It’s no secret that the acquisition of new clients is difficult and expensive. Nor is it a secret that selling is the core of any business, and thus, knowing how to acquire new customers is the golden ticket to growing and expanding your company and attracting additional capital.
However, no matter how potent your customer acquisition model looks, it’s mere speculation until converted into hard numbers and integrated into your financial model.
Forecasting your client acquisition strategy in your model accomplishes three major things:
It clarifies your strategy’s real costs and returns.
It illuminates the strengths, weaknesses, and potential improvements of your acquisition marketing strategy.
It assures investors of your growth forecast’s reliability and your acumen as a founder.
Unfortunately, many financial forecasts we receive are half-baked and lack depth, providing founders and investors with a skewed and unreliable growth prognosis. Today, we’ll show you how to reflect your customer acquisition model in a financial forecast, along with some insider presentation tips & tricks to impress investors.
But let’s start with the basics first.
What is a customer acquisition model?
To understand what a customer acquisition model is, one must answer “What is customer acquisition?” first. User acquisition is the process of getting new customers who are ready to pay for your products or services.
Consequently, a customer acquisition model is a plan on how you’re going to attract those clients. To be more precise, it’s a mix of customer acquisition tools, strategies, channels, and platforms you may use to make people use your products or services.
The bad news is that there are so many different customer acquisition models because the perception of “user acquisition” varies from sector to sector and even from company to company.
In e-commerce, customer acquisition might heavily depend on digital marketing strategies like social media ads, SEO, or email campaigns to drive online traffic. If we’re talking about SaaS businesses, organic customer acquisition is the main focus, with free trials, freemium models, or content marketing used to convert users over time. B2B companies think more about lead acquisition via networking, direct sales, and account-based marketing. Given this, you must keep in mind your specific industry and business goals while crafting your customer acquisition model.
Remember that regardless of which customer acquisition model you choose, your CAC (customer acquisition cost) must be less than your LTV (customer lifetime value). Otherwise, your acquisition model won’t be sustainable. If you want to check your CAC and LTV ratios, use our:
Three pillars of your customer acquisition model
Regardless of your industry, your projections will be based on three mutually dependent facets: acquisition channels, expected growth rate, and budget. Remember, the more you tailor these elements to your specific business, the more realistic and effective your customer acquisition model will be.
Acquisition channels / Traffic source
These are the channels you use to attract traffic. Depending on your solution and go-to-market strategy, your client acquisition strategy can rely on inbound/organic channels, outbound channels, or both types of channels to drive traffic. For a detailed breakdown of how to estimate and forecast your traffic numbers, check out our guide on calculating traffic for your startup.
Inbound/organic traffic comes from:
SEO
Content marketing and blogging
Social media marketing
PR activities
Referrals and partnerships
Outbound traffic comes from:
Running paid ads on Google, social media, TV, etc., or offline
Messaging prospects through email or social media
Cold-calling
Offline events
We always break down outbound traffic by a customer acquisition channel, as it is more straightforward and easy to forecast than inbound.
Your customer acquisition must follow an upward trajectory, or you’re in trouble. The pace of this growth may vary depending on your resources and industry benchmarks, but it must be present and accelerate eventually to meet your milestones.
To set a realistic growth rate % and apply it to your customer acquisition channels, consider the benchmarks for your stage, industry, and specific channel.
Conversion rates
In your customer acquisition model, conversion typically manifests as a multi-step sales funnel.
Traffic-to-lead conversion: traffic to Marketing Qualified Leads (MQLs)
Lead progression: MQLs to Sales Qualified Leads (SQLs) to opportunity
Lead-to-customer conversion: SQLs/opportunities to clients.
Here is one of our examples of a sales funnel in a forecast:
This funnel may vary between businesses, but you can use the above example for inspiration. Support your assumptions with industry benchmarks or historical data where possible; where not, rely on logic and common sense.
If you can’t yet predict conversions from some indirect marketing activities like PR, don’t sweat it — simply set a budget for it without a conversion forecast.
Budget
Growth isn’t free, so you must consider the cost of achieving your targets. Typically, chubbier budgets mean higher growth, assuming your acquisition strategy is effective. To calculate your budget, break down the user acquisition channels you’ll be using, the expenses related to them, and the growth rate.
The expenses might include:
Content creation
CPC for paid ads
Sales team composition and compensation
Costs associated with conducting events and conferences
Travel expenses, etc.
As you can see, there are quite a few things to consider. We discuss this in detail in our guide on effective budgeting strategies for sales and marketing.
When you’ve set the expected growth rates and budgets for each customer acquisition channel, it’s time to translate your customer acquisition model into Excel sheets.
But enough with theory. Let’s talk practice.
Forecasting your customer acquisition model
Let’s delve into the practical steps for constructing your customer acquisition model and transforming it into a robust forecast. We’ll examine the forecasting of three typical components of customer acquisition strategies: paid traffic, organic traffic, and sales function.
Paid traffic acquisition
If your acquisition marketing strategy employs multiple paid advertising channels, consider the following elements.
1. Channel breakdown and budget allocation
To forecast paid traffic, begin by dividing your monthly budget by customer acquisition channel. To determine how much to allocate to each channel, refer to industry benchmarks or use customer acquisition metrics like cost per click to estimate the traffic you can anticipate for your budget.
If you plan to use various paid user acquisition channels but intend to launch them at different times, detail this in your sheet. When it comes to numbers, such details matter. Remember: your customer acquisition expenses will grow with your company. Not accounting for this growth is a typical mistake we see in models we review.
To avoid this, apply an expected growth rate to your monthly/annual budgets:
2. Budget-to-traffic conversion
Once the budget is set, you need to understand the logic of converting each dollar of your budget into the traffic you will receive.
To create a reliable and comprehensive traffic funnel, include all channel-specific metrics, e.g.:
Cost per view and # of views for YouTube
Cost per 1000 impressions and # of impressions for TikTok
CTR % for each channel, etc.
Your projected numbers for each customer acquisition metric should come from reliable sources — historical data, market research, competitors, etc. While they won’t be 100% accurate — they’re educated guesses — the main thing is that you can justify them. From there, you can calculate the traffic based on your budget and specific metrics for each channel.
Note: Ideally, your acquisition marketing efforts should improve over time, with your click-through rate and other metrics enhancing, so don’t forget to factor this in.
Organic customer acquisition
Organic traffic is when potential customers come to you from word-of-mouth, OOH advertising, results in the Google search, etc. As a rule, its amount depends on the resources you can invest in user acquisition channels like SEO or content.
In our customer acquisition models, we usually don’t break down inbound traffic by channel and simply put an overall amount we expect from all channels combined. We also specify what % of the total traffic we will get from inbound activities.
Here is a customer acquisition example:
Organic traffic might be harder to project due to its indirect and somewhat unpredictable nature. This is especially pronounced when dealing with traffic from TV, radio, billboards, or leaflets.
Since there are no clear-cut benchmarks and references for organic customer acquisition, focus on backing up your projections with a portion of logic and realism. Consider historical data (if there is any), your current level of publicity, and future promotional activities to make a more reliable prognosis.
Sales funnel
If you have a sales function on top of your marketing activities, this section is for you.
Sales acquisition consists of two components: a team and a sales cycle.
- Team
When it comes to your sales team, the key questions you must answer are:
Do I really need one?
If yes, how big should it be?
By this point, you likely have answered the first question (if not, check out our article on how to build a sales team). If your solution doesn’t require sales reps to sell it, jump right to the next section.
If you do need a team, here is what to include in your customer acquisition model:
The number of salespeople people at a given stage
The quotas for each salesperson in terms of SQLs and closed deals
Ramp-up time for the newly-onboarded folks.
Here is an example from one of our customer acquisition models:
2. Sales cycle
A sales cycle is the process of converting your leads into customers. This process typically includes multiple stages and can roughly look like this:
Each stage involves specific actions and interactions with the prospect, guiding them through the buying journey to conversion.
Understanding your company’s sales cycle is crucial for building your financial forecast. It includes the following elements:
Type of clients (if you have multiple): small, medium, SMB, enterprise
Lead status: MQL, SQL, opportunity, win/close
Conversion rates: from traffic to MQLs/SQLs to clients, etc.
You can refer to the above customer acquisition example to see what a sales cycle can look like in a forecast.
Another factor to consider here is the length of the sales cycle. How long will it take to convert a visitor into a customer? One, two, five months? The answer will depend on the complexity and price of your product.
How to level up your customer acquisition model in the eyes of investors
For those of you crafting a financial model for your fundraiser, we’ve stored some tips & tricks to make it more appealing to investors:
Back up your assumptions. Investors will question the origins of the numbers in your customer acquisition model. They will surely want to know why you chose a particular conversion rate, click-through rate, or the number of Marketing Qualified Leads. Give investors the proof. Otherwise, your numbers are nothing more than empty claims. To maintain credibility, use industry benchmarks, competitor data, and historical information (if available) to show investors that you really know what you’re saying.
Explain the logic, but try to keep it simple. Your financial model should illustrate your client acquisition strategy in action, proving its effectiveness. For instance, if you target multiple countries and offer several products, include them all. But avoid making things too complicated—get rid of complex formulas with numerous variables. In such a way, you’ll save yourself from errors and save investors time as they won’t have to decipher your forecast.
Be consistent and comprehensive. Present a complete customer acquisition journey to investors, from views and impressions to traffic, leads, and ultimately, clients. Also, don’t forget to visualize your data in a clear yet compelling manner. Make sure the most important numbers pop up to investors.
Wrapping up: Why to build a customer acquisition model
To have a rock-solid customer acquisition model is not only about attracting new clients, it’s about generating more revenue, showing more traction, and measuring marketing ROI. Of course, it’s not so easy to craft a good customer acquisition plan. You have to gather tons of details, know what exactly to include, know how to present your numbers correctly, support them with valid data to show investors how exactly you arrived at these projections, and make everything visually appealing and not overloaded. Also, you must know how to spot the gaps in your marketing acquisition strategy and fix them on time.
However, when done correctly, your customer model becomes a litmus test for your client acquisition strategy and a significant tool in your fundraising arsenal. Make sure to read all the amazing stuff we wrote on creating financial models to get some fresh ideas. Or just give a shout to our financial wizards to create a stellar financial model that investors will love.
FAQ
What is client acquisition?
Client acquisition is the process of getting new customers to use your product/service. It’s all about finding potential clients and convincing them to choose you over your competitors. Use customer modeling to target your audience. When you understand who your ideal clients are, what they want, and how they behave, you can tailor a better customer acquisition plan.
What are the three phases of client acquisition?
Customer acquisition funnel (aka customer acquisition journey) consists of the awareness phase, when your prospective customer learns about your product/service, the consideration phase, when your prospect weighs all the options and thinks about which one to choose, and the decision or conversion phase, when your lead has already made a decision, and your task here is to make them convert into your clients. Remember that not all customer acquisition journeys are linear, especially in industries like B2B, where sales cycles are longer.
What is the difference between customer acquisition and lead generation?
Lead acquisition is just a part of a customer acquisition journey. At this point, you’re searching for prospects whom you’ll nurture and try to convert into paying customers.