Demand products & CAC cashflow
And what you can learn from the "lower back tattoo" of SaaS
Hi all -
This week I’ve been listening to the DGMG podcast with ClickFunnels’ CEO, Dave Woodward.
ClickFunnels is a bootstrapped landing page builder + marketing automation product that’s currently doing $167M annual revenue after being founded in 2014.
At best, ClickFunnels can be described as “salesy, inspired by the old guard of direct response marketers.”
A more sober view from Reddit is: “The whole thing reeks of MLM shadiness. I’m wondering if this platform is even legit, or if it’s a scam.” It gives off a “get rich quick” and “Gary Vee” type of vibe. Their website looks more like they’re selling a “wealth is a mindset” conference at a Holiday Inn Express than a software product.
So… what can you learn from ClickFunnels, even if they seem like the lower-back tattoo of SaaS?
Demand products & CAC cashflow management
In VC-backed SaaS, we think about Customer Lifetime Value and compare it to Customer Acquisition Costs: Basically, we want customers to spend a multiple (usually 3-5x) of what it costs to “acquire” them to have a good SaaS business.
When your LTV/CAC ratio looks good, investors will pour money in so you can go out and find a bunch of customers.
But when you’re bootstrapped or trying to be cash-efficient, waiting 6+ months to recoup CAC costs in cash revenue can slow your growth. And if you’re venture-backed, the longer it takes for you to get cash-in-bank, the more equity you give up simply for working capital.
If you could get paid immediately - or even before your ad accounts are charged - you’d be able to spend a bunch more money on customer acquisition because your CAC spend would be cashflow positive.
Which is where ClickFunnels might have figured something out. Basically their customer acquisition process takes people through what they call “breakeven funnels”.
Instead of trying to get people to buy their $100/month software at a ~$300+ CAC plus a 2-week trial (long cashflow cycle, expensive CAC), they try to sell people “info products” where they recoup cash investment immediately at lower CAC. These info products include books, courses, and webinars.
And then, once they’ve profited from customer acquisition on a positive cashflow cycle, they can (1) reinvest the cash into additional customer acquisition and (2) upsell people who bought their info products - convert them into software buyers using email marketing at virtually ~$0 CAC.
So what?
In theory this could boost cashflow, enabling you to constantly reinvest in customer acquisition… which is sweet.
But it’s probably not for everyone:
There are probably some markets where selling “info products” doesn’t make sense
Maybe you have to be excessively salesy / scammy for this to work (though I don’t think so)
If you are currently getting annual contracts paid up-front with quick sales cycles at lower costs than your CAC, you’ve got this figured out
If the future is getting paid up front via Pipe for monthly contracts, you might not need this
What do you think? Cool? Spam?
PS - next week I’m writing about what I call “demand products”. They are a culmination of ideas about growth, triggers, and demand. If you like this newsletter, please share it with fellow entrepreneurs - excited for what’s coming next!