The finance guys come in and make an expected lifetime value of a customer. So at $200 a month, that's $2400 a year. But right away they assume the average pers

The finance guys come in and make an expected lifetime value of a customer. So at $200 a month, that's $2400 a year. But right away they assume the average person will stay with them for 5 years, so thats $12,000 per signup. Now that they have this figure, all math is based off it. So if you sign up 100 people you just made 1.2M of expected value. So if you want to be worth 120M you just need to be able to get 10,000 signups. Of course, when reality hits this all falls apart. Customers churn with new competition, so the 5 years was too optimistic. You also to lower your rate to $100 a month to keep up with the market, and costs increase. That's why you try to get acquired before that happens.