You can’t be an entrepreneur without a healthy streak of optimism. There’s just no way you can survive the gruelling task of trying to convince yourself and investors to believe in a dream while shrugging off a steady stream of rejection. But while optimism might be a crucial personality trait for entrepreneurs, it’s often accompanied by self delusion lurking nearby in the bushes. This could mean convincing yourself of product/market fit when there isn’t one, or forecasting an unrealistic CAC (Customer Acquisition Cost).
I’ve seen many startups solve the product/market fit problem, only to fail when the cost of acquiring and monetizing customers turns out to be higher than expected. Previously, I’ve talked about how to balance CAC with Customer Lifetime Value (LTV), but I didn’t go into the gory details of how a crafty entrepreneur goes about keeping CAC low.