Business Owners: Only Two Numbers Matter Ross | December 7th, 2011

Howard Morgan, the Managing Partner of First Round Capital has a simple and practical view on evaluating Internet-based businesses:

If you have a business that’s based around the internet, basically only two numbers we need to know: What’s the cost to acquire a customer? What’s the lifetime customer value? If the lifetime customer value is higher the than cost to acquire, you’ve got a business. If it isn’t, you don’t.

All business owners – and not only those building Internet-based businesses – should follow this advice. Here’s Howard Morgan’s short video on this subject.

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  • Paul

    I respect the guy and he has is pretty much spot on. In the interest of your readers though a little more… it wouldn’t be as catchy of an article if it was “the only 4 numbers that matter” because there are a couple more:

    – # of new customers acquired each month. You can have a great Cost to Acquire but if you can’t acquire them, well then…

    – Gross marginal Costs or conversely, COGS. Granted, for web businesses, the marginal costs are typically low, so we can probably ditch this one. And if LTV is including COGS and/or overhead already and is really meant as incremental lifetime net profits discounted back, well then, he’s spot on.

  • Hey guys:

    First off this was an amazing video, and I have since passed it along to all of my readers and followers of my social media channels.

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    You should have your web team look into fixing this IMMEDIATELY!

    If you have questions about how exactly to do that, or what I am talking about, please contact me privately, and we can talk about it, you can follow my firm @Biquitous on Twitter, and we can private message from there.

    In the mean time, please keep up the great work!


  • Those of the interesting information you always bring out the best that I know, thanks.

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