Ford’s plant had nearly 100 miles (160 km) of interior railroad track, had its own power plant and sat in a land area of 1.5 miles (2.4 km) wide by 1 mile (1.6 km) long. For years, Henry Ford employed over 100,000 workers at this location — even during the Great Depression of the 1930s. Can you imagine the initial capital investment to build such a massive car assembly plant? During the Industrial Age, starting a business demanded huge INITIAL investments — yet most of these businesses had insignificant customer acquisition costs (CAC). So to answer your question, by far… the #1 mistake I see startup entrepreneurs make in today’s economy is ignoring this. Listen, save your money, don’t even start a business until you fully understand this:
Today, we live in a world of abundance, and this changes everything! While it’s true that today it’s cheaper than ever to start a business — it’s also now more expensive than ever for businesses to acquire new customers! Today most entrepreneurs fail NOT because they had a bad idea, but because they completely ignore this simple fact:
CLV > (CAC + COGS) = Profits!
Listen, if a business is unable find a cheap way to acquire customers they will sooner or later “choke” themselves to death burning money forever. It’s now critical for entrepreneurs not only to consider the initial investment required to get their business up and running — but most importantly they MUST budget enough capital to be able to acquire enough customers until they can break-even. Business has changed. Entrepreneurship has changed.
