How Would Socrates Review That Customer Acquisition Model?

There is something about being the founder of a company that leads you to believe that you're supposed to be an expert in every discipline, from marketing to software development to creative production.

One of the hardest lessons to learn is how to delegate. One of the most important paths to success is to hire people that are smarter than you in specific disciplines as you grow your team.

This does not mean that you simply handoff decision-making to others. The trick is to come up with a framework for making decisions that enables you, as the CEO, to weigh in, test certain assumptions, and ultimately assess risk and opportunity to agree on the best path forward.

I've written about the importance of modeling out your assumptions rather than just taking high-level guesses and plunging into the deep end. This is not just an important approach to decision-making across your company.

It's also how you can drive decision-making in critical areas even if you're not the expert.

Your job as CEO is to ensure that your team does the hard work of making the case for important decisions. To layout their assumptions. Explain the opportunities. But also clearly explain the risk.

Let's look at two specific examples:

If we are talking about a customer acquisition plan, potentially involving spending 50% of your cash over the next 12-18 months, there better be a detailed model, by channel. That model should outline all of the inputs and outputs that drive down to the projected CPA (cost per acquisition). That CPA should connect to an LTV model.

You should be able to ask about historical performance, regardless of how small your spend has been so far. You're looking for overly optimistic assumptions that break with what's been happening. The hockey stick growth that seems to rely on the sprinkling of magic dust rather than grounded in any performance to date.

You should be able to ask questions about the LTV model. Is your LTV math based upon an estimate of customer value over 4 years? Really? Your company is only 12 months old, and you only have another 18 months of cash, but your ROI is based on 4 years of expected behavior?

When you make your team do the work, you as the CEO can flush out these kinds of assumptions that put your company at risk, even if you're not the performance marketing expert in the room.

You can take a similar approach to your building your technology roadmap. I've seen far too many tech roadmaps that are a wishlist of projects on a scrap of paper. Your VP of Engineering is leading a discussion around prioritization that seems almost impossible to follow. And it doesn't at all feel connected to what you perceive to be the priorities of the company.

Make your team do the work. First, every item on the roadmap needs to have a realistic estimate of the amount of time it will take to complete it. How many sprints? How many people in each sprint on each project? What is the total people weeks investment of time required to complete each project?

Next, any project that is on the tech roadmap needs to have a specific business justification to it. If the project is designed to build a new module in your SaaS product, you should be sure you have a go-to-market strategy ready to go with sales estimates to justify the investment now. If you're discussing back-end engineering work that is designed to improve scalability so that you can serve 100x the current customer base, that work should be connected to when that additional scale might be required.

With this level of detail, you don't need to be a developer or system engineer on par with your CTO to make the best decisions for your company. You have the information you need to balance risk and opportunity for the company.

When you don't require your team to model out their assumptions and expectations as a part of decision making, you are going to be forced into decision making based upon gut and opinion versus data and facts. That's a trap.

I've watched CEOs walk into a meeting full of bravado and certainty, knocking down recommendations from their unprepared team and ultimately making a series of decisions on gut feel. I wrote about the classic line, "If we have facts, let's go with the facts. If all we have is opinions, we'll go with mine."

Make your team bring the facts.

Then, run your meetings like Socrates. The concept of Socratic questioning was described by Plato as:

this rigorous method of teaching to explain that the teacher assumes an ignorant mindset in order to compel the student to assume the highest level of knowledge.

Lead like Socrates. Expect your team to assume the highest level of knowledge in their area of work. Every day they are making plans to spend your two most precious resources. Time and money. Challenge assumptions. Assess risk.

And once decisions are made and plans are executed, bring everyone back regularly to review actual performance against expected results. Adjust quickly. Lean in when something is working better than expected. Be ready to pull back fast when the data tells you to.

That's the value of doing the work upfront to drive decision-making in your company.