Ann: Skyfii Quarterly Business Review and Appendix 4C, page-11

"That has been pushed off, revenue growth is great but at some point that has to flow through to the bottom line. Operational leverage is not yet apparent. "

In terms of maximising shareholder value creation, I'd far sooner have operating leverage start to manifest itself from a Revenue base of $20m (or $25m or $30m), than $12m.

But to get to $25m requires getting and on-boarding more customers. And getting and on-boarding new customers does not come for free.

Conventionally, it is preferable that operating costs are kept low. But that is a bit of an oversimplification that overlooks the fact that some costs are actually "good" costs, where the financial return that gets generated from that cost outlay is attractive and value-accretive. In which case it makes eminent sense for those costs to be incurred.

And that is exactly what is happening at SKF.
(See: https://hotcopper.com.au/posts/39765001/single)

The real question that needs asking at this stage of the company's evolution is not where the operating leverage is, but what is the relationship between the lifetime value of a customer and what it costs to get that customer on-board.

Someone recently kindly sent me a report that suggested that the lifetime value of a customer should be a multiple of at least three times what it costs to acquire that customer.

To date, I have not been able to derive that figure for SKF.
I'd be very keen to hear from anyone that has given it a go.

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