Channel-Model Fit: The ARPU-CAC Spectrum

Channels and business models constrain each other. Picture a spectrum: on one end, low ARPU (average revenue per user), on the other, high ARPU. Your customer acquisition cost has to sit comfortably below your ARPU, which means each end of the spectrum only supports certain channels.

Low-ARPU products (free or a few dollars a month) cannot afford sales teams or expensive paid acquisition. They need cheap, scalable channels: virality, SEO, product-led loops. High-ARPU products (tens of thousands per year) can and usually must fund high-touch channels like inside or field sales, because their buyers don't convert through a self-serve funnel.

The danger zone is the middle: a mid-priced product too expensive to spread virally and too cheap to fund a sales team. Balfour maps nearly all $100M+ companies onto the ends and well-matched points of this spectrum. Your channels are determined by your model, and vice versa.