The document discusses the ratio of customer lifetime value to customer acquisition cost (LTV:CAC) metric. LTV:CAC compares the total value a customer provides over their lifetime with a company to the costs to acquire that customer. Calculating LTV:CAC allows companies to assess return on investment from customers and make more informed growth strategies. The document provides steps to determine LTV:CAC, including calculating customer lifetime value and comparing it to customer acquisition cost.

1. METRICS HOW-TO
Ratio of Customer Lifetime Value to
Customer Acquisition Cost
(LTV:CAC)
A publication of

2. Do you know the value
of your customers?
?
Customer Acquisition Cost (CAC)! Prerequisite:

3. More specifically, do you know
the value of your customers
throughout their lifetime with you
as it compares to what you spent
to gain those customers?
?

4. The LTV:CAC metric is the
answer to those questions…

5. What is Ratio of
Customer Lifetime Value to
Customer Acquisition Cost?

6. LTV:CAC
is an estimate of the total value your
company receives from each client
in comparison to what you spent
to acquire that client.

7. Why LTV:CAC
is so Important.

8. LTV:CAC allows you to easily define
your Return on Investment (ROI)
performance and develop a more
educated growth strategy.

9. How to Determine
Your LTV:CAC

10. (Customer Revenue in a Period of Time – Gross Margin)
÷ Estimated Churn % for that Customer
1 Find Your Customer Lifetime Value

11. (Customer Revenue in a Period of Time – Gross Margin)
÷ Estimated Churn % for that Customer
1 Find Your Customer Lifetime Value
2 Compare this to Your Customer Acquisition Cost
LTV:CAC

12. (Customer Revenue in a Period of Time – Gross Margin)
÷ Estimated Churn % for that Customer
1 Find Your Customer Lifetime Value
2 Compare this to Your Customer Acquisition Cost
LTV:CAC
LTV = $500,000
CAC = $150,000
LTV:CAC = $500,000:$150,000 = 3.3 to 1
Example…

13. Congratulations!
You’ve now mastered the metric LTV:CAC.