Well, in the last post, I realize that it is a really long game if you opt for a business model where your CAC is recovered over a long period instead of up-front. And the smaller your initial capital is, the longer time it will take to scale to a reasonable amount for exit. Another insight was that hey drop shippers are able to multiply their revenue so fast because their costs are recovered upfront, so they can reinvest their revenue back into the business and run more ads. I’m someone who is looking to enter the software space but I want to do something high ticket. Also, I have another constraint that I do not want to create a process-oriented app, but something that is primarily a data flow app with minimal processing. Data that is used continuously in workflows of our clients. So, how do I match these three competing concepts of:

• Software business

• Upfront cost recovery

• Minimal processing application

Well, first artificial constraint I can introduce is of only having annual plans. That way, even if it takes months or revenue to recover the customer acquisition cost, if you are taking years’ worth of revenue upfront, you will, of course, break green. Or just charge higher so that you can cover your CAC. Or there can be other data flow applications with minimal processing that command a higher price point.

from claude:

Examples of data flow apps with minimal processing:

- API aggregators (pull data from 5 sources, normalize it, push to client's system)
- Data sync tools (keep two systems in sync in real-time)
- Monitoring dashboards (pull metrics, display them, alert on thresholds)
- Feed processors (ingest RSS/webhooks, transform format, route to destinations)
- Integration middleware (connect Tool A ↔ Tool B for specific industries)

With high tickets, the mathematics also changes. Instead of looking for 850 user @ $20 month to get that sweet financial freedom, one can go $500-1000 month for like 40 – 20 businesses. And instead of being a game of identifying one archetype of a person, selling to them, and repeating the pattern 850 times, you can identify one business archetype and just repeat it 20-40 times. While there are 8 billion people on the earth, it is really hard to find 850 people with similar interests. But you can really find 40-50 businesses that are similar to each other via tools we have right now because businesses are expected to have certain data available, while individuals enjoy some privacy. And maybe at the start, you don’t even need to run ads. You can directly go for outreach and ask them to try it out and buy. Maybe the reliance on advertisements can be a bit lighter here, but in no way can organic content help much here. It’s too specific to target using organic audience.

Make something that targets a single type of firm, a single critical stage in their workflow and provides clear perceivable output.

Thus you need to have knowledge of different types of industries and forms in them – about their workflows, about the problems in their workflows, and how it is pursued by the workers and the management. In the previous phase, I concluded that coding was not a problem anymore; it was distribution. Now, I have abstracted this whole thing to the level where coding is not a problem, and distribution is also not a problem because the set is way too small. The problem is workflow literacy. The ability to be aware about various workflows, be curious enough to read about them, understand them, and how you can improve them. Lack of it is what will make this endeavor fail. Because when you are targeting 40-50 businesses, who are you even competing with? Come on, it’s not a distribution problem. You can close your eyes, pin 10 times, and still be able to point towards a client who matches your profile because of how advanced filters have gotten about companies these days.

Talk with management consultants, read their books. Read case studies on workflows. Read Read Read. Get intel on workflows.

But one thing I am realizing here is that the faster you make the money flow, the better your business is. In this case, it is recovering your customer acquisition cost as soon as possible. In business with inventory, it’s about reducing your working capital cycle. Because credit exists. You leverage yourself up, you complete a cycle fast enough, now you have more money to double down and pay off the interest. It helps you compound. The faster the cycle, the faster the compounding. You spend money to find work, then you spend money to do the work, then you get the money because you did the work, now you reinvested back into finding more work. Thus, if you make the time between finding work and getting paid shorter, you can just repeat this loop and multiply it, have a lot of those instances running in parallel on a greater scale. Instead of thinking about billions of features, one must be thinking about how I make the cycle faster or at the very least establish it.

As long as you can engineer, establish, and run a cycle that is fast, I think you can grow any business fast, be it product, SaaS, services, or whatever. Maybe a revenue cycle engineer of sorts. Because the valuation or quality of the business is not determined by how good the product is, but by how healthy the cash flow is. Revenue cycle engineering might be one of the core skills of business. How do I create a cycle here that can run fast, and thus the business can grow fast?

Every business reduces to:

1. Spend money to get attention / leads
2. Convert some of that into work
3. Deliver the work / product
4. Get paid
5. Reinvest into step 1

Your job is to minimize the time and leakage between steps.