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LTV:CAC ratio

LTV:CAC ratio

What does LTV:CAC mean?

The definition of LTV:CAC, or the customer lifetime value to customer acquisition cost ratio, measures the relationship between the lifetime value of a customer against the cost of acquiring them. 

This ratio signals the profitability of your customers, as well as the efficiency of your marketing. 

How do you work out LTV:CAC? 

Consider a company with a gross margin of 82% and a monthly customer churn of 1.5%.If the average customer spent £50, then the calculation would look like this: 

82% x (1/1.5) x 50 = £2,733