The Upside of the Downturn: Part 3

A recession is a great time to be a startup. (Or just think like one.)

Richard Branson, Tim Ferris and Warren Buffett all agree on one thing: a bad recession is a good opportunity.

In part two of The Upside of the Downturn, we talked about how recessions are the best time to grow your customer base, cheaply. Or, as Warren Buffett famously said, “Bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked down price.”

And there is another type of business that thrives in recessions.


Richard Branson and Tim Ferris are among those who agree a downturn is the best time to start up. And the media loves stories about entrepreneurs who thrive in recessions specifically because their backs are against the wall. They have passion and grit. They bake in low overhead. They have nothing to lose by pivoting to a new business model.

And all that is true.

But there’s another reason so many successful businesses were born in lean times. A reason the headlines tend to overlook.

Startups naturally gravitate towards the ideal ratio of LTV:CAC.

Even if their founders didn’t realize it, they were operating based on sound, tried-and-true marketing formulas.

“Um, LTV:CAC? What’s that?”

One of a marketer’s most important jobs is to understand and allocate resources to optimize two critical metrics.

CAC is the Cost to Acquire a Customer.

It’s the sum of all the salaries, costs, and overhead you need to get someone to buy your product or service. Usually, good marketers find ways to lower it.

LTV is the Lifetime Value of a Customer.

It’s the amount of profit you derive from the average customer. And usually, marketers try to raise it as high as possible.

In a previous blog post, “Why You Don’t Need A SEO Case Study,” we talked about how to calculate each number. And you can get an even deeper dive if you order our guidebook, The Unified Marketing System.

What’s interesting now though, as the world stands on the brink of a recession, is the ratio between the two.

At estound, we find venture capital-driven startups often keep their LTV:CAC as low as 1:1 to 2:1, chasing scale at all costs. Growth-oriented companies usually have ratios between 3:1 and 5:1, which lets them acquire market share while staying in the black. And successful ongoing enterprises hold their LTV:CAC ratio between 6:1 and 8:1. This allows them to prioritize profits while still allowing for some growth.

But during recessions, even the most established marketers win if they drop their ratio to around 3:1.

This allows them to start buying up market share at a cheap price. And then, when the business cycle brings the economy back, they blow past their competitors.

The take-home? There’s science behind startup success.

If you’ve made it this far through The Upside of the Downturn series, you’ve got some ideas on how to approach the recession – and use it to your advantage. And there’s something else we hope you’re walking away with.


Newspapers and politicians love doom and gloom. But business people? We don’t have time to crawl behind the nearest couch. So take a deep breath, remember the fundamentals, and then do what you do best:


We’ll be standing by if you need a round of applause.

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Drop us a note and we'll coordinate a time to discuss where your marketing has hit a wall and how UMS might help you break through.

The UMS method has transformed our business. The discipline it gave us helped us survive through tough times and then thrive with years of double-digit growth. This process works and we are evidence of it.

David DeCamillis
VP Sales & Marketing, Platte River Networks