Customer Acquisition Costs
  • November 16, 2022
  • Seo Team
  • 0

A runway refers to the survival duration of the business before it’s out of money. It is a crucial time for strategizing, budgeting, forecasting, and fundraising throughout the company’s lifecycle.  It helps you analyze spending cash, raising capital, and change the business model if required. It can be calculated by analyzing the availability of funds (whether pre-revenue, already making millions of funds, or requiring a fund) and expenses. It is one of the biggest challenges for any startup.

To meet up the demands, even the highest growing startups are revamping their financial planning. Some are compromising their growth plans, some are making decisions on staffing, and some are delaying their plans, but shortening growth in exchange for safety is not the only solution. It can be simultaneously maintained by having an ongoing knowledge of their Customer Acquisition Cost (CAC).

CAC is a vital business metric that helps you analyze the spending you require to acquire a customer through costs such as marketing and sales spending. CAC could be a crucial tool for extending your business runway. A question must be arising in your mind: how will CAC do this?

How can CAC financing play a role?

Concerning return on investment, CAC is where you tend to have the most predictability in your business. So, many D2C brands use revenue-based financing (RBF) as a working capital line to finance that predictable go-to-market (GTM) motion. A GTM is a strategy that details how a business can engage with customers to convince them to buy their products or services in terms of advertisement and marketing.

RBF is a type of financing which lets the founders insinuate an exact amount of capital every month to cover their CAC costs and align the repayment term with their payback time to minimize the fee.

What Advantage You Could Get If You Finance Your GTM Spend Through RBF?

There are several advantages that a business could get if they finance their GTM spend through RBF firms such as VedFin. VedFin helps you in unleashing your growth potential by raising a tailor-made debt offer and flexible repayment cycles. It extends the cash runway by providing an extra cushion of cash to achieve your company’s next growth milestone without delay. The benefits are as follows:

In an economic situation that has forced many businesses to clip their wings, a start-up that can develop ahead with growth plans will win an outsize benefit.

If you invest more into growth, this means you double GTM investment with zero cash flow influence.

You are shifting your spending to something else i.e. product development, market expansion, etc that will ultimately help you in the further growth of your business.

Further, you can extend your runway to your desired minimum.

So you can use CAC financing or RBF to free up capital, even if you are taking other measures across your business to increase your runway, to reinstate the growth initiatives and expansion plans you had to cut. You can also look at it as a means to extend your runway. 

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