Sam Jacobs

And so, again, we can talk about how to calculate that.

The magic number calculation is revenue, really gross margin contribution in this period compared to sales and marketing spend in the prior period.

But the point of it is that we want to solve for payback period.

We want to solve for LTV to CAC.

So what does that mean if you have a two and a half to one LTV to CAC or you're getting paid back in 36 months?

What it means is that you have a problem with your business that is manifesting in retention.

And what you need to do is slow down your growth investments so that you can fix the retention problem.

Because fundamentally, retention is what drives enterprise value.

Yeah, sure.

Payback period would be sales and marketing spend, customer acquisition cost, over average revenue per customer, right, roughly.

And then you take that in a given time period.

It could be over a year.

It could be over 30 days.

What you would do is match it to the sales cycle, typically.

So if you have a 30-day sales cycle, how much do you spend on sales and marketing in that period, customer acquisition costs, over your average revenue per customer in that period, right, however much they contributed?

Yeah.

per new customer, right?

But it's really average gross margin contribution per customer.

So if you have 80% margins, they pay you $10,000 on average.

It's $8,000 in terms of gross margin contribution.