What is their estimated Customer Lifetime?
3 months? 3 years?
At first, you’ll have to use your gut and any market data you can gather (taken with a grain of salt) to determine estimated Customer Lifetime
If you’re in-market, you have some history to look to… BUT… if you have a high churn rate because you haven’t done what it takes to keep customers around – but you’re going to in the future – your past Average Customer Lifetime metric could be meaningless.
This is the metric that will help drive our Acquisition spend… if a customer pays $1000/mo but only stays 2 months and you paid $3000 to acquire them, you lost $1000 + support/operating costs. This is bad.
If you think you can keep a $1000/mo customer for 36 months, and you pay $2000 to acquire them, we’ll have 34 months of profitable revenue from that customer, even if they don’t expand their use of the service (Expansion Revenue) over that time. This is good.