November 06, 2018

Carrying Capacity

In our simulation, we learn that there are different definitions of Carrying Capacity.


If the CFO demands that we maximize profit of acquisition based on one-year profit, then our Carrying Capacity is 37,678 new customers (at an investment of $500,000).

If the CFO demands that we maximize profit of acquisition based on five-year profit, then our Carrying Capacity is 45,000 new customers (at an investment of $1,000,000).

If the CFO demands that we maximize profit of acquisition based on ten-year profit, then our Carrying Capacity is 47,951 new customers (at an investment of $1,250,000).

Notice that the difference between spending $250,000 on customer acquisition and $1,250,000 on customer acquisition isn't great.

Notice that the difference between spending $250,000 on customer acquisition and $1,250,000 on customer acquisition is HUGE when evaluating 10-year profit.

In other words, we frequently optimize for short-term profit, and we wonder why our business never grows in a healthy manner.

Measure Carrying Capacity. If you want a healthy business in the long-term, you have no choice but to know what your Carrying Capacity is.





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