the state of your business. Reflect on your actions and attitudes that may be holding you back. It’s not an easy process, but it’s a necessary one for anyone serious about growth.

3Qs to Propel You Forward

1. What is one area in your business where you’ve been placing blame externally, and how can you take ownership to change it?
2. Who can you reach out to for guidance, a mentor, coach, or peer, who has successfully overcome the challenges you’re facing?
3. What is one fear that’s been holding you back, and what actionable step can you take this week to confront it?

Remember, the journey of entrepreneurship is as much about personal growth as it is about business success. By addressing the internal barriers, we pave the way for external achievements.

Rickard

One of the most important metrics to track in any business is customer retention. A happy customer returning to make a repeat purchase is more than just a sale, it’s their way of casting a vote for your business. If you’ve done a great job, your customers will come back. If they don’t, then there’s an opportunity for growth you’re missing.

I recently spoke to a hotel owner who told me that most of her guests didn’t return after their first stay. This is especially challenging in the hotel industry, where it can be difficult to generate repeat business.

But as we talked, it became clear that the issue wasn’t the service or the location, there was no system in place to make rebooking easy or encourage repeat visits. The hotel was listed on platforms like Airbnb and Booking.com, making it more of a commodity where guests often book simply because it was the only available option, or the cheapest.

The hotel had numerous unique selling points (USPs) that could set it apart, and these could be highlighted in a way that encouraged loyalty. With no loyalty program, follow-up emails, or easy rebooking systems, the guests don’t have a reason to return. In contrast, large hotel chains have loyalty programs and automated systems that make it easy to rebook, incentivizing guests to stay within their brand.

For smaller businesses, the lesson is clear: repeating sales is not only about offering a good product or service; it’s about building relationships, creating systems, and making it easy for customers to return.

In Two-Brain Business, the concept of customer retention is captured through something called “LEG” (Length of Engagement). This measures how long a customer stays committed to your service and is a key indicator of business health.

The longer the LEG, the more successful your business is likely to be. I’ve learned a lot from my work with TwoBrain, where we emphasize that this is a well-known but often neglected metric. Creating systems and incentives to nurture customer loyalty will not only drive growth but create long-term stability for your business.

3 Quick Questions (3QQ) to Ask Yourself:

1. Do you have a system in place that makes it easy for your customers to make a repeat purchase?
2. Are you offering incentives (like loyalty programs or offers) for customers who come back?
3. Are you making it clear to your customers why they should choose you again over the competition?

At the end of the day, your repeat customers are your biggest fans. It’s their return that signals the true strength of your business.

Rickard

In the world of business, the difference between success and failure often lies in how we communicate value. One of the best examples of this is how Apple introduced the iPod. They didn’t just list the features, like “5 GB storage.” Instead, they framed it in a way that made sense to people: “1000 songs in your pocket.” Simple, clear, and relatable.

This focus on results over features is why businesses like Apple thrive. They make it easy to understand the value of their product. You don’t have to be a tech expert to know that carrying around your entire music collection is life-changing.

So, how does this apply to gyms?

Gym owners often fall into the trap of marketing equipment or class availability. But what really matters to your clients is what those features will do for them. Here are some examples of how to position your gym to focus on results, not features:

• Feature: “We have 10 rowing machines.”
  Better: “You’ll build stamina and shed pounds in half the time.”
• Feature: “We offer a variety of classes.”
  Better: “Transform your body and mind with workouts that fit your life.”
• Feature: “We have a fully equipped strength training area.”
  Better: “Feel stronger, look better, and live healthier with our personalized strength programs.”

To take this approach one step further, gather data from your clients’ results and share it. For example, track progress, share testimonials, and highlight the changes they’ve made in their health. Just like Apple, you’ll make it easy for prospective clients to see what’s possible for them.

When your gym becomes more about the transformation than the equipment, you’re no longer selling a service…YOU’RE SELLING A SOLUTION.

That’s where the real value lies, and that’s what will help you stand out.

This is how you can charge 10x more than your competitors.

QUICK ACTIONS

Here are three quick, actionable questions for entrepreneurs to gain better clarity:

1. What problem am I solving for my clients, and how does it improve their life?
   • Action: Write down the tangible outcomes your product or service delivers, not just its features.
2. How easy is it for my clients to understand the value I provide?
   • Action: Revisit your messaging. If it’s full of jargon or overly complex, simplify it to one sentence anyone can understand.
3. What metrics am I tracking to show that my solution is working?
   • Action: Choose 1-2 key performance indicators (KPIs) that directly reflect the results your clients get from using your service. Then, make those results part of your marketing.

The purpose of this blog is simple: to provide a library of knowledge and tools for business owners, particularly gym owners, who want to grow their businesses.

Through different categories, I will share my own experiences, experiments, and insights gathered over years of running and mentoring gyms. I’ll also share what has worked for thousands of other gyms around the world.

Gyms are unique in that they don’t just provide a service, they change the most valuable asset a person has: their health.

But the principles of growth and success that apply to gyms also work across many industries. That’s why I believe we can all learn from various sectors to keep improving.

So, whether you’re just starting out or looking to level up your business, this blog will offer practical advice and insights to help you succeed.

If you want to connect or have any questions, feel free to email me at: contact@rickardlong.com.

Thanks for being here!