This transcript was generated from the episode audio and may contain minor errors.
This is a very specific question we got today from a listener. I liked it. I spent some time thinking about it. And I always try to choose questions that are going to be relatable to the most number of people as possible. But sometimes it's helpful to choose something really specific because it can show you a different way to think or show you like what do you do when you're a little bit further along and your business is making a good amount of money. In this case,
it's like this guy's got a couple thousand dollars to spend and he wants to spend that money in the right way. So he's got a tiny subscription app. I shouldn't say tiny because he has I think what 180 customers that are all paying each month. So that's great. And of course, he also has people canceling each billing cycle that's normal. And so he's just trying to figure out like which move
would grow his income faster. Would it be like trying to patch the cancellations, decrease the churn rate, we would say for a subscription service, have fewer people cancel, or should he try to spend that money on acquisition? So basically, it's like, are you tightening the bucket so the water stops leaking? Or are you trying to pour more water into the bucket? And they both can be good strategies. So how does he make the decision? What is best for him? I'll do my best to be helpful.
He's saying, what should I tackle first lifetime value or acquisition cost? I'm going to break that down in a quick action packed episode. His question my answer coming right up. Hey, Chris, it's Santiago calling from Miami. My bootstrapped software service has 180 paying users at $15 a month. I have about $2,000 to reinvest over the next quarter. Some advisors say
retention is king, raise lifetime value with better onboarding and support. Others insist I need more users and should lower acquisition costs through marketing. With limited cash and time, which focus tends to deliver a faster and clearer ROI for a tiny company? How do I pick the right metric to chase at this stage without spreading myself in? First of all, let's say congratulations. Your
bootstrapped service has 180 paying users at $15 a month. A lot of our side hustlers will be very happy with that. That is a wonderful foundation that we can build upon. There are probably some other things that you could spend this $2,000 on. But if we're going to look at the question specifically, and say, okay, if you've got two options, one is you're trying to decrease cancellations, the other is you're trying to increase acquisition and bring new people on board. To answer that
question, you look at what is the churn rate? How many people actually are dropping out? Because if it's a relatively small number, then you're not going to have a big impact by decreasing it further. And in fact, with every subscription business, there is always going to be churn. That is a fact, so it's just a question of what the churn rate is. If it's really high, then perhaps it's worth
investing in that. Because if you get that fixed, then it's much more effective. And you can bring on new customers and have just a higher ROI all around. That's your next step. But if it's pretty low, then I think you focus now on acquisition. Sounds like you're in a good place,
honestly. So I think you ask, what happens if we cut cancellations in half? And if that has a measurable impact, then perhaps that's the answer. But assuming it doesn't, just relative to the overall income, then I think this might be a point in which you can focus on customer acquisition. I always tend to counsel people to focus more on their existing customers. But at this rate,
with 180 customers at a relatively low price, $15 a month, you've got a couple thousand dollars net coming in each month, I think now is the time to perhaps see, can we get that up to $5,000, maybe up to $10,000 a month? And then it's like, oh, okay, this is a serious hustle. What am I going to do? Am I going to try to grow this to like a more significant business? Am I going to try to grow it to where I can sell it? Do I have some different goal of just like passive income?
That's also great. Lots of good options at that point. So I think patch your big leaks first, if you have big leaks, but if your turn rate is not that bad at all, I think it's time to focus on bringing new people in. Exciting times, exciting place to be. Let us know what happens.
Listeners, let me know what's going on with your business or your business ideas as well. sidehustleschool.com. Every single episode has a detailed notes page there. You can sign up for my free email newsletter. You can download every episode, also free. Everything's free. New episodes
out every day, seven days a week, always free as well. Thank you for tuning in. My name is Chris Guillebeau. This is SighthustleSchool. From the Onward Project.
