Don't sell ice to Eskimos

We use this saying in startups a lot – Your business co-founder should be able to sell ice to Eskimos.

I heard this today as well. And that intrigued me.

Should you really sell ice to Eskimos?

(We are assuming that Eskimos have lots of free ice and don’t need your ice)

When selling ice to Eskimos, you will have to put a lot more effort into selling it, vs say selling it to someone in a desert. More effort means more cost of acquiring a customer (CAC).

If they don’t really need ice, because it is already available for them, and that too for free, or very less effort, why will they want to come back and buy from you again?

If they don’t come back to buy from you again, the profits you make from customers over the lifetime goes down. Let’s call this metric LTP for lifetime profits.

Repeat purchase is the most important thing that will make or break the company over a long period.

Now, the value of a business will be proportionate to the LTP and inversely proportionate to CAC.

\[value\approx\frac{\text{LTP}}{\text{CAC}}\]

So higher LTP and lower CAC is what you’re aiming for:

\[value\approx\frac{\text{LTP 🔼 ✅}}{\text{CAC 🔽 ✅}}\]

But selling ice to Eskimos gives you lower LTP and higher CAC:

\[value\approx\frac{\text{LTP 🔽 ❌}}{\text{CAC 🔼 ❌}}\]

Literally, the worst thing you can do for value creation, and by extension, your business.

You should, as quickly as possible, find out whether you’re trying to sell ice to Eskimos. Tracking repeat purchases is probably the best indicator to find whether you’re selling ice to Eskimos.

Don’t sell ice to Eskimos!