Providing Your Own Outside Perspective
4-minute read covering how you can coach yourself toward making better decisions.
đđź Iâm Alek, a repeat founder with a successful exit. Every week, I organize my thoughts around the challenges Iâm facing. Through A Founderâs Life for Me, I share these condensed thoughts with you in weekly ~5-minute reads. I typically write about developing resilience and applying a practical, data-driven mindset to your company and career.
An Outside Perspective
When youâre in the weeds of your life and working through the minutia of the day-to-day, itâs easy to put your focus on the wrong things. Through working on my startup and doing independent consulting, Iâve learned that the advice I give my clients is often the advice that I need to hear.
Looking Out
I recently worked with a client to help them focus on higher-value problems for their business. I broke down the customer acquisition funnel for their subscription business into six components (illustrative numbers):
Traffic to Website (50k people per week)
Free Account Sign-up Rate (2%)
Free Account to Paid Account Conversion Rate (2%)
Average Monthly Revenue per Paid Account ($20)
Average Months Retained (10 months)
Win-back Rate (people who re-subscribe after canceling) (5%)
With this funnel, youâd bring in $4,000 in new revenue and win back $200 every week. Here are some examples of how changes in each metric would impact revenue:
(Easier) If they improve the free account sign-up rate from 2% â 4%, they would increase new revenue by $4,000 per week and win back by $200.
(Easier) If they improve the free-to-paid conversion rate from 2% â 4%, they would increase new revenue by $4,000 per week and win back by $200.
(Harder) If they improve the average months retained from 10 to 12 months, they would increase new revenue by $800 per week and win back $40.
(Harder) If they improve their win-back rate from 5% â 50%, their new revenue will remain the same, and win-back will increase by $1,800 per week.
Going into the conversation, the customer wanted to focus on improving their retention and win-back rates. Retaining customers for longer is doable, but it would take unachievable increases in retention to drive significant outcomes. Improving win-back rates is also achievable, but the same is true.
I encouraged the client to focus on the earlier steps of their funnel because smaller changes would lead to more significant impacts.
Looking In
The observation felt obvious to me as I walked the client through it, âHow is this not obvious to them?â But I sat with the thought a while longer, âIâm running my company this way, right? RightâŚ?â Turns out Iâm not; I often fall into the trap of focusing on initiatives that arenât hitting the right metrics. Letâs do the same exercise for one of my startups:
Traffic to Website (50 people per week)
Free Account Sign-up Rate (1%)
Free Account to Paid Account Conversion Rate (1%)
Average Monthly Revenue per Paid Account ($20)
Average Months Retained (5 months)
Win-back Rate (people who re-subscribe after canceling) (1%)
With this funnel, Iâm bringing in $0.50 of new revenue every week and winning back <$0.01. This is why Iâm also doing consulting to pay the bills! đ
OK â but, where am I focusing? Iâve focused a lot on âimproving the product.â Which, on the surface, doesnât sound like a bad place to focus. But, âimproving the productâ impacts retention and thatâs not whatâs limiting my growth. It would be higher impact for me to focus on driving traffic, sign-ups, and paid conversions.
I was falling into the same pitfall as my clientâŚ
Lessons Learned and Moving Forward
Inviting an outside perspective to tell you what youâre doing wrong can be scary. We are all making dumb, obvious mistakes somewhere in our lives and nobody likes having those mistakes put on display. So, if you don't want to invite someone else to call you out on your mistakes, try doing it yourself! What advice would you give someone else if they were in your situation?
When you take a step away and act as your own coach, youâll be surprised at the new perspective you unlock.
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By sharing my experiences, I hope to provide insight and advice to entrepreneurs facing similar hurdles. Please leave a comment or email me with any questions.