Questions

Can I assume that my business model is working if a small batch of people pay a yearly fee to access my B2C product ?

They are not my friends or family. These are normal people brought in through adwords PPC. Paid $500 , received 350 visits, 168 became simple members, 26 registered for a free trial, 19 autoenrolled for 70Usd/year, the rest canceled. For me this is relevant because I got my money back. I can pursue existing members to share and get me their friends in exchange of 1-2 months free. Would these numbers be relevant for an investor ? Should I keep on doing it and see if the numbers stack up or if it was a lucky streak?

4answers

I would do another test run to confirm that it wasn't a one-time lucky streak that you hit. These numbers are definitely relevant to investors as they want to know the conversion rates. You should calculate your Customer Acquisition costs as this number will be important to investors. However, looking at your numbers your model seems to be working just fine.


Answered 4 years ago

My first question would be, have all your users paid the $70 upfront, or is there a chance that some of them might cancel and get refunds? In order to make sure your economics make sense, you need to take churn into account and it's not 100% clear to me whether this is the case.

Assuming that you do have churn under control (and therefore that your product does have a clear benefit that a fraction of your users are willing to pay for on a repeatable basis), my next step would be to assess market size. The spectrum ranges from 19 people (your current users) to 1b+. What you could do would be to try and run a slightly larger campaign and see if the numbers still add up, ideally spending no more than the proceeds of your previous campaign.

If things work out well, you might even make this a self-funded business, in which case you wouldn't even need to search for an investor ;-)


Answered 4 years ago

IMHO It depends. :-)

What works now might not work later. Is this scalable? is there differentiation in the market? Do you have a something unique and sustainable long term?

I would certainly do another test run to see if you can get it really off the ground and make some real money. If you see something that could prove a good ROI long term then it might be interesting for an investor.


Answered 4 years ago

Congrats! You've reached a milestone few entrepreneurs do - you have paying customers!

More tactically:
1. If you have CAC < ACV for an initial trial that's a great sign of existing market demand. Especially if this is an unoptimised PPC campaign.
2a. You've not mentioned how long this experiment ran. If it was a few hours, it suggests that the market is significantly large. If it ran for a week, not as much.
2b. If you're paying $1.5 per click, that suggest low or no competition (depending on the segment, keywords, optimisation).
3. If you got your money back, and your COGS of the product are low, keep pumping at least the $500 back into PPC. There is no downside, and you will quickly find out what the limit is.
4. May be relevant for an angel investor (friends, family, fools) not institutional. The ticket size is low, churn is unknown, and market size is unclear.

There is a huge amount of work ahead of you in segmentation, targeting, to find adjacent segments, building a referral program, and understanding market scale.

But this is an awesome first step! I've helped multiple B2C products & marketplaces scale revenues 2-10X over 6 months, can help more over a call.


Answered 4 years ago

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