Answer the money question, starting with acquisition cost

1. Where you stand when you get here

By now the answers have run through the earlier exits: the numbers are missing, the market seems too small, the owner doubts the business is worth it. Each of those is taken up on SOP 184 — Find the one constraint with six questions, and none is repeated here. What remains is the tactical part. Marketing more is off the table for lack of money: it is simply unaffordable.

This question splits into four parts of its own. One more question follows it, manpower, and that one is its own procedure: SOP 200 — Treat a supply constraint as demand for talent.

Counted with their sub-questions, the six are, it is thought, technically nine. Cheaper leads on its own fills a single line of that list, and a single line holds a lot, with many different routes to a solution.

2. The four branches, in order

Ask them in this order. Each answer points at a different kind of fix.

Order	The answer	What it says you need	Where the fix is
1	Leads cost too much	Better advertising: cheaper leads	SOP 197
2	You close too few of them	Better sales	SOP 197
3	You do not make enough per customer	Higher lifetime gross profit	SOP 197
4	You make enough, but it comes in too slowly	Faster cash flow	SOP 198

The kind of work behind each branch.

• Leads. Ads, hooks, branding and the wider marketing setup. All of it is for owners who need better advertising: the need is cheaper leads.
• Sales. Nurture people better, close better, and put more proof into the process.
• Profit per customer. Where the trouble sits in delivery, the answer is to raise lifetime gross profit per person.
• Cash. Where the business needs its profit, or its cash, to come in faster.

How owners spread across the branches. A rough guess at the share of owners in each branch was offered, and in the same breath called numbers made up. This page gives no figure for how owners divide among the four branches.

3. Start with the acquisition cost

The way to tell the branches apart begins with CAC, the cost of acquiring a customer. Ask one thing of it first: is it around the industry average?

Finding the average. If you do not know it, search for your industry's average cost of acquisition, or have an AI tool work it out. Ranges are offered, and offered in broad generality:

Who you sell to	Acquisition cost
Local businesses: ordinary brick-and-mortar firms, home-service businesses and the like	should probably fall from $1,500 to $3,500-ish
Consumers	Varies widely, depending on the volume of spend, the price point and what you sell: anywhere from the tens of dollars up to about $1,000

When a cost counts as too high. A rule of thumb for how far above the industry average a cost can sit before it signals a problem, with the readings of the band around it, belongs to SOP 42 — Cost an engaged lead off payroll and set the learning budget, section 5. It is not restated here.

4. Costs sit close; businesses do not

In one example, the acquisition costs of many different agencies could be seen side by side. Two things stood out.

• The costs clustered. Across agencies working by different methods, the cost of winning a customer was typically pretty similar: maybe one or two times apart at most, not ten, unless you have a brand. For anyone without one, winning customers in the generic way, through outreach, paid ads or the like, the cost was not very different.
• The winners differed somewhere else. What separated the agencies doing 20x from another agency was typically never their acquisition cost. It was typically other things: customers stayed longer and their lifetime value stacked up, and a better model meant fewer people churned out.

The same comparison is also made across businesses in different industries: the cost of acquisition was very similar between them, while the businesses themselves differed in size.

So the useful question is how far off the industry average your own cost sits. A comparable measurement, with its own spread and what it means for bidding, is on SOP 55 — Compute lifetime gross profit and the ratio that gates spending, section 9.

5. Average cost, and you still cannot afford leads

If your acquisition cost is about average yet leads are beyond what you can pay for, the trouble is lifetime value. Winning a customer costs you what it costs everyone else, yet you cannot afford to do it. The reason given: the others earn more than you do, which lets them outbid you in the marketplace. In short, an average cost and no money made means lifetime value is too low.

For some of you, this might be the issue. It is the third branch, and what to do about a customer who is worth too little is set out on SOP 197 — Solve a leads, sales or profit-per-customer problem. The aim at this point is at least to be sure which constraint is in front of you.

6. Average cost, good profit, and no cash to spend more

If the cost is average and the profit is good, but cash flow keeps you from spending more, you are cash-flow constrained, even though the business makes a profit.

The shapes given: you are paid on net ninety, or a customer pays you $100 a month for years but cost $1,000 to win. This is called super common among home-service businesses, where pay comes net ninety, the profit is fine and you wait on the cash, and super common with software companies too.

Either way you make a profit, and it arrives too slowly. The answer is to speed up cash flow, which is the fourth branch, and the moves for it are gathered on SOP 198 — Accelerate cash flow when profit does not come fast enough.

7. A cost that is too high: leads, sales, or both

If the cost of winning a customer is too high, it comes down to one of two problems, or both: your advertising is not working, or your selling is not. The two multiply each other, so improving either could solve the problem. The work goes to the weaker of the two, the one that returns the most for the effort.

Read it through these cases:

• A 25 percent close rate and a very low opt-in rate. Say you close 25 percent of your sales conversations, and very few people opt in. Then the opt-in step is likely what holds you back, meaning leads cost too much. Better advertising, conversion optimization and the like fix that one.
• A 5 percent close rate. Say you close 5 percent of your phone conversations. Then the trouble probably sits in sales, not necessarily in leads: you close too few, the second branch.

The leads and sales branches share one page of fixes, SOP 197, named above.

8. The same sorting, told for leads

A version of the same test is used to confirm that leads are truly the constraint before any work on them starts. It runs in this order:

1. Can you handle more customers? This is the first test of whether leads are the problem at all.
2. If yes, can you afford more of them? That is: could you simply spend more, and would spending more bring in more? If this and the first question both get a yes, do that. Do more outreach, make more content, and set the rest of this aside. The point is made plainly that at this stage nobody's further help is needed.
3. If you can take more but cannot afford more, do leads cost too much? Judge it against the industry averages in section 3. Work on getting leads is meant only if your acquisition cost runs way too high; if not, the problems lie elsewhere. Marketing is probably something you love, and maybe some of what is taught about it appeals to you; that still might not be where the problem lies.
4. Maybe the reason you cannot afford them is that too few convert. Judge it against benchmarks for your conversion mechanism: a salesperson face to face, a salesperson on the phone, a checkout page, or some kind of big presentation. There are not that many mechanisms. If your conversion is at the benchmark, it is your leads that cost too much. If both of these check out, you could move on to the other issues. Benchmarks for several of these mechanisms, each on its own base, are SOP 245, section 4.
5. Customers earn you too little. That is the problem of lifetime gross profit.
6. Last, you lack the cash flow to cover it. Lead costs are where they should be, so is conversion, the business still turns a profit, and the money arrives too late.

If this order looks like the six questions of SOP 184, that, in the words used, is exactly what it is.

9. One question about your engaged leads

A shorter diagnosis puts a single question to your engaged leads: do they have the problem you solve, and money to spend on solving it?

Answer	What it means	The problem
No	They are not qualified	Advertising
Yes, and they buy, but there are not enough of them	Qualified, too few	Advertising
Yes, but they do not buy	Qualified, not buying	Sales

That tells you where the issue sits and where your attention goes.

Beside section 7, this is another test, and it ends in the same places. The weakest-link test above compares the rate at one step with the rate at another and works on the weaker; this one asks whether the leads fit and whether they buy. Both send a shortage of leads to advertising and a failure to close to sales.

10. Any step in the funnel raises what comes out

A side point, if you are not supply-constrained, as many owners are not: raise any step of the funnel and throughput goes up.

The worked figures below were said to be made up on the spot, and not good ones. Clicks cost $1 each; 10 percent of the people who click opt in; 10 percent of those schedule; 10 percent of those buy.

Change	What it does
Any one step from 10 to 15 percent	50 percent more
One step from 10 to 20 percent	A double
The scheduling rate from 10 to 50 percent	Five times
The 20 and 50 percent changes together	Ten times

Of the move to 20 percent, the claim is that you could get there; of the move to 50, that you could probably get there. That is why having metrics on every step pays: look at them and you start to see which ones you can move.

You might then ask whether, if what you need is cheaper leads, moving either of those steps would get you there. The answer offered is yes. There are, in the picture used, multiple ways up the mountain; weighing them is SOP 186 — Pick the path up the mountain that fits your skills.

The one-answer trap. Taking a problem to have a single solution is, it is thought, a huge mistake, common to entrepreneurs and to people in general; part of the reason, it is thought, is schooling, which teaches that each question has one correct answer. The thinking asked for is divergent rather than convergent: a problem has many solutions, and all of them can be right; the more right solutions you find, the more your answer is worth in what you can make.

11. Where pattern matching comes in

This is where pattern matching proves its worth. Set out for every business at once, a method can give only the variables above. Looking at one business, someone with enough pattern matching can say quickly, for example, that plumbing should never cost more than a certain amount to acquire, and so say where it is all being missed. This page gives no figure for what a plumbing customer should cost. What the sections above should at least give you is the variables for making the call yourself.

12. Where this sits

• The six questions and the order this one comes in: SOP 184.
• The rule of thumb for a cost that runs too high, and the disagreement over its band: SOP 42, section 5.
• What counts inside acquisition cost: SOP 56 — Define and compute what a customer costs to acquire.
• How long a customer takes to pay back what they cost: SOP 57 — Compute the payback period and shorten it.
• Choosing one step of a funnel to test, by arithmetic: SOP 41 — Run one test a week.
• When the problem is that you do not have the numbers yet: SOP 189 — Get the numbers and decide fast on reversible bets.

13. What this page does not decide for you

• How far above the average a cost must run to count as too high. This page gives no figure for that threshold; the rule of thumb and the readings of its band sit on SOP 42.
• What the 20x in section 4 measures. Not established on this page.

14. The checklist

Step	What to do
1	Confirm you reached money through the earlier questions on SOP 184
2	Find your industry's average cost of acquisition, and set your own cost against it
3	Average cost, cannot afford leads: lifetime value is too low (branch 3)
4	Average cost, good profit, no cash to spend: cash flow (branch 4)
5	Cost too high: leads, sales, or both; work on the weaker of the two (branches 1 and 2)
6	Check it from the leads side: can you take more customers, can you afford more; if both, do more
7	Ask whether engaged leads have the problem and the money; not qualified or too few is advertising, not buying is sales
8	Remember that if you are not supply-constrained, raising any funnel step raises throughput

15. What this page does not cover

Close-rate benchmarks for each way of selling, from a face-to-face conversation to a webinar or an e-commerce page, are in section 4 of SOP 245. The fixes for each branch are not covered on this page.