Yesterday we were on a call with a potential client that we were having talks with for the past 5 months and they announced they shut down all the operations.
The main reason was making bad decisions and an agency just spending money and not acquiring new customers which put the final nail in the coffin.
When we first started to talk with them in April, they were making $110k a month with really bad profit margins generating small profits.
They just got new results promising agency and were stoked to grow.
Since we were in the talks they gave us Tripple whale and Facebook ads access to just once in a while monitor on how they are doing.
And right off the bat, we saw multiple red flags.
Their NC CPA went up from $80 to $130 and revenue from returning customers went from 40% to 60%
We sent them a report of what is going to happen if they will not attack this situation right away.
This agency was really hard on spending an advertising budget of $50k a month with NC CPA around $280 which was higher than the customer LTV in the first 90 days.
They also told that this was their amazing strategy, getting in a new audience and then creating retargeting campaigns to recapture the audience a few weeks later.
They didn’t even test new advertising angles, new video creatives, they didn’t advertise any offers that acquire customers.
This is was they were doing.
- Multiple campaigns
- One LLA stacked with lookalike audiences
- One interest ABO audience – this campaign was the money spender, each audience got an $80 EUR budget.
- They had only one video running in the ad account, this video was the breadwinner in the ad account 10 months ago.
- They had one retargeting campaign where they were advertising FLASH SALES to capture a new audience.
We saw this and notified these things to the CEO and they decided to talk with the agency to fix things and also let us know that they were in a contract with them until July.
We were kind of shocked by the CEO not firing the agency on the spot and letting things play out so we stepped away.
Then came last week were saw an article published by the CEO announcing that they are closing the company down.
So we reached out to discuss what happened and turns out the company had 80% of its revenue from new customers and 20% of the revenue came from the new customers, so the company investors saw this trajectory and just turned the lights off for the whole business.
The person at fault was the CEO because of bad decision making and the agency that they hired was just the final nail on the coffin.
Here are my takeaways from this story.
- Make decisions fast and fire an agency fast if this feels off in the first two weeks of them getting started.
- Follow your numbers ( What is the cost to acquire new a customer on a weekly basis, follow new customer vs returning customer revenue on a weekly basis)
- Don’t run 20%, 30%, or 40% sale campaigns or Flash sale campaigns in hopes to acquire new customers.
- Create and test offers that help you acquire customers until you find the winning offer. ( This is not that hard )
- Simplify your advertising account structure so you can spend 90% of creating amazing ads rather than wasting hours on account optimization. ( FB ad account daily optimization should not take longer than 10-20 minutes )
Sorry for being all over the place on this post.
Thanks for reading.