Nutria: allocating €600k between outbound and self-serve
Nutria sells inventory software to independent restaurants at €180 per month per account, with a 78% gross margin. Blended customer acquisition cost is €2,400 across two channels. Outbound (SDR team) acquires accounts at €3,100 each and those accounts churn at 2.1% per month. Paid search and self-serve trial acquires accounts at €1,150 each, churning at 4.6% per month. The VP of Sales wants the entire €600k acquisition budget behind outbound, arguing that outbound customers are 'clearly better because they stay more than twice as long.' The CFO has not modelled payback. Cash on hand is €1.4M and the company is not yet profitable.
1. Compute monthly contribution per account, LTV, LTV:CAC and CAC payback for each channel.
Read the worked answer
Contribution per account per month = €180 × 78% = €140.40
| Outbound | Self-serve / paid search | |
|---|---|---|
| CAC | €3,100 | €1,150 |
| Monthly churn | 2.1% | 4.6% |
| Expected lifetime (1/churn) | 47.6 months | 21.7 months |
| LTV (€140.40 × lifetime) | €6,686 | €3,052 |
| LTV:CAC | 2.16 | 2.65 |
| CAC payback (CAC ÷ €140.40) | 22.1 months | 8.2 months |
Note the arithmetic of the VP's claim: 47.6 vs 21.7 months is 'more than twice as long,' and it is true - but the outbound CAC is 2.7× higher, so the ratio and the cash cycle both favour self-serve. A channel that returns 2.2× its cost over four years is not obviously better than one that returns 2.7× over two.
2. Evaluate the VP's claim and recommend how to split the €600k, given the cash position.
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Three flaws in the claim.
- It optimises the wrong ratio. Lifetime and LTV:CAC both favour self-serve (2.65 vs 2.16). Outbound only wins on absolute LTV, which is irrelevant if capital is the constraint.
- Cash, not LTV, is the binding constraint. With €1.4M in the bank and no profit, a 22-month payback means €600k of outbound spend sits unrecovered for almost two years. At €3,100 per account, €600k buys ~194 accounts. The same €600k in self-serve buys ~522 accounts at an 8-month payback and recycles cash inside the year.
- CAC is not constant at scale. The €3,100 is a blended historical figure. Doubling SDR headcount brings ramp time, lower-quality territories and quota dilution; expect the marginal CAC to be materially above €3,100 and the marginal LTV:CAC below 2.16.
Recommendation. Put the majority - roughly 65–70% (€400–420k) - behind self-serve/paid search, and cap outbound at €180–200k, enough to keep a presence with the larger accounts and to preserve a channel that may produce expansion revenue. Instrument CAC by cohort and channel before scaling either.
The caveat that matters. The churn gap may not be caused by the channel; it may be selection - outbound sells to operators who are asked qualifying questions, self-serve signs up anyone with a credit card. If so, the fix is qualification in the self-serve funnel, not budget reallocation.
3. What evidence would change your recommendation?
Read the worked answer
Re-run the model if any of the following is true:
- Net revenue retention above 100% in outbound. LTV = contribution ÷ churn assumes a flat account. If outbound accounts add sites or modules and expand 20–30% a year, their LTV is understated by roughly that factor and outbound could reach an LTV:CAC above 3. Ask for expansion revenue by cohort before accepting the 22-month payback as fatal.
- Marginal, not average, CAC. Plot CAC against monthly acquisition volume by channel for the last 6 months. If self-serve CAC is climbing (auction saturation on restaurant-intent keywords), the 2.65 ratio is a historical artefact too.
- Churn measured on logos vs revenue. A 4.6% logo churn with stable revenue per account is a different business than 4.6% revenue churn.
- Payback convention. If the company can raise or has a revolver, a 22-month payback on a 2.1%-churn base is fundable; if it cannot, payback dominates LTV:CAC and the answer hardens toward self-serve.
State the decision rule explicitly: fund the channel with the highest LTV:CAC subject to payback under 12 months, given the cash balance. On current data that is self-serve; on expansion-adjusted data it may not be.