photo credit: Tracy O
In many articles that provide tips to building successful startups, a lot has been written about three key factors: The caliber of a startup team, quality of a startup’s product and size of a startup’s market. Many entrepreneurs believe that the only thing that matters when it comes to startup success is getting a right team/product/market fit. But an important point most startups forget is the cost of customer acquisition. In fact a lot of startups solve the product/market fit problem, but fail because they don’t find a way to acquire customers at a low enough cost.
It is also important to ask yourself the question: can my business realistically expect to acquire customers for considerably less than the amount that I can monetize them?
The service/product your startup is providing may be extremely interesting and compelling. However, if your business doesn’t pay attention on how much will it cost to acquire customers, your startup success dream, perhaps, will just remain a dream.
The article mentioned below gives a detailed explanation on how to calculate the cost of acquiring customers and comparing it with the lifetime value of a customer (LVC) to find out if your startup can really succeed:
http://www.forentrepreneurs.com/startup-killer/
The article is a great resource for startups.
Businesses spend money before they even open their doors. Start-up expenses are those expenses incurred before the business is running. Many people underestimate start-up costs and start their business in a disorganized, unplanned way. To determine your startup costs, you must identify all the expenses your business will incur during its startup phase. A critical factor in determining these expenses are the length of time it’s going to take to open your business.
It is true that every business is different and has its own specific cash needs; therefore there is no generic method for estimating your startup costs. But the article below makes a good attempt in breaking down the mystery and creating a clear picture of expenses that your startup will need.
http://www.startupnation.com/articles/1248/1/startup-costs-new-business.asp
A timeless and probably a cliché suggestion but “Beware of the little expenses; a small leak will sink a great ship.” – Benjamin Franklin
No matter what your business type, take into account everything you will spend, from the moment you dig in to the startup process, through the time you're ready to sell a product or service. If you need three months from the time you sign a lease to the time you can put the "open" sign on your retail storefront, calculate how much money you will need for salaries, electricity, rent (and your mortgage payment!) during those three months.
