The One Thing That Metrics Like CAC, LTV, Churn Can’t Cover For Your Skyrocket Growth

The Hidden Growth Driver Behind Metrics

Many CEOs closely track business metrics like Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and customer churn rate. However, they often overlook one crucial factor that drives business growth: cash flow.

Cash flow determines when and how much you can invest in your business. This is essential because growth relies on the compound effect – you need to keep reinvesting the money your business earns to grow further.

The Dangerous Assumption: “My Accountant Handles That”

Some CEOs think cash flow management can be left entirely to CFOs or accountants. However, cash flow isn’t just a financial metric – it’s the lifeline that determines your business growth and can lead to business failure when managed poorly.

When Perfect Metrics Hide Cash Flow Problems

Even when other metrics look promising, the cash flow situation can be challenging. Here’s a simple example:

Let’s say your business has excellent metrics:

  • Only 1% customer churn
  • $1,000 lifetime value per customer
  • Just $100 to acquire each customer

These numbers look great on paper, but let’s look at the actual cash flow timeline:

  1. You spend $100 upfront to acquire a customer
  2. The customer uses your free plan for two years
  3. They finally become a paying customer
  4. You wait another month to charge them
  5. You then receive $10 per month

Perfect Metrics VS Cash Flow Timeline

This model can work if you have plenty of cash reserves. However, you need to look at cash flow to truly understand if your business model is sustainable and supports the growth you want.

The CEO’s Role in Cash Flow Management

Without proper cash flow management, you can’t see when money comes in and goes out of your business. Even with perfect metrics, you can’t spend money on marketing if you don’t have cash available.

That’s why CEOs should actively manage cash flow and create cash flow plans. While it may seem challenging, cash flow determines how much you can reinvest and how fast your company can grow. This isn’t something you should delegate entirely to your CFO or accountants.

You can start by asking your CFO or accountants to teach you about cash flow planning. Remember, while metrics like CAC, LTV, and churn are important parts of your sales analysis, they work best when used alongside cash flow planning to drive sustainable growth