This rule is extremely simple, CAC < LTV CAC is the cost of acquisition of a customer LTV is the life time value of the customer CAC metric is calculated by considering the total cost spent in acquiring a customer, this will include salaries, marketing campaigns, lead generations - travel and so on divided by the total no. of customers acquired for that particular period of time. If i spent $500 in a week and acquired 6000 customers then 6000/500 is the CAC. i.e, $12 LTV is to be calculated by the margin earned on one customer. In layman terms your cashburn should be less than your earnings. Here CAC and LTV are not to be calculated from start. Expected LTV should be considered, which gives the advantage of estimating the value generated by the customer in future.
Rule#1 Friends are friends, colleagues are colleagues: This is the first and foremost rule for every startup founder to instill. Your friends might have joined you in your entrepreneurship journey, but they need to prove their professional worth to be a part of a startup just like any other team member is expected to do. Rule#2 Don’t push away legal formalities We understand that you are a startup, and lots of your processes are still not in place, but that should not justify any lethargy in following standard practices, especially in hiring. Friends might be okay to join without any paperwork, but other members should not be expected to work without an offer letter. Make sure you are perfect with the paperwork, tomorrow your team might not be with you but you must ensure they talk highly of you. Rule #3 Respect employees. You hired them for a reason. Give employees a chance to show their worth and don’t jump to judgments quickly. People take time to understand the company and its culture before feeling the comfort of an office space. Learn to trust them with work and accept the changes they feel need to be implemented in order to improve the core product. Rule #4 Create an office culture that is fun, but not awkward. Head massages in the office are a strict no-no! Fun, laughter, and small talk is all okay and even necessary in this age of high stress level and competitive targets, but so is discipline. It is very important for the founders to set the right examples in front of employees instead of making them uncomfortable by becoming over-friendly or carrying personal grudges. Rule #5 Be flexible, employees will stick around longer. As the company grows, it needs to follow certain processes and rules to manage the growing number of employees on a daily basis, especially women. We agree that work is the most important, but work–life balance is essential too. Make sure you create an environment where employees can avail a work-from-home option or can leave a little early once in a while. Rule#6 Don’t encourage favoritism Each individual brings something different to the table, not everyone has the same strengths or weaknesses. This is where one’s experience is tested. To identify strength and use it to its best advantage for the company is not an easy task. If the founder cannot adapt to each individual, they will only end up with a racehorse view of their own vision. Rule#7 Be humble at all times. Don’t gloat about how much funding you’ve got or how much revenues the company makes. Just don’t show off to your employees. Remember you did not have this kind of money a few years ago and your team is the one working very hard to give you a taste of success. Rule#8 Focus on your own strengths. Enhance them. Being a CEO of a startup means you must be ready to do everything. There might be some aspects of running a business that you may not even be aware of, work on learning them. It does not help to act like Mr. Know-it-all. Employees need a good example. When they see you working toward achieving something, they will do so too. Rule #9 Be aware of the way you communicate Verbal language and body language plays a huge role in setting a tone in the office atmosphere. Swearing, abusing, demeaning others in front of the team, or shouting unnecessarily will put off the people working with you. Overall productivity suffers and employees become like islands. They will hesitate to come forward with their ideas and will not be able to contribute to the company’s mission. Rule#10 Empathy is a must. Founder must definitely empathise with employees and extend a helping hand to them to make sure they work towards the betterment of the startup. Fire employees if you have to, but do it with dignity. If you ask an employee to leave overnight, the least can do is treat your employees the way you would like to be treated. More and more startups are mushrooming in India and there are many founders without any disregard to their surroundings. Sudden authority or the sudden availability of funds sometimes makes founders forget basic humanity. Channelising their energies in the right direction is necessary. Startups play a huge role in setting an example to others just like great professional setups like Facebook and Google have done. But remember Mark Zuckerberg and Larry Page were all great founders.