CAC and LTV: The Two Numbers Every Founder Should Know

If you can't answer "what does a customer cost us?" and "what is a customer worth?", every marketing decision is a guess.

Customer Acquisition Cost (CAC)

Total sales and marketing spend in a period, divided by new customers won in that period.

Spent $20,000, won 10 customers = $2,000 CAC.

Lifetime Value (LTV)

Average revenue per customer, times gross margin, times how long they stay.

$1,000/month x 60% margin x 24 months = $14,400 LTV.

The ratio

A healthy business usually aims for an LTV:CAC of 3:1 or better. Below that, you're buying growth you can't afford. Way above it, you may be under-investing.

Why it matters

Once you know these numbers by channel, budget decisions get easy. Put more money where the ratio is strong, and fix or cut where it isn't.

No spin. Just math.