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The Number That Will Scale Your Business More Than Anything Else | Ep 739
The Game w/ Alex Hormozi
Understanding the Crucial Business Ratio for Growth and Profit
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The key ratio for growing a successful business is the Lifetime Value to Customer Acquisition Cost ratio. This ratio determines how efficiently a business can make money and predict its scalability. Lifetime Value should be calculated as the lifetime gross profit after deducting the cost of delivering the service or good. Customer Acquisition Cost represents the expenses incurred to acquire a customer. A high ratio indicates the potential for significant growth, efficiency, and profitability. To ensure profitability, it's imperative to analyze the lifetime gross profit and understand the true revenue after deducting costs. Mismanagement of costs can lead to a situation where expenses outweigh revenue, resulting in no profit. By mastering and optimizing the Lifetime Value to Customer Acquisition Cost ratio, businesses can generate substantial wealth and achieve success.
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