Mastering Customer Acquisition For Startups

Mastering Customer Acquisition For Startups

Building a SaaS company is arguably the most straightforward way to become wealthy.

The entry barrier is low, the profit margins are high, and the revenue is recurring. Moreover, scaling is easy, at least compared to other popular business models.

However, despite all that, most entrepreneurs who launch software startups fail because they can’t figure out how to acquire customers in a sustainable manner.

They quickly learn that creating software is easy but getting people to pay for it can be extremely difficult. 

That’s why today we are going to discuss customer acquisition for startups and share the strategies that we used to grow ClickFunnels from zero to $100M+ in annual revenue.

Customer Acquisition Metrics

Let’s start with the basics of customer acquisition.

Customer Acquisition Cost (CAC)

Customer acquisition cost (CAC) is a business metric that shows how much money on average you need to spend to acquire a new customer.

You can calculate it using this formula:

Customer Acquisition Cost = Cost of Marketing + Cost of Sales / The Number of New Customers Acquired

If you don’t know what your CAC is, you need to calculate it ASAP!

Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is a business metric that shows how much revenue the average customer brings in over their entire lifetime as a customer.

Calculating SaaS CLV can be somewhat tricky because of the variables involved. 

Here’s a simple SaaS CLV formula that you can use.

CLV = Average Revenue Per Account (ARPA) / Revenue Churn Rate %

Say, if the monthly ARPA is $1,000 and the monthly revenue churn rate is 15%, then your CLV will be $6,666. 

However, this formula doesn’t account for gross margins, which is why it’s better to use the more advanced SaaS CLV formula:

CLV = Average Revenue Per Account (ARPA) x Gross Margin %/ Revenue Churn Rate %

Say, if the monthly ARPA is $1,000, the gross margin is 40%, and the revenue churn rate is 15%, then the CLV would be $2,666.

As you can see, CLV can change drastically once you introduce the gross margin variable!

We understand that all this may seem confusing but if you don’t know what your CLV is, you need to do the math, doublecheck that math, and make sure that you have the correct number.

The Relationship Between CAC and CLV

It’s also important to understand the relationship between customer acquisition cost and customer lifetime value.

Your CAC can’t be higher than your CLV if you want your business to be sustainable.

Consequently, CLV is the primary limiting factor when it comes to CAC!

“Whoever Can Spend the Most To Acquire a Customer Wins

Our co-founder Russell Brunson often quotes Dan Kennedy:

“Whoever can spend the most to acquire a customer wins.”

He recently had an opportunity to discuss this with Kennedy himself and asked him to elaborate on this idea:

Outspending your competitors on customer acquisition allows you to buy speed, sustainability, and scale. 

That’s why we advise entrepreneurs to maximize their CLV so that they could increase their CAC.

We will explain how to maximize your CLV later in this article!

Best Sales Funnels for Customer Acquisition

Now it’s time to get into the nitty-gritty of customer acquisition.

Here are five proven sales funnels that you can use to grow your business:

The Product Launch Funnel

The product launch funnel is designed to help you build a pre-launch email list, get your email subscribers excited about your product, and then launch that product. 

Here’s how it looks like:

Page 1: A squeeze page. 

Page 2: Video #1.

Page 3: Video #2.

Page 4: Video #3.

Page 5: Video #4.

Page 7: A product order page. 

Page 8: An order confirmation page. 

You should send one video every day or every other day. 

Don’t make them all available immediately because that would beat the whole purpose of the product launch funnel!

Build a Product Launch Funnel With ClickFunnels 2.0!

ClickFunnels 2.0 includes a product launch funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.

Start Your Free Trial

The Squeeze Page Funnel

The squeeze page funnel is the most popular sales funnel out there because it’s so simple and easy to build. 

It looks like this:

Page 1: A squeeze page.

Page 2: A thank you page.

The Squeeze Page Funnel

Build a Squeeze Page Funnel With ClickFunnels 2.0!

ClickFunnels 2.0 includes a squeeze page funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.

Start Your Free Trial

The Reverse Squeeze Page Funnel

The reverse squeeze page funnel also looks like this:

Page 1: A squeeze page.

Page 2: A thank you page.

So what’s the difference between the regular squeeze page funnel and the reverse squeeze page funnel, then?

With the regular squeeze page funnel, you keep all the free value behind the opt-in wall. 

Meanwhile, with the reverse squeeze page funnel, you provide some free value right there on the squeeze page itself then ask for the potential customer’s email address in exchange for more free value.

In practice, this typically means that you display a video on your squeeze page that the potential customer can watch without opting in, then encourage them to get your lead magnet at the end of that video.

Build a Reverse Squeeze Page Funnel With ClickFunnels 2.0!

ClickFunnels 2.0 includes a reverse squeeze page funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.

Start Your Free Trial

The Survey Funnel

The survey funnel allows you to direct potential customers to different sales funnels from a single starting point.

It looks like this:

Page 1: A survey.

Page 2: A squeeze page based on the survey results. 

Page 3: A thank you page based on the survey results.

The Survey Funnel

We recommend using this survey structure:

  1. Ask them who they are.
  2. Ask them about the situation they are in.
  3. Ask them what is their skill level.
  4. Ask them what they are struggling with.
  5. Ask them what they are struggling with on a personal level.
  6. Ask them something that you are curious to learn about them.

The first question is called the “bucket question” because it determines which sales funnel that person will be directed to. 

Survey funnels are a great solution for startups that serve several distinct customer segments that require different sales messaging!

Build a Survey Funnel With ClickFunnels 2.0!

ClickFunnels 2.0 includes a survey funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.

Start Your Free Trial

The Webinar Funnel

The webinar funnel is a funnel where you use a webinar as your lead magnet. 

It looks like this:

Page 1: A webinar registration page.

Page 2: A thank you page.

Page 3: A webinar page.

You then pitch your product at the end of the webinar and direct the attendees to its sales page.

The Webinar Funnel

This sales funnel holds a special place in our hearts because Russell used it to get ClickFunnels off the ground during our first year in business. 

Back then he aimed to do 5-7 webinars a week but would sometimes end up doing 2-3 webinars a day. Pretty crazy but it worked!

And he still swears by this approach a decade later:

Build a Webinar Funnel With ClickFunnels 2.0!

ClickFunnels 2.0 includes a webinar funnel template, a visual editor that you can use to customize that template, and an email marketing functionality that allows you to collect potential customers’ email addresses and sell them your products and services via email.

Start Your Free Trial

Maximize Your Customer Lifetime Value (CLV) With the Value Ladder Sales Funnel

We believe that the Value Ladder sales funnel is the best way to maximize customer lifetime value. 

It was created by Russell who then used it to take ClickFunnels from zero to $10M+ in annual revenue in just one year (it’s at $100M+ now!).

This sales funnel has four stages:

  • Bait. You offer the potential customer your lead magnet in exchange for their email address.
  • Frontend. You offer the potential customer your least expensive and least valuable product or service.
  • Middle. You offer the customer a more expensive and more valuable product or service.
  • Backend. You offer the customer your most expensive and most valuable product or service.

Ideally, you also offer a continuity program of some sort, meaning, a subscription product that generates recurring revenue.

We also recommend adding downsells, upsells, and cross-sells to these core offers in order to maximize your revenue.

The Value Ladder

The reason why this sales funnel works so well is that it allows you to:

  1. Start the relationship with that person by offering free value.
  2. Nurture that relationship by continuing to provide free value via email.
  3. Build trust by providing progressively more paid value at each stage.

Here’s how Russell explains it:

The vast majority of SaaS companies only have one offer: they charge subscription fees for their software. 

Yes, there are typically several pricing plans, but their software is their only source of revenue.

If you start adding more offers and build out your Value Ladder, you will inevitably increase your customer lifetime value with these additional sources of revenue. 

Your rivals who only have subscription revenue will struggle to keep up with you because you will be able to outspend them on customer acquisition!

Startup Case Study: ClickFunnels

Let’s take a look at one of our sales funnels.

Russell has written three best-selling books:

All three books are available on Amazon but we also use them as lead magnets so you can get them directly from us for free.

Here’s the sales funnel that we built for “DotCom Secrets”. See how instead of just one offer there’s an entire Value Ladder?

Dotcom secrets value ladder

We have tons of direct competitors but most of them are completely reliant on software subscription revenue.

Meanwhile, we have:

  • Software subscription revenue.
  • Info product revenue.
  • Online event revenue.
  • Live event revenue.
  • Membership community revenue.

Is it any wonder that we were able to grow extremely fast, become the dominant player in our niche, and reach $100M+ in annual revenue?

We want you to take a page from our playbook. Yes, you have a SaaS startup, so you sell software. But what else can you sell?

Figure out how you can provide more value to your dream customers and start building your Value Ladder!

The Top 3 Ways to Drive Traffic to Your Value Ladder Sales Funnel

Here are three ways to drive traffic to your sales funnel:

#1 Social Media Marketing

Don’t have a marketing budget?

Promoting your business on social media is free!

Here’s the general approach that you should follow:

  1. Create a content schedule that you can keep up with indefinitely.
  2. Commit to that content schedule and adhere to it religiously. You can produce content in batches and then use social media scheduling tools like Buffer or MeetEdgar to schedule and publish it.
  3. Ensure that each and every piece of content that you publish provides value to your followers.
  4. Use your social media to promote your lead magnet but don’t be obnoxious about it. Providing value to your followers should be the main focus.
  5. Interact with your followers. Ideally, you want to respond to each comment, tweet, and reply that you get.

That’s pretty much all there is to it but you will need to keep at it for at least a year if you want to see results. Consistency is the name of the game!

#2 Affiliate Marketing

Affiliate marketing is another great way to promote your software when you don’t have a marketing budget.

Identify people whose audiences overlap with your target audience, cold email them and pitch them an affiliate partnership:

  1. They promote your webinar to their audience.
  2. You host the webinar and pitch your software at the end of it.
  3. They get a 50% ongoing commission from each sale.

Say, if your software costs $20/month, your affiliates should get 10$/month for each customer they bring in for as long as those people remain customers.

#3 Paid Advertising

We believe that paid advertising is the best way to drive traffic to your sales funnel because paid traffic is immediate, targeted, and scalable.

All major social media platforms allow you to run ads on them so pick the one that’s favored by your dream customers, set up an ad campaign, and start running it with a small daily budget. 

Once you figure out how to run ads profitably, you can start scaling your campaign by gradually increasing its daily budget!

Build Your First Sales Funnel in Just Five Days!

Let’s keep it real:

Building a sales funnel from scratch can seem like a daunting task.

That’s why we created our 5 Day Lead Challenge where Russell walks you through it step-by-step.

You will:

  • Create your first lead magnet.
  • Build your first squeeze page funnel. 
  • Set up a 6-email welcome sequence. 
  • Launch your funnel.
  • Start driving traffic to it.

…in just five days!

So don’t hesitate. Take action. It can change your life!

Join Our 5 Day Lead Challenge Today!

P.S. This challenge is completely FREE!

Leave a comment

Your email address will not be published. Required fields are marked *

X