Ferro Industries: Is the Growth Worth What It Costs?
Ferro Industries sells industrial components subscriptions in Europe. Growth has been strong and the board has asked whether it is profitable growth.
Marketing spends €44 M a month and acquires about 3,017 new customers in that time. Average revenue per user is €2153 a month at a 57% gross margin. Monthly logo churn runs at 1.5%.
Roughly 59% of new customers come through paid channels; the rest arrive organically but are counted in the same blended figure. The CMO reports a healthy LTV/CAC and wants to double the budget.
spend
- new customers per month
- 3017
- monthly marketing spend m
- 44
- paid share of new customers pct
- 59
economics
- arpu monthly
- 2153
- gross margin pct
- 57
- monthly churn pct
- 1.5
derived hints
- blended cac
- 14584
- payback months
- 11.9
- ltv gross margin basis
- 81855
- implied lifetime months
- 66.7
Advise the board. Your answer should provide:
- Analysis — CAC, LTV on a margin basis, the ratio, and payback in months. Show the working.
- Risks — what the blended number is hiding.
- Recommendation — scale, hold or cut, and where.
State any assumptions you make.
80 points, 60% to pass.
- recommendation20
- market analysis20
- risk assessment15
- financial analysis25
Reveal suggested structure
CAC = spend / customers acquired. LTV = ARPU x gross margin x 1/churn. Judge on payback period and on unblended channel economics.