Introduction
If you don’t know your Customer Acquisition Cost (CAC) and Lifetime Value (LTV), you’re operating blind.
These two numbers determine whether your business is sustainable.
What is CAC?
Customer Acquisition Cost =
Total Marketing Spend ÷ Number of Customers Acquired
Example:
- Spend: $1,000
-
Customers: 10
→ CAC = $100
What is LTV?
Lifetime Value =
Average Revenue per Customer × Customer Lifespan
Example:
- $200 per month
-
6 months
→ LTV = $1,200
The Golden Ratio
A healthy business aims for:
LTV : CAC = 3:1 or higher
How to Track It
You need:
- Marketing spend data
- Customer count
- Revenue per customer
Store this monthly:
- CAC per month
- LTV rolling average
Why This Matters
If CAC > LTV:
- You’re losing money
If LTV >> CAC:
- You can scale aggressively
Conclusion
CAC and LTV are not just metrics—they are your growth boundaries.