Your ad agency won't tell you this.
Scroll through LinkedIn and you'll see endless posts from marketers obsessing over
Meta ROAS and viral Ad strategies.
Meanwhile, the 8 and 9-figure brands I work with are laser-focused on a completely
different metric.
๐๐ถ๐ฟ๐๐-๐ผ๐ฟ๐ฑ๐ฒ๐ฟ ๐ฝ๐ฟ๐ผ๐ณ๐ถ๐๐ฎ๐ฏ๐ถ๐น๐ถ๐๐.
The ability to make a profit on the very first purchase from a new customer - before
retention, before LTV calculations, before anything else.
Here's why first-order profitability is so important:
โ Creates instant positive cash flow from day one
โ Eliminates dependency on retention to break even
โ Allows you to scale ad spend aggressively without debt
โ Minimizes your overall business risk
The 3 key metrics you need to track religiously to achieve first-order profitability:
1. Variable Costs
This includes COGS, shipping, fulfillment, payment processing, etc.
You need to know this number down to the cent.
2. New Customer Revenue
Not blended revenue, not total revenue - specifically new customer revenue.
This is what you're actually generating from first-time buyers.
3. CAC (Customer Acquisition Cost)
Your all-in cost to acquire one new customer.
โ-
When you have these dialed in, you can calculate your contribution margin - the
profit left after all variable expenses.
This is your actual North Star.
I've seen too many brands chase top-line revenue while their costs spiral out of control.
Remember: you can have incredible ROAS numbers and still lose money if your unit
economics don't work.
Fix your first-order profitability, and everything else becomes easier.
This post was originally shared by on Linkedin.