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📈 3 Metrics Every Newsletter Operator Should Know

PLUS: How to drive more clicks for your newsletter sponsors..

Author

Kieran Lenahan
August 19, 2024

Welcome to BetterLetter 📧

In today’s email, you’ll learn:

  • The 3 newsletter metrics you need to know 📊 

  • How to calculate each of them for your newsletter 🤔 

  • Tactical ideas to make more money with your newsletter 💰️ 

Let’s dive in 👇️

  • 📊 How to drive more clicks for your newsletter sponsors (link)

  • 😂 When your newsletter makes big promises but doesn’t deliver (link)

  • 🧠 Why marketing is the most important skill set in the new era of entrepreneurship (link)

*These are affiliate links

Know Your Numbers 📊 

I’m surprised by how many newsletter operators, media companies and B2B companies don’t know these metrics:

  • Cost per subscriber (aka CPS, CPL, CPA)

  • Lifetime value of a subscriber (LTV)

  • Payback period

Even if you don’t know exact figures, you should at least have a ballpark idea of these numbers (LTV can be tricky for very new newsletters).

The basic playbook of a newsletter-driven business is this:

  • Increase LTV ($)

  • Decrease cost per lead ($)

  • Decrease payback period (months)

  • Grow your audience (subs)

If you earn more money from a subscriber than it costs you to acquire them and you can afford to wait the duration of your payback period, you have a scalable model.

So let’s define terms.

Then, I’ll teach you how to measure them and give you tactics for improving each metric.

Defining terms:

  • 🫰 Cost per acquisition (CPA): how much it costs to acquire a new subscriber

  • 💰️ Lifetime Value (LTV) of a subscriber: the avg revenue that a subscriber generates throughout their lifespan as a subscriber

  • 🗓️ Payback period: how long it takes you to break even on your acquisition cost

Know these 3 metrics and you can make educated decisions about where to focus time, money and effort.

Cost per acquisition (CPA) 🫰 

This is straightforward if you’re running ads to drive newsletter subscribers.

It’s the number in the cost per result column 👇️ 

a week’s worth of subscribers for one of our clients

For paid ads, CPAs typically range from:

  • B2B: $2-$5

  • B2C: $1-$3

If you’re only growing your newsletter audience organically, it doesn’t cost money, but it does cost you time.

Emma Grede GIF by The Roku Channel

If you want to calculate an ‘organic CPA,’ here’s how to calculate it:

  • Let’s say you value your time at $50/hour.

  • If it takes you 20 minutes to create a piece of organic content from start to finish, it costs you $16.66 to create each post.

  • If you drive 10 new subscribers per post, your organic CPA is ~$1.66 and you can gain subscribers at a rate of 30 per hour of work.

A $1.66 CPA sounds pretty good, but unless you go viral, that means you’ll spend 40 hours just to gain 1200 subscribers.

If you have loads of time but no money, you have a few options:

  • create more content

  • make it faster using tools like Spiral

  • make it higher quality (drive more subscribers per post)

  • sell high-ticket services to drive revenue quickly so you have the option to invest in paid growth

Your goal should be to eventually get off the content treadmill (or at least have the option to).

slow down GIF

newsletter operators on the content treadmill

If you have more money than time, invest in paid ads:

  • It produces more results without requiring more time 🍇 

  • It scales beyond your limited organic reach 📈 

  • You get off the content treadmill 🏃‍♂️

You can do this by either:

  • Learning how to run Meta ads yourself

  • Hiring an agency to handle it all for you (obviously, I recommend ours)

Lifetime Value of a Subscriber (LTV) 💰️ 

CPA gets a lot of attention, as it should.

But many newsletter operators neglect the other side of the coin: LTV.

Simply put, LTV is how much money you make on average per subscriber during their lifespan of being a subscriber.

CPA has a floor. It can’t go below $0.

But LTV is virtually unlimited.

To calculate LTV, you have 3 options:

  1. Use beehiiv’s calculator

  2. Use this simplified formula: Total Newsletter Revenue in Last 12 Months ➗ # of Subscribers

  3. Use this calculator I created (Click File → Make a copy or click here to make your own copy immediately)

With a newsletter driven business, you want your LTV:CPA ratio to be at least 3:1, and ideally 5:1 or higher.

Once you have that, you have a repeatable model.

Aka the more you grow your audience, the more money you will make (assuming you have the systems in place to fulfill new sales).

Let’s look at 2 examples 👇️ 

👉️ Example 1: 

  • You have 10000 subs

  • You made $30k in the last 12 months (1% of subscribers in a paid community at $25/mo)

  • You acquire new subscribers via paid ads for $1

  • The average subscriber stays subscribed for 1 year

Your LTV is $3 and your LTV:CAC ratio is 3:1.

In this situation, you could:

  • 📈 Reinvest profits: Keep growing via ads

  • 🔼 Increase LTV: Offer a new product or service that solves another problem (or the same problem with more effectiveness) for those in your paid community.

    • Examples:

      • Group coaching

      • Self-paced course

      • Cohort-based course

      • One-on-one coaching

      • Done-for-you services

      • High-ticket mastermind

👉️ Example 2:

  • You have 100,000 subs

  • You made $200k in the last 12 months

  • You acquire new subscribers via paid ads for $2

  • The average subscriber stays subscribed for 1 year

Your LTV is $2 and your LTV:CAC ratio is 2:1.

In this situation, you should: 

  • 🔼 Focus entirely on increasing LTV:

    • If you’re a product/service driven business:

      • Survey people who have bought from you → what else do they want // what problems are they willing to pay to solve?

      • See the list above for product and service offering ideas

    • If you’re a sponsorship driven business:

      • Analyze click data → What types of products are people most interested in?

      • Survey people who clicked to better understand their interests

      • Build an ad sales operation to fill 100% of your ad inventory

When it comes to surveying and learning from the audience you already have, here are some important reminders:

  • Don’t make decisions based on only what your audience tells you. Sometimes people tell you they want one thing, but their actions say otherwise. Don’t fall into the trap of only “creating exactly what your subscribers ask for.”

    • Use these three inputs to guide your strategy:

      • What YOU believe your audience wants/needs (what you think)

      • What your audience tells you they want/need (what they say)

      • What they actually do (what they do)

    • Actions speak louder than words. Like Ford said, “If I had asked people what they wanted, they would have said faster horses.”

Rules of Thumb

  • Consumer audience: If your LTV is $10+ and your payback period is less than 6 months, you should be investing in paid ads.

    • You should be able to acquire new subs for ~$2, which gives you a 5:1 LTV:CPA ratio.

  • B2B audience: If your LTV is $15+, you should be investing in paid ads if cash flow is enough to sustain you through your payback period.

    • You should be able to acquire new subs for ~$3, giving you a LTV:CPA ratio of 5:1.

Payback Period 🗓️ 

Your payback period is how long it takes you to break even on your subscriber acquisition costs.

So if it costs $2 to acquire a new subscriber, it’s how long it takes you to make $2 back from the average subscriber.

If you’re spending money on paid acquisition, you can calculate your payback period using this calculator.

(Click File → Make a copy or just click here to make your own copy immediately)

Tactics to reduce your payback period:

  • Use referral widgets like Sparkloop Upscribe and beehiiv boosts

  • Sell a low-ticket offer on your thank-you page and/or welcome email ($99 or less)

    • Premium newsletter

    • Private membership

    • Digital course

    • Swipe files

    • Database

    • eBook

  • Leverage affiliate marketing for an offer that is closely aligned with your audience.

The shorter your payback period, the faster you can reinvest in growth and profit from your growing audience.

👉️ Here’s a summary of the takeaways:

The basic playbook of a newsletter-driven business is this:

  • Increase LTV ($)

    • Offer products or services that solve a problem for your audience:

      • Software

      • Group coaching

      • Self-paced course

      • Cohort-based course

      • One-on-one coaching

      • Done-for-you services

      • High-ticket mastermind

  • Decrease payback period (months)

    • Sell a low-ticket offer on your thank-you page and/or welcome email ($99 or less)

      • Premium newsletter

      • Private membership

      • Digital course

      • Swipe files

      • Database

      • eBook

    • Leverage affiliate marketing

  • Grow your audience (subs)

    • If you have more money than time, invest in paid ads by learning to run them yourself or by hiring us to handle it for you.

🛠️ Tools

To calculate LTV and payback period:

  1. Use beehiiv’s calculators

  2. Use this simplified formula: Total Newsletter Revenue in Last 12 Months ➗ # of Subscribers

  3. Use this calculator I created (Click File → Make a copy or just click here to make your own copy immediately)

There you have it. Get to work 🫡 

Until next time,

Isaac + Kieran

P.S. When you’re ready to grow your newsletter…

Let us do it for you. We help creators, brands, ministries and media companies grow their newsletters so they can drive more revenue.

If you want us to grow your newsletter for you and are ready to invest at least $2k/month on ads, book a call with us here.