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Step 5 of 10 in this module#915 of 1,000

5. Calculating the LTV:CAC Ratio (The North Star)

Part 10 • Customer Acquisition Cost (CAC) and Lifetime Value (LTV)

Once you have both CAC and LTV, calculating the LTV:CAC ratio is straightforward:

<ul> <li><strong>Formula:</strong> `Lifetime Value (LTV) / Customer Acquisition Cost (CAC)`</li> <li><strong>Example:</strong> `LTV ($115) / CAC ($20) = 5.75`</li> </ul> An LTV:CAC ratio of 5.75:1 is exceptionally healthy. It means for every dollar you spend to acquire a customer, they generate $5.75 in revenue over their lifetime. This is the metric that drives scalable growth.

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In this module: Customer Acquisition Cost (CAC) and Lifetime Value (LTV)10 steps
  1. 1Customer Acquisition Cost (CAC): The Price of a New Fan
  2. 2What to Include in "Total Marketing & Sales Spend" for CAC
  3. 3Lifetime Value (LTV): The Total Worth of a Fan
  4. 4Why LTV is Not Just Purchase Value
  5. 5Calculating the LTV:CAC Ratio (The North Star)
  6. 6The Strategic Importance of the 3:1 Ratio
  7. 7How to Improve Your CAC
  8. 8How to Improve Your LTV
  9. 9The Data-Driven Approach: Continual Monitoring
  10. 10Your Actionable LTV and CAC Strategy