2 Key Performance Indicators (KPIs) for Course Creators
As a course creator or business coach, it's important to stay on top of your finances to ensure your business is performing well and growing. Here are two key performance indicators (KPIs) you should be tracking: Customer Acquisition Cost and Life Time Value (LTV) of a customer.
Customer Acquisition Cost
First, let's talk about CAC. This metric is used to tell us how much you are spending to acquire a new customer and whether your marketing efforts are working. It's calculated by dividing the total cost of your sales and marketing efforts by the number of new customers you acquire during a specific time period. To get an accurate number, make sure to include all of your costs, such as advertising, sales salaries, and commissions, as well as any other costs associated with acquiring a new customer. Or keep it simple and divide your total Ad Spend by number of new customers you acquired. A high customer acquisition cost (CAC) is an indicator that your company is spending a lot of resources, such as time, money, and effort, to acquire new customers. It could also mean that your company’s marketing efforts are not reaching your target audience or you are using inefficient methods to acquire new customers. Tracking and evaluating this monthly will provide you with great insight into your marketing efforts and allow you to pivot if necessary.
Life Time Value of a Customer
Next, let's talk about LTV. This is the estimated amount of revenue a customer will generate for your business over the course of their relationship with you. To calculate LTV, you'll need to determine the average length of time a customer remains with your business, and the average revenue they generate per period of time. Once you have this information, you can multiply the average revenue per period by the number of periods in the customer's lifetime to get your LTV.
Before you break out your high school math books, let me give you an example. Let’s say your company sells a monthly membership of $50 and the average customer lifespan is 2 years or 24 months. Then the LTV is $1,200 ($50 x 24 months). LTV is an important metric to track because it provides a clear picture of the value that a customer brings to a business over time. By understanding the LTV, course creators and business coaches can make informed decisions about how much to invest in customer acquisition and retention efforts. You wouldn’t want to be spending more money on acquiring a customer than you will ever receive from them.
Evaluating CAC and LTV together
By understanding your CAC and LTV, you'll be able to make informed decisions about your sales and marketing strategies. If your CAC is higher than your LTV, it means you're spending more money to acquire a customer than you'll get back in revenue, which is not sustainable in the long run. On the other hand, if your LTV is higher than your CAC, then you're in good shape! Just be sure to be evaluating this metric often to so you can pivot sooner than later if necessary.
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