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CMA Final · Entrepreneurship and Startup · Scalability, Scaling up and Stabilisation of Sustainable Business

A startup has 8% monthly churn. Its founder proposes spending heavily on advertising to acquire new users before addressing churn. Which advice is most consistent with sound scaling practice?

The founder should fix retention and unit economics first. With 8% monthly churn, newly acquired users leave quickly, so heavy advertising pours capital into a leaky base. Sound scaling requires demonstrated retention and positive customer economics before accelerating acquisition spend.

  1. AFix retention and unit economics first, since acquiring users into a leaky base wastes capitalCorrect
  2. BIncrease advertising immediately because growth always cures churn
  3. CRaise prices sharply to offset churn
  4. DStop tracking churn as it is not a scaling metric

Explanation

High churn means new customers leave quickly, so extra acquisition spend is partly wasted and unit economics worsen. Scaling should follow evidence of retention and a positive contribution per customer. Growth does not cure churn.

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