Transparent Growth Measurement (NPS)

Ratio of Customer Lifetime Value to CAC

The Ratio of Customer Lifetime Value to CAC is a way for companies to estimate the total value that your company derives fromeach customer compared with what you spend to acquire that new customer.

Why is it important to know LTV:CAC?
  • Throws light on the ROI generated by your sales and marketing team.
  • Indicates the total value your company gets from each customer against the amount you have spent to acquire that new customer.
  • Helps you strike the mean path by keeping this ratio within a normal range, neither too high nor too low.
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Do you all know that it’s more costly to acquire new prospects than to retain existing ones! That’s why extending your CLV is essential to a healthy business model & overall business strategy… Don’t believe us? Here is an Ebook on 7 vital metrics every startup founder should know – you need to read if you want to increase profitability, retention and overall ecommerce success.


Why these 7 metrics are significant for your business and should be measured at regular intervals?

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Answers to Frequently Asked Questions about Marketing % Of Customer Acquisition Cost

What is LTV(Lifetime Value)?

LTV is a (Revenue the customer pays in a period – gross margin) ÷ Estimated churn percentage for that customer

What LTV:CAC Means and Why It Matters?

The higher the LTV:CAC, the more ROI your sales and marketing team is delivering to your bottom line. However, you don’t want this ratio to be too high, as you should always be investing in reaching new customers. Spending more on sales and marketing will reduce your LTV:CAC ratio, but could help speed up your total company growth.

What is the LTV formula?

LTV = ARPU (average monthly recurring revenue per user) × Customer Lifetime. Using churn, you can also determine lifetime value. (Which is a number you likely have more readily available). User churn / ARPU equals LTV. Your lifetime value will decrease the higher your user churn rate.

What is the difference between LTV and LTC?

It contrasts the loan amount (“loan”) with the estimated post-construction value (“value”) of the structure. Similar to the LTC ratio, we use the actual loan amount for the “loan” portion of the LTV ratio. However, the value is arbitrary; therefore, a property assessor evaluates it.

What % of LTV is good?

< 80% A healthy loan-to-value ratio, as a general guideline, shouldn’t be higher than 80%. A high LTV is anything above 80%, meaning borrowers may pay higher borrowing fees, need private mortgage insurance, or even be turned down for a loan. LTVs, more significant than 95%, are frequently viewed as unsatisfactory.

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