TRACTION / 1-10K users
You can get LTV1
than your CAC3
in 4 weeks.
1 Customer Lifetime Value (LTV) is how much your average customer pays you over time
2 300% or 3:1 is the ideal ratio of LTV/CAC that you need to scale profitably
3 Customer Acquisition Cost (CAC) is how much you pay to gain an average customer
Customer Lifetime Value
You can increase LTV to 300% over CAC1 (a 3:1 ratio) by raising LTV and lowering CAC. For every $1 of LTV (revenue), aim for $0.33 of CAC (expense) or vice versa; both are inversely related. If your LTV is way higher, like 6:1, you can acquire twice as many customers (6:2 = 3:1) or take the profit.
1 Customer Acquisition (CAC) is how much you pay (development, operations, sales, and marketing) to gain an average customer. CAC is often miscalculated and conflated with CPA (Cost Per Acquisition).
Treating customers like subscribers can raise customer lifetime value (LTV1) to 3x CAC2 (3:1)
1 LTV = Annual revenue per customer * time retained
Getting customers to refer new customers can lower customer acquisition cost (CAC2) to 0.33 LTV1 (3:1)
2 CAC = All annual expenses / total number of customers
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