(Physical product) How/when/why did you know your 1st, 2nd etc. successful business would scale and not only appeal to a few hundred paying customers?

When the cost to acquire each additional paid user:
-is less than the prior user you are in viral growth.
-is equal to the prior user you are growing.
-is more that the prior user than you are starting to reach maturity (but possibly not there yet).
-is equal to what you are willing to pay then you are at maturity.
-is greater than what you are willing to pay then you are in decline.

Define your potential customer segment and ask them (Would they purchase your product at $X? How many/often would you purchase? Etc.). You can do a statistically significant, +/- 4+%, marketing research survey for about $500 at SurveyMonkey.com.

The survey results should help to answer your other questions.

Cheers and good luck!

I started my second business which was a pre-paid telephone service and products to credit challenged customers.

To answer your question, after I researched to find that there was a market for my product, I also looked at is that market reachable? How would I be able to reach it effectively with my current limited budget.

At that point, to be completely honest, I had no idea. BUT, I decided to give it a shot. I then, created partnerships that did not require any money. I partnered with a business who also targeted my specific market. I began selling my product and services to those clients without it costing me any money.

I believe that big money should be used for investing in proven concepts so it is important that you do test and get some revenue as soon as possible. It will not only create a proven model, but will also prove it to yourself.

I would love to answer any more questions for you if you would like to set up a call. Good Luck!

When CAC < LTV, but the trick here is pre-revenue so the only way you could actually really have a comprhensible gauge on this would be if you did a kickstarter, indiegogo to measure "interest" before engaging in real "physical" product development.
Remember a crowdsourcing site goal is not just to fund a product but also can help as a tool to measure "interest". Think of it as a "surveymonkey" for physical products.

"X" amount of interest could actually give you a hint of what the possible outcome could be and if you are starting at an ilussion or not.

Good luck :)

You should not scale until you reach product market fit. You should not scale unless of your cost of acquisition is greatly below your lifetime value of customer. You need to know how to run profitably small before you scale big.

That being said a good benchmark is don't scale until 40% of your users would pay rather than lose your solution.