Should you focus on user acquisition or user retention first?
This is a false binary that traps founders into picking a side when the answer is sitting in their analytics dashboard.
The Short Answer
If your retention is below 50%, fix that first. Adding more users to a leaky bucket is burning money. But if retention is solid and you’re growing 30%+, push harder on acquisition channels.
Why This Matters
Founders feel pressure to “grow fast” while simultaneously bleeding users. The instinct is to chase acquisition because it feels like progress. More signups, more downloads, more traffic. The dashboard looks good.
But here’s the trap: acquisition without retention is expensive theatre.
Every user you acquire costs something – money, time, attention. If half of them disappear within a month, you’re not building a business. You’re running a very expensive demo.
The compounding effect works in reverse too. Retention improvements compound over time. If you improve retention by 10%, that 10% stays with you every single month, multiplying across your entire user base. Acquisition improvements are linear – you spend more, you get more, but the economics stay flat.
How This Plays Out
We saw this unfold with a food services company. Their ad campaign was performing well by all the usual metrics – clicks, signups, cost per acquisition looked healthy. So they kept optimizing the acquisition funnel.
Meanwhile, retention numbers were bleeding out month over month.
They kept pouring budget into acquiring users who weren’t sticking around. The real problem wasn’t the acquisition channel – it was that they were targeting the wrong audience entirely. The people responding to the ads were never going to become super consumers. They were discount hunters, one-time users, people who would never come back.
The acquisition numbers looked good. The business was dying.
When they finally looked at retention data, it revealed the actual problem: messaging and targeting attracted the wrong customer profile. Fix that first, and suddenly the same acquisition spend produces users who actually stay.
The Nuance
This 50% threshold doesn’t apply universally.
If your product is a one-time purchase, or something customers buy once a quarter, the retention math works differently. You can’t expect monthly engagement from a product that’s meant to be used annually.
But for most startups – especially SaaS, apps, and recurring purchases – the 50% benchmark holds. Below that, you have a product problem masquerading as a growth problem.
What To Do This Week
Open your analytics dashboard. Calculate your retention rate.
Not your signup numbers. Not your traffic. Your retention rate – what percentage of users from 30 days ago are still active today and making purchases.
If it’s below 50%, stop acquisition campaigns and diagnose why users leave. Talk to churned users. Look at where they drop off. Fix the leak before you turn on the tap.
If it’s above 50% and you’re growing steadily, that’s your signal to push harder on acquisition. The foundation is solid. Now scale it.
The answer isn’t acquisition or retention. It’s knowing which one your numbers are telling you to focus on right now.
Related: How do you get your first 100-1000 customers without a big budget? | What’s the difference between viral growth and sustainable growth?