Reserv’s $4K ACV Problem: Why Product-Led Growth Isn’t Universal

Reserv’s $4K ACV Problem: Why Product-Led Growth Isn’t Universal

The allure of product-led growth is intoxicating. Low friction onboarding. Viral expansion. Customers signing themselves up while you sleep. It’s the promised land that every B2B founder dreams about. But in a recent episode of Category Visionaries, Martha Dreiling, Co-Founder & President of Reserv, shared the brutal economics of why PLG failed spectacularly for their digital experience platform—and the specific numbers that revealed the truth they should have seen much earlier.

The Math That Doesn’t Work

Reserv’s self-service product had all the surface-level characteristics of a PLG winner. The onboarding was smooth, customers could spin up websites quickly, and the initial traction looked promising. But underneath the vanity metrics, the unit economics were catastrophic.

“It was really easy for them to spin up a site and then not ever talk to us again,” Martha explains. The very feature that made the product attractive—friction-free setup with no sales involvement—also eliminated any meaningful relationship with customers. They’d sign up, build a site, and never expand their usage or spend.

The numbers told a stark story. Average contract value hovered around $4,000 annually. Churn was approaching 50%. And with no natural expansion mechanisms built into the product, there was no path to making the economics work.

“You’re never going to make enough money off of those customers to recoup your cost of acquisition,” Martha states bluntly. This is the core equation that kills PLG strategies: if customer lifetime value doesn’t significantly exceed acquisition costs, you’re not building a business—you’re subsidizing customer usage at a loss.

The Missing Ingredient: Natural Expansion

The fundamental problem wasn’t that Reserv built a bad product. Customers were using it and finding value. The problem was that the product lacked the characteristics that make PLG sustainable over time.

“You really need a product that has that viral loop,” Martha emphasizes. This is the critical factor most founders overlook when evaluating PLG potential. It’s not enough for a product to be easy to adopt. For PLG to work economically, the product needs built-in mechanisms that drive expansion.

These mechanisms can take different forms: network effects where adding users increases value for everyone, usage-based pricing that naturally scales with customer success, features that require inviting teammates, or workflows that surface additional needs over time. Without these expansion drivers, even a perfect onboarding experience just creates a pipeline of customers who extract value at one price point and never grow.

Reserv’s self-service website builder had none of these characteristics. Once a customer spun up a site, they had everything they needed. There was no compelling reason to add more sites, invite more team members, or upgrade to higher tiers. The product delivered its value in a single transaction, then the relationship went dormant.

The Hidden Cost of Self-Service

The absence of human interaction that made Reserv’s self-service product efficient also created a deeper problem: customer disengagement. When customers can get full value without ever talking to the company, they also never develop the relationship or understanding that enables expansion.

Traditional enterprise sales, for all its inefficiencies, creates multiple touchpoints where salespeople can understand customer needs, identify expansion opportunities, and build relationships that increase retention. Self-service optimizes away all of these value-creating interactions in pursuit of efficiency.

For Reserv, this meant they were acquiring customers but had no mechanism to influence their behavior, understand their evolving needs, or identify when they were at risk of churning. By the time they realized a customer wasn’t finding value, the customer had already left.

The 50% churn rate was a symptom of this fundamental disconnect. Without ongoing engagement, customers who hit any friction or found their needs evolving simply moved on. There was no relationship to fall back on, no account manager to problem-solve with, no reason for customer loyalty beyond the immediate utility of the tool.

The CAC Payback Period That Never Came

Let’s walk through the math that should have stopped Reserv’s self-service experiment earlier. With a $4,000 annual contract value and 50% annual churn, the average customer lifetime is approximately two years, generating roughly $6,000 in total revenue before churning.

Now factor in the cost of acquisition. Even efficient PLG motions require investment in product development, infrastructure, customer support, and marketing to drive signups. For B2B software, even lean CAC often runs $1,000 to $3,000 per customer. At those rates, with a $6,000 LTV, you’re looking at barely 2-3x LTV to CAC ratio—below the 3x minimum most investors consider healthy, and well below the 5x+ that venture-scale businesses target.

But the real killer is opportunity cost. Every dollar and hour spent optimizing the self-service motion was a dollar and hour not spent on enterprise customers with $250,000+ annual contracts. The team was grinding to acquire $4,000 customers when they could have been closing deals 60 times larger.

“Average deal size is 250k a year,” Martha notes about Reserv’s enterprise business. Even factoring in the higher cost of enterprise sales, the economics are incomparably better. Close four enterprise deals and you’ve generated more revenue than acquiring 250 self-service customers—with far better retention and expansion potential.

The Product Requirements for PLG Success

Martha’s experience crystallizes what product characteristics actually enable PLG to work at scale. “You really need a product that has that viral loop,” she states. But what does this mean in practice?

First, the product needs to become more valuable as usage increases. This could be through network effects, accumulated data, or features that unlock with scale. Users should naturally want to do more within the product over time.

Second, there need to be logical expansion paths built into the core workflow. If users achieve their goals without any reason to expand usage, you’ve capped your own revenue potential per customer.

Third, the product should create reasons for users to invite others. Whether it’s collaboration features, approval workflows, or shared resources, built-in social dynamics drive organic growth and increase switching costs.

Finally, the economic model needs to align with value delivery. Usage-based pricing, per-seat models, or tiered features that correspond to customer growth ensure revenue scales as customers extract more value.

Reserv’s self-service product failed most of these tests. It delivered value in a one-time transaction, had no collaboration features driving invites, and created no pressure for customers to expand usage over time.

The Courage to Admit Failure

Perhaps the most valuable lesson from Reserv’s experience isn’t about the specific numbers—it’s about decisiveness. The fundamental problems with the self-service model were apparent within months. The economics didn’t work. Customers weren’t expanding. Churn was unsustainable. But the experiment continued for years.

“Don’t be afraid to make hard decisions quickly,” Martha advises. “The longer you wait, the more brand damage you do, and the harder the recovery becomes.”

This is the trap many founders fall into with PLG strategies. The dream is so appealing, and there’s always a rationalization for why the numbers aren’t working yet. Maybe we just need better onboarding. Maybe we need more features. Maybe we need to optimize the funnel. Maybe next quarter will be different.

But sometimes the problem isn’t execution—it’s fundamental product-market fit for the PLG model itself. No amount of optimization fixes unit economics that don’t work. The sooner you acknowledge this, the sooner you can redirect resources toward models that actually have a path to profitability.

The Real Test for PLG

Before committing to a product-led growth strategy, run Reserv’s economics test. Calculate your realistic CAC, expected ACV, and projected churn based on products with similar characteristics. Factor in the absence of expansion if your product doesn’t have natural viral loops or usage-based growth.

If the math shows LTV barely covering CAC, or if you need heroic assumptions about retention and expansion to make it work, PLG probably isn’t your path. No matter how smooth your onboarding is.