Stop losing money on ads! Grab your copy of Tier 11’s FREE calculator with all the actors and formulas you need to determine the most important metric in your marketing efforts.
Download Your nCAC Calculator Now: https://www.tiereleven.com/ncac
Joining us today is Cole Turner, Growth Strategist at Tier 11. We break down how incorrect nCAC (New Customer Acquisition Cost) calculations can make you believe you’re profitable when you’re actually hemorrhaging cash. Cole walks us through a real-world example of a beauty brand, showing how fixing their nCAC revealed a massive discrepancy that changed their entire business strategy.
We also discuss how adjusting your ad spend to align with real business costs can actually help you scale. If you’re spending on ads without understanding your real margins, you could be scaling in the wrong direction. Join the conversation now and get your business metrics in order before your next big marketing push.
In this episode:
03:45 What nCAC is and why it matters
05:10 Case study: nCAC error in a beauty brand’s strategy
10:40 Common mistakes in nCAC calculations
13:13 How to calculate nCAC accurately
18:50 How overheads factor into nCAC on scale
23:07 Why ad spend efficiency isn’t enough
25:53 The importance of knowing your numbers
Unlock the Ultimate Marketing Advantage With Our Creative Diversification Package!
Get 30 monthly deliverables,10 ad types, and access to the Tier 11 data suite. Available exclusively for 11 lucky businesses at: https://www.tiereleven.com/apply
Resources mentioned:
Andromeda Episodes: https://perpetualtraffic.com/?s=john+moran
Episode 744: The Pros and Cons of Meta’s New Advantage+ Creative Image Generator Tool: https://perpetualtraffic.com/podcast/episode-744-the-pros-and-cons-of-metas-new-advantage-creative-image-generator-tool/
Episode 743: Stop Pausing Winning Ads! Andromeda Ad Strategy That Changes Everything: https://perpetualtraffic.com/podcast/episode-743-stop-pausing-winning-ads-andromeda-ad-strategy-that-changes-everything/
Creative Diversification Playbook: https://perpetualtraffic.com/wp-content/uploads/2025/10/Creative-Diversification-Playbook-Practitioner-Guidance.pdf
Marketing Performance Indicators Checklist: https://www.tiereleven.com/mpi
Listen to this episode on your favorite podcast channel:
Follow and listen on Apple: https://podcasts.apple.com/us/podcast/perpetual-traffic/id1022441491
Follow and listen on Spotify:
https://open.spotify.com/show/59lhtIWHw1XXsRmT5HBAuK
Subscribe and watch on YouTube:
https://www.youtube.com/@perpetual_traffic?sub_confirmation=1
We appreciate your support!
Visit our website: https://perpetualtraffic.com/
Follow us on X: https://x.com/perpetualtraf
Connect With Cole Turner:
- LinkedIn: https://www.linkedin.com/in/coleturner98
Connect with Ralph Burns:
- LinkedIn – https://www.linkedin.com/in/ralphburns
- Instagram – https://www.instagram.com/ralphhburns/
- Hire Tier11 – https://www.tiereleven.com/apply-now
Connect with Lauren Petrullo:
- Instagram – https://www.instagram.com/laurenepetrullo/
- LinkedIn – https://www.linkedin.com/in/laurenpetrullo
- Consult Mongoose Media – https://mongoosemedia.us/
Thanks so much for joining us this week. Want to subscribe to Perpetual Traffic?
Have some feedback you’d like to share? Connect with us on iTunes and leave us a review!
READ THE TRANSCRIPT:
The #1 Mistake That’s Secretly Killing Your Meta Andromeda Ads With Cole Turner
00:00:00:02 – 00:00:16:09
Cole
Hancock is often an overlooked metric. Even a small percentage difference in how you’re calculating those can take you from breaking even or profiting and growing into a sustainable large company. Or on the contrary, you could be losing money on every single order.
00:00:16:11 – 00:00:24:13
Lauren
There’s huge companies that blow up overnight if they don’t get acquired by VC firm because they’ve overspent without knowing these important metrics.
00:00:24:14 – 00:00:29:05
Cole
First step, if we want to determine our ncoc is.
00:00:29:07 – 00:00:39:13
Ralph
Hello and welcome to the Perpetual Traffic Podcast. This is your host, Ralph Burns, founder and CEO of tier 11. Alongside my incredibly amazing co-host.
00:00:39:15 – 00:00:42:00
Lauren
Lani Butcher, the founder of Mongoose Media.
00:00:42:04 – 00:01:00:21
Ralph
So glad you joined us here today. And yes, I did get at a blush yet again. If you’re a Director of marketing, VP of marketing and CMO, running a company, trying to figure out this whole digital marketing thing or you’ve arrived at the right place, we teach people how to do this stuff the right way through metrics that matter and growth at scales.
00:01:00:21 – 00:01:20:19
Ralph
And speaking of metrics that matter, we’re going to be talking those metrics today. The most important metric of all. Lauren, cost to acquire a new customer. Otherwise known as Ncac. If you say it fast, you might get the, you know, the disapproval of the, Apple podcast rating system.
00:01:20:20 – 00:01:23:09
Lauren
How would you do it in your Boston accent? You can say in.
00:01:23:09 – 00:01:37:18
Ralph
Kakak kak Ncac so, today’s show, we have a special guest. It’s sort of funny that we’ve got this guy on after we were trashing the shoe buyers in the whole last episode.
00:01:37:20 – 00:01:43:08
Lauren
No. We’re trashing. We’re saying goodbye, RIP to what a media buyer used to, right?
00:01:43:10 – 00:01:49:09
Ralph
Right. Not our media buyers. Because our media buyers on our travel vlog. Mazing. Because they’ve all these.
00:01:49:09 – 00:01:50:11
Lauren
Strategies.
00:01:50:13 – 00:01:51:04
Ralph
And yet they’re.
00:01:51:04 – 00:01:53:21
Lauren
No longer media buyers. Their media strategy is straight.
00:01:53:21 – 00:02:18:14
Ralph
Oh, I like that. Actually. That’s that’s good. We might need a change in vernacular or at tier 11. But anyway, today we have the King of the mullet, the pressured into getting married Cole Turner growth strategist extraordinaire from tier 11 here today showing up all flannel up from the South Carolina. Welcome to the show Cole Turner.
00:02:18:16 – 00:02:20:23
Cole
Thank you. Happy to be here.
00:02:21:00 – 00:02:34:18
Ralph
So we’re giving you a hard time before it’s like here your girlfriend is the one that’s pressuring you to get married, but you’re the one who’s getting retargeted for all the wedding rings, so that should tell you right there. That’s wrong. She should be the one getting retargeted. Well, no.
00:02:34:20 – 00:02:48:11
Lauren
No, I’m defending her. Absolutely not. You want your partner to do something? We all know. We speak to the phone, we start looking on their stuff. We leverage the algorithms to what we want. I think it’s fair play.
00:02:48:13 – 00:02:51:05
Ralph
I don’t know, it’s just unfair being a guy like, why do you.
00:02:51:06 – 00:02:52:06
Lauren
Oh come on.
00:02:52:08 – 00:03:04:24
Ralph
Yeah, I got off early. I got easy, though. 26 years ago. My wife didn’t want a wedding ring. We just got wedding bands, like, how about that? And she didn’t want a wedding. We actually eloped. Did you know that? Lauren.
00:03:05:01 – 00:03:06:17
Lauren
I ever tell you that? I did not know that.
00:03:06:17 – 00:03:09:24
Ralph
So I got off easy. So I feel bad guys like.
00:03:10:03 – 00:03:15:05
Lauren
I’m here for elopement. I asked for an elopement. That’s best.
00:03:15:07 – 00:03:22:02
Ralph
That’s. Yeah, it’s totally awesome. It’s my best friend, my sister in law, my brother in law. On a beach and on Cape Cod. There you go. Done.
00:03:22:07 – 00:03:27:20
Lauren
Oh, see, my old man was with Elvis in Vegas and a FaceTime with my mother in law in Italy.
00:03:27:24 – 00:03:29:07
Ralph
Oh, really? I didn’t know you eloped.
00:03:29:08 – 00:03:30:05
Lauren
Yeah.
00:03:30:07 – 00:03:49:24
Ralph
Oh, geez. Look again, another thing we have in common here. All right, well, instead of boring the audience with our elopement stories here. But, we’ll continue to just press your call here just because we like to give our guests a hard time. As first time on perpetual traffic. Let’s get to the serious stuff. Ncac or Ncac, as they say in Boston.
00:03:50:01 – 00:03:59:20
Ralph
The most important metric, I would say call as growth strategist extraordinaire at tier 11. Would you agree? Disagree. Like what? What are your thoughts on this?
00:03:59:23 – 00:04:22:09
Cole
Ncoc is 100% the most important metric for any business, because if you just look at something like TAC, for example, like Total Blended Calc, you are looking at a picture of growth within the business. So we might have a great shock on meta, for example, but we might be retargeting everyone who’s already in the bottom of the funnel that is, purchase three times and just placing a view through conversion on them.
00:04:22:13 – 00:04:36:18
Cole
And then they were going to buy anyways. And we all come together and say, hey, our cock is great. And then we come back six months later and it’s like, where’s the cash in the business? Where’s the lifeblood? So Ncac, I think is a measure of the growth of the business.
00:04:36:18 – 00:04:56:06
Ralph
Yeah, I agree, I mean, I don’t want to put words in your mouth, but I mean there’s obviously there’s NPIs that are important, like the marketing performance indicators. All of them are important. And of course you can get that over a tier 11.com/npi. But today’s show is actually all about Ncac, which is front and center on those NPIs and the spreadsheet that we’re gonna actually go through today.
00:04:56:08 – 00:05:16:24
Ralph
You, the listener, or you, the watcher, can get, that over on our site for free tier 11.com/ncac and that is Ncac. If you don’t know how to spell, there’s no KS in there, I’m pretty sure. So today you actually found a hole in the one that we were doing using this. Oh, I love what we find there.
00:05:16:24 – 00:05:39:22
Ralph
I know we find our own mistakes, so we now fix that, for human. Yeah. So the challenge was this. And I think I actually did a video on this a while back. Chalkboard video. But it was a beauty brand that was reporting to you as the growth strategist what their costs were, but it didn’t quite measure up.
00:05:39:23 – 00:05:54:19
Ralph
Can you sort of set the stage for us, like how we found this mistake, how we rectified it, and we’ll even go through the calculator. And of course, we’ll be doing this over on our YouTube channel, Perpetual Transcom Forward slash YouTube if you’re just listening. So, so set this one up for us.
00:05:54:21 – 00:06:28:02
Cole
Yeah. So the context was we had established and goals for the brand itself. But I noticed that when we would speak to the client, there was like a sense of urgency and a sense of confusion almost about the business health as a whole. So it was like, how are we determining this? Uncrc I just and just a lot of other ancillary questions that led me to think that the business might not actually be as healthy and that the, performance might not be as strong as what we originally had thought.
00:06:28:04 – 00:07:00:07
Cole
So I went through and I looked at the calculator that was being used to calculate their ncoc, and I realized that the cost of sale percentage, which is essentially the portion of your revenue per order that is eaten up by variable costs, I noticed that that was calculated using just cost of goods sold. And so we had an artificially low end goal, because this cost of sale percentage was incorrectly calculated and was too low.
00:07:00:09 – 00:07:09:23
Cole
So we were going with an incorrect that we thought was profitable or break even for the business, when in reality they were hemorrhaging cash to acquire new customers.
00:07:10:00 – 00:07:32:08
Ralph
Yeah. So in those cogs which a lot of people just think of as let’s say you’re manufacturing a product, it is the that is the cost of the raw materials, wholesale cost like that cost that goes into the physical goods, like, look at, you know, any like bottle of moisturizer would be the plastic bottle. It’d be the stuff that you actually put in it.
00:07:32:08 – 00:07:52:03
Ralph
And then the top and then the packaging that’s cost of goods sold. But it’s if you look at that as cost of sales, it’s actually incomplete. So maybe just draw a differentiation between like what people sort of traditionally will think is like cost of goods sold, but what’s actually cost of sales and how you equate that in this particular case.
00:07:52:08 – 00:08:14:16
Cole
Everyone that I know or I’ve seen when they talk about gross margin is your revenue minus the cost of goods sold. And what you mentioned is exactly correct. It’s just what they think is the fulfillment cost. But true cost of sale percentage is all of the variable costs that scale with orders. So this is not overhead. Overhead would be things like salaries.
00:08:14:22 – 00:08:36:17
Cole
It would be things like if you’re paying on an agency, like a flat monthly retainer of $5,000 per month, those things are not variable because they don’t scale with volume. The true metrics to look at if you want to calculate cost of sale percentage would first be cost of goods sold. This is, as Ralph mentioned, raw materials product cost, packaging.
00:08:36:19 – 00:09:12:02
Cole
There’s also fulfillment and shipping costs too. This is things like warehouse postage, delivery fees as well also marketplace and platform fees. So you think your Amazon fees, those scale with volume. Shopify fees scale with volume. Of course credit card processing fees also discounts, returns and refunds. And those are really the big ones. And when you calculate all of that and you get a much more accurate picture of what is the contribution margin or the profit dollars left over after all of those things are taken out.
00:09:12:02 – 00:09:36:03
Ralph
So in this case, the numbers that were being fed to you guys, it wasn’t necessarily. And I’ve actually seen this spreadsheet, which is which is fine because it’s a lot of times it’s not broken down individually into individual like sort of line items for those cost of sales, but it’s just sort of an aggregate number. So you were taking that aggregate number, but they weren’t including a lot of these other things into their calculations that they were feeding you.
00:09:36:03 – 00:09:53:24
Ralph
I mean, there’s a there’s an accounting term for it. It’s like when you send PNL to somebody about like your costs or whatever it happens to be, whatever financial metric that you’re trying to measure. You know, there’s there’s fields that are hidden. And this is very easy to do inside of QuickBooks or whatever happens to be. So you guys are getting that information, but not the full story.
00:09:54:01 – 00:09:59:03
Ralph
And as a result of that, the cake changed wildly.
00:09:59:05 – 00:10:20:12
Cole
Yeah, yeah. I just think that they might have not understood the importance of this calculation. They might have thought that this is just like routine, like goal setting or something arbitrary or, you know, not necessarily like pivotal, pivotal to the health of the business. So we were just using kind of a blanket number that had been provided, I think maybe even an estimate.
00:10:20:12 – 00:10:28:09
Cole
Not sure, but it definitely wasn’t the breadth of information that you have to deep dive into in order to really calculate this accurately.
00:10:28:11 – 00:10:52:19
Ralph
Right, right. So when you guys are and we’ll get into the screen share here in just a second. So if you’re not watching this, definitely check it out over a perpetual traffic.com/youtube. We’ll get to that in just a second. There’s also another cost that a lot of people don’t even consider. So when I figure out Ncac, I also want to put in you mentioned returns, super important returns, refunds.
00:10:52:21 – 00:11:14:08
Ralph
That should be a part of this whole thing as well. And sometimes that might be five, ten, 15%. If it’s over 15%, you probably have a you might have an issue with your product itself. I always say like 20% or fulfillment. Yeah, fulfillment for sure. So there is there is that component to it. But there’s this underlying operating expenses which does not vary.
00:11:14:10 – 00:11:38:09
Ralph
And I think that’s where people get a bit confused on cost of sales, cost of goods, because that opex, which is does not fluctuate with volume, that’s always there. And that’s taking money out of your bank account every single month, like for example, all the freaking softwares that we pay for it to your 11, which is a staggering amount every single month like that doesn’t fluctuate.
00:11:38:11 – 00:11:56:00
Ralph
If I have $1 million in sales or $100,000 in sales, that’s the same no matter what. So like when you’re figuring this out, do you talk to the client about even that fixed cost as well as a factor in determining and or is that sort of a separate conversation?
00:11:56:02 – 00:12:21:04
Cole
Yeah, it’s a great question. It’s not really a factor in determining Ncac, but it is extremely important when determining the budget. And that’s something that I haven’t really seen many people talk about, that you can actually calculate the required ad spend needed to get over the overhead. So like let’s say for example, a dramatic polarized example where we have an NCI goal of $25.
00:12:21:10 – 00:12:48:15
Cole
Right. And our actual Ncac is $10 and we’re spending $500 a month on that. We might say great. Our Ncac looks fantastic, but we have $25,000 in overhead every month, and we’re not spending enough to generate the margin dollars to overcome the overhead. So it’s a separate conversation from the Ncac calculation, but it is still imperative to know how much you need to be spending.
00:12:48:15 – 00:12:52:10
Cole
And sometimes people need to be spending more and they don’t understand that.
00:12:52:12 – 00:13:13:03
Ralph
Right. And that was I remember when this came up and you did a video for I forget which channel it was inside tier 11. You’re like, they actually need to be spending more instead of less because they’re barely even covering their operating expenses. Exactly. Which I think sort of bent some some minds there on the client side, like it all made sense.
00:13:13:03 – 00:13:31:00
Ralph
So maybe we can get into the screen share here and kind of show people how to do this. Because like I said, I think this is we’ve talked about this many times here on the show, but I don’t think this can be underscored enough because we actually thought we had sort of figured this out. And then we brought this client on.
00:13:31:00 – 00:13:49:09
Ralph
They had listened to this show. They had been followers of us for years, and they didn’t quite get it right. So the reason why you’re actually on the show here today is to teach people how to do this stuff the right way. So why don’t we get into the screen share? You can kind of get it, explain it a little bit further instead of us sort of theorizing it here.
00:13:49:11 – 00:13:53:12
Cole
Of course, you guys see my screen.
00:13:53:14 – 00:13:55:04
Ralph
Yes.
00:13:55:06 – 00:13:56:20
Lauren
Awesome.
00:13:56:22 – 00:14:07:11
Cole
Okay. Perfect. Yeah. So this is the calculator here. This is V3, a courtesy of me. We were on V2 before I came around, so I’m an innovator.
00:14:07:13 – 00:14:08:16
Ralph
But anyway,
00:14:08:18 – 00:14:10:06
Lauren
Lauren in the making.
00:14:10:08 – 00:14:11:07
Cole
That’s right.
00:14:11:09 – 00:14:12:13
Ralph
He is.
00:14:12:15 – 00:14:15:19
Cole
That’s right. Yeah. And so I’m going to Ncac theorist.
00:14:15:21 – 00:14:26:08
Ralph
He is, he is. He’s on the vanguard of hacking. So. Right. All right. So perpetual traffic.com/youtube if you’re not watching, take it away.
00:14:26:10 – 00:14:47:21
Cole
Oh. So yeah, the first step, if we want to determine our end cog is for us to determine our lifetime value. So lifetime value here we have for this example. This is just taken directly from Shopify reports. But we have our first order. There’s our AOV right here essentially from this called month one. But this is like the point of the first order.
00:14:47:21 – 00:15:19:06
Cole
We’re averaging a $49 AOF. And then we have our 12 month LTV here. We can see for this particular client the LTV does increase over time, but that’s not extremely important in determining the actual Ncac. Really this month, one number here I would say is the kind of the main metric to look at, because unless you’re a VC backed business that can afford to expend like hundreds of thousands of dollars in cash, you don’t want to look at like month 12 revenue or A or B to determine your Ncac.
00:15:19:08 – 00:15:43:00
Cole
You want your impact to be what can I spend? And either break even or become profitable on the first order? But that being said, this month one AOF here is $49, and this example, we just need to put that information right here. It’s just manual entry. Then on the step two tab down here at the bottom, this is kind of the meat and potatoes of this sheet so to speak.
00:15:43:02 – 00:16:05:10
Cole
We have our cost of sale percentage here, which as we defined earlier is not just cost of goods sold. It’s all of the variable costs that go into the business. And then we also can input our overhead here. And we have for this particular example we have 37.5 ish thousand for overhead. That’s not used to calculate Ncac. We can talk about that later.
00:16:05:10 – 00:16:30:04
Cole
We kind of touched on it already really the cost of sale percentage is what’s used. And from there we can calculate the gross margin. So to back up a second, the way to calculate cost of sale percentage is essentially all of your variable costs divided by revenue. And then you multiply that times 100 to turn it into a percentage.
00:16:30:06 – 00:17:03:06
Cole
So let’s say that, for example, we had our cost of sale percentage just calculated using Cogs. We might have 32%. That’s what that cost of sale percentage turns into. And if we look down here at the bottom, we can see that that contribution margin number has now changed. And contribution margin is effectively the gross profit that you have after the order for that $49 order that we had on step one, 32% of that goes to our cost of sale percentage.
00:17:03:08 – 00:17:24:22
Cole
The other 33 is margin that’s left over. You can think of it as the fuel to grow your business or do with what you please. Right. It’s the profit before ads, before overhead. But going back a second, we can see how dramatic a change in the cost for sale, cost of sale percentages and the effect on contribution margin.
00:17:24:24 – 00:17:58:18
Cole
In the previous example, we had a $33 contribution margin. With the correct calculation, we have a $24 contribution margin, last step on the actual Ncac target itself. This is pretty much calculated automatically. So if let’s say we put in here our desired profit margin per new customer as 0%, which is we want to breakeven our new customers, then we can see that our max allowable Ncac is equal to the contribution margin.
00:17:58:20 – 00:18:23:07
Cole
So that means that that $24 in gross profit we had left over. If we spend all of that, get one new customer, we’re breaking even. Right? So that’s why it’s extremely important to have this cost of sale percentage. Correct. Because if we would have miscalculated this, and we thought that our actual max allowable Ncac was $33 and we spent up to that, we would be hemorrhaging.
00:18:23:07 – 00:18:46:19
Cole
What is that $9 right, per order. And we would be literally, if we’re scaling and spending more, we’re losing $9 for every customer we bring into the business. And going back to my first point, many brands can’t afford to do that. So yeah, it’s a really simple calculator. It’s really easy to use. And, you just need to make sure that you calculate your cost of sale percentage accurately using this equation.
00:18:46:19 – 00:18:50:06
Cole
And the sheet and the handy dandy sheet. We’ll do the rest for you.
00:18:50:09 – 00:19:18:20
Ralph
The part of this that, I thought was an interesting analysis is based upon their operating expenses. So overheads, opex, overheads, whatever you wanna call it. The same things they have. They’re carrying basically $37,000 per month in those overheads, which are salaries, legal fees, you know, office rent, whatever it happens to be, we’re pulling that number. They’re sending that to you.
00:19:18:20 – 00:19:50:12
Ralph
You’re not getting a breakdown of that. I sort of have to assume, how does scale affect that? Because that is something that when I do an care calculation and say, you have to think about this, you have to consider it, but there’s a point of where you can actually turn it on its head and cover those costs if you have the right Ncac, because in this particular case, you’re going for basically a zero profit on that contribution margin.
00:19:50:14 – 00:20:08:11
Ralph
On month one and they’re making their profit month three six all the way through to 12. Point is, is like, how do you factor in those overheads when it comes to scale. So you can at least cover those costs. And the business is actually is is healthy and can pay all its bills.
00:20:08:13 – 00:20:40:02
Cole
Yeah, that’s a great question. So yeah, it’s really it’s a function of the revenue of the business. So I don’t think we have built in calculator on this sheet that will show you how much you need to be spending. But the overhead comes into play when we think about the total revenue of the business. So if we say that like, let’s say we want to break even overall every month we would have revenue minus our variable costs minus our ad spend minus overhead equals zero.
00:20:40:08 – 00:21:06:19
Cole
Right. So if we want to calculate like the required ad spend that we need, we can use an equation of ad spend is equal to the overhead costs divided by the contribution margin. I’ll just call that like C. O divided by Ncac minus one. So it’s a pretty nuanced equation and it probably just looks like gibberish here.
00:21:06:21 – 00:21:17:15
Cole
But it’s a function of having enough of these contribution margins left over. You get over that overhead. It’s that makes.
00:21:17:15 – 00:21:37:15
Ralph
Sense. So it could be like a volume game here. So literally if you know that it’s 37,000, if you divide that by 24, you know how many units you need to sell in order to cover that monthly nut, which is your operating expenses, salaries and all the other sorts of things. Is that just sort of that simple?
00:21:37:17 – 00:22:15:09
Cole
It is. Yeah. But if we’re spending on odds, that contribution margin is also going to have the ad dollars eating into it as well. So we would want to see what we have left over after the ad dollars, which is why we have this handy dandy little portion here of like desired profit margin for a new customer. So if we put like 12.5%, our max allowable Ncac actually becomes $18, then we can use this gross profit right here and say like, okay, if we’re spending 37,000 or we have 37,000 per month in overhead, how many of these $6 do we need to make to overcome that and grow the business?
00:22:15:11 – 00:22:25:06
Ralph
Right. So your argument with these guys was and I forget exactly what their desired profit margin was, was it was it these numbers here? Was it 12.5%. Was it do you recall.
00:22:25:08 – 00:22:27:04
Cole
It is is 12.5%.
00:22:27:06 – 00:22:38:15
Ralph
Those 12.5%. So your your argument was listen, you actually need to scale in order to cover those costs instead of staying stagnant and, you know, contracting your ad spend.
00:22:38:17 – 00:22:57:17
Cole
Exactly. And that’s the counterintuitive approach, because anyone who’s run any kind of ads will think, oh, I need to scale back to get more profitable, to get a higher murr, to get a higher efficiency. But sometimes your efficiency can be too high. And I had always heard people say that throughout my whole career. And I was like, how can you have to have an efficiency?
00:22:57:19 – 00:23:05:14
Cole
And now this is the explanation because you need margin. Dollars are more important than efficiency for the lifeblood of the business.
00:23:05:16 – 00:23:07:08
Ralph
Yeah, yeah.
00:23:07:10 – 00:23:22:03
Lauren
So be like, that’s something relevant you never really talk about. Like when we think about efficiency, it’s like when you go to scale, you know that you’re supposed to hit a minimum of 50 conversions per ads in a seven day period. And we talk about the efficiency of scaling, but not the efficiency of the lifeblood of the business.
00:23:22:05 – 00:23:41:10
Lauren
So wish that you can meet your operating costs. And I think like one thing about this is what you’re doing is you’re blending regardless of like all your paid media efforts, you’re not taking into a fact that your website and organic is supposed to be pulling in some of those sales for those operating costs that your emails are supposed to be pulling in for some of those sales, for those operating costs.
00:23:41:10 – 00:23:56:19
Lauren
You’re saying, like if you had nothing else and need to make sure that your paid ads are covering all of your expenses so that you can continue to grow your business, and then everything from email, website and organic is just profit. Here’s where you need to start.
00:23:56:24 – 00:23:57:21
Cole
Yeah, that’s right.
00:23:58:00 – 00:24:27:10
Ralph
In this case. And an aggressive business to that point. And obviously through the tier 11 data this week you can sort of blend all of this together. You can get a blended end based upon email organic. It’s really not as much on the direct side, but through your paid channels you can sort of get a blended end. And to get more aggressive on, your end goal, you could include those other non-paid channels as well.
00:24:27:10 – 00:24:44:05
Ralph
If your propensity to scale or your inclination for increased risk or whatever it happens to be, you’ve got an, you know, very aggressive revenue goal for that year. You could aggregate that all together into a blended end cake, as opposed to just sort of a paid media Ncac, which is what this is. Correct me if I’m wrong.
00:24:44:07 – 00:25:03:01
Cole
Yeah, that’s correct. But this is I think maybe I misunderstood your question more. This is the ncoc for the business itself. So we’re looking at total business metrics here. Like the all of the costs even including like Amazon cost or the cost of sale percentage. So the unpack here is the uncrc. The blended uncrc across.
00:25:03:03 – 00:25:22:19
Ralph
Is a blended uncrc. Okay. Correct. Yes. Yep. Okay. I mean, you could do it just paid media. And I mean that would be a little bit harder because, you know, obviously your organic search probably is coming from originally a click and or a view that might be, you know, from a paid media ad. So it’s a little bit harder.
00:25:22:19 – 00:25:41:19
Ralph
I mean, I can see what you’re saying as far as having it be a little bit more strict here, but we tend to really gravitate towards like everything’s working together in this universe of media, whether it’s email, whether it’s organic, whether it’s Amazon, whether it’s, you know, at a Google. Yeah. I mean, it’s they’re all ships. Yeah, they’re all working together.
00:25:41:24 – 00:25:53:21
Ralph
So I mean, that email sale didn’t happen just because somebody woke up in the morning and said, hey, I want, you know, Cole Turner Cosmetics, that seems like a great buy for me this morning. Like, yeah.
00:25:53:23 – 00:26:12:09
Lauren
Well, ideally your email is inspiring to do that. But unless, I mean, it’s this whole ecosystem of how you have not just ads, we were asking for direct, but you’re marketing your brand and your marketing the additional benefits or different angles for which you should buy. And then maybe the email is what ultimately results in that last book attribution.
00:26:12:09 – 00:26:32:05
Lauren
It was the thing that pushed you into the pool. But I think with so many of the episodes that we’ve been talking about is like the options that meta needs, the diversity of the creative, you say, content diversification, all those different pieces again, come together and that this is just if you don’t know your numbers, you need to start understanding how the numbers intersect with each other.
00:26:32:05 – 00:26:57:07
Lauren
Because if we’re distracted from knowing the true numbers, lifetime value of a customer, average order of the first, like seeing how much money you can win back from your new customers, and month one to at least break even or see what your cash flow is. I think a lot of business owners lose sight of some of these important metrics and get distracted by all of these other things and like hyper fixate on, well, why is this ad not performing the most?
00:26:57:07 – 00:27:15:01
Lauren
Or why am I not moving this much of this specific product when it’s like, hold on, hold on, let’s go back to I’m going to keep selling what our grandparents did and make sure that we know our numbers, because if we don’t know our numbers, you have no numbers to know. Kind of situation. And just as you’re saying call, you can run yourself out of cash really quickly.
00:27:15:01 – 00:27:29:07
Lauren
And especially for ecommerce brands. I mean, your cash runway is what’s going to allow you to survive or not. Like there’s huge companies that go blow up overnight if they don’t get acquired by VC firm because they’ve overspent. Without knowing these important metrics.
00:27:29:11 – 00:27:30:06
Cole
Exactly.
00:27:30:08 – 00:27:30:17
Ralph
Yeah.
00:27:30:17 – 00:27:47:21
Lauren
I was like rip to several brands that I don’t want to put in the bad juju, but there is some brands that I miss and it’s like, it’s like shocking. Like a lot of things that like I’ve seen and again, like so the last was a graph where it’s like, we have to give grace business owners, there’s so many things out there and we’re like, hey, yeah, makes sense to spend $80,000 on a content video explaining this product.
00:27:47:21 – 00:28:08:00
Lauren
And I’m like, well, hold on, you’re building these customers and it looks like you’re being profitable, but your bank account and your ad networks are completely disagreeing right now. Yeah. And that $80,000 investment before you do that, before you take these next things, let’s make sure you know and understand these numbers higher than $80,000 video could yield an amazing return.
00:28:08:02 – 00:28:38:10
Lauren
Or you could be bleeding yourself to death because you’ve got the wrong numbers and your Ncac goal and your actual have you bleeding $9 per new customer at that point. There’s so many business owners that like, why am I in business? I’m working 72 hours a week and I’m losing $9 for every new customer. Yeah. And when you’re looking at those things, if I were to see that I’m losing $9 per new customer, I would go back to the fulfillment team, to the product team and understand with the lifecycle marketing, why are we not getting that faster?
00:28:38:10 – 00:28:54:18
Lauren
Reorder? Why is it only nine months of value? Why haven’t they come on to a subscription and say, what else have we pushed to them to increase that lifetime value? Like those numbers? If you are bleeding at the front, you need to fix in the back end, or you need to radically change how you’re approaching your customers.
00:28:54:20 – 00:28:55:17
Ralph
Yeah, I totally agree.
00:28:55:19 – 00:29:29:11
Cole
Yeah. So and cock is often an overlooked metric because people think it’s like a vanity metric a lot of the time, like return on ad spend. But we’ve seen here that even a small percentage difference in how you’re calculating those can take you from either breaking even or profiting and growing into a sustainable large company. Or on the contrary, you could be losing money on every single order, and in six months you wake up and the odds look great, but the bank account doesn’t extremely important to know these numbers.
00:29:29:11 – 00:29:38:00
Ralph
And just, my recollection was there was a pretty large difference between your care calculation initially and then when you got the true numbers, do you remember what those numbers were?
00:29:38:02 – 00:29:56:07
Cole
Yeah. I think that we were like originally at like $35 and carat gold based on the old cost of sale percentage. When we redid this, it dropped to $24. So like an $11 difference, what the true income is going forward with profit.
00:29:56:07 – 00:30:03:02
Lauren
And that’s not just breaking even. You were able to get them to a point, a profit, and then again, getting them to the numbers that they want from their paid media.
00:30:03:03 – 00:30:36:04
Ralph
Yeah, that’s what’s the difference. It’s a major it’s a major difference. Well, anyway, well, we’ve, revised the calculator here just a bit. Just add a few more layers to it and you can get that over at two 11.com/ncac, of course. And get that download. And then if you get that download, you’ll probably be pitched for our Q4 end of Q4 special year, or you will get the creative diversification package, but you’ll get the media buying and the tier 11 data suite for free.
00:30:36:06 – 00:30:41:10
Ralph
Yes, 11 lucky businesses call. This is where I pitch tier 11 right here.
00:30:41:10 – 00:30:43:21
Cole
You forgot about. They get to see the mullet too.
00:30:43:23 – 00:31:10:05
Ralph
That’s right. You might actually get Cole on your case to see the mullet live in person on weekly calls like that unto itself, and then you can give them a hard time about getting, you know, getting pressure to be getting married. Anyway, Cole, awesome to have you on here today. And, yeah, thanks for clarifying. I love it when the growth strategists figure out something that I think actually, it was like the director of media buying.
00:31:10:05 – 00:31:27:20
Ralph
Put this together with me. You you found a little hole in it and realized you had to plug that hole. So innovation, props to you for, improving the stuff that we do here at year 11 and obviously sharing it here with the professional traffic audience. So super appreciate, having you on here today. Of course. All right.
00:31:27:20 – 00:31:35:17
Ralph
I have a feeling the mullet will return, Lauren, because he I guess he he made the grade here today. He was a little bit nervous.
00:31:35:19 – 00:31:52:08
Lauren
You know, I approve. I approve of his returning back. Especially when is a chance for us to see where we can improve and see, like, the pieces we know. I’m, like, hiding from the sun because it’s creeping in. No, I think it’s awesome. And it’s a lot to say, like, hey, we this is what was working for us, but we found a way to make it even better.
00:31:52:08 – 00:32:12:07
Lauren
So if you’ve previously downloaded the incorrect calculator, I it’s a great time to, like, revisit if you downloaded it and then never did anything with it, pull it back open. Listen to some parts of this episode again because I think it’s really important. Like this is a level of knowing your numbers that like a CFO or the CEO should know.
00:32:12:09 – 00:32:34:11
Lauren
And I think what’s been great is that a lot of the marketing teams are being held responsible for those financial components when there is not a CFO, especially if you’re a small or medium sized business and you don’t have those resources available. And it’s really important for marketers to know and understand what you’re spending money on, because the two ways that companies can go bankrupt are always overspending on labor, overspending on marketing.
00:32:34:11 – 00:32:38:16
Lauren
And none of us in the marketing space want to be held accountable for the latter.
00:32:38:16 – 00:33:03:17
Ralph
So definitely not. So, do it the right way over a tier 11.com/ncac. And of course, if you want our help with all this and you want the content diversification package with your media buying into your 11 data suite free, hit us up at tier 11.com/apply. All right. Thanks Cole for coming on today. On behalf of my amazing co-host Lauren E Petrillo.
00:33:03:19 – 00:33:06:16
Ralph
So till next show, see you.
