How to Use LTV and CAC Together
Lifetime value and acquisition cost should be analyzed together when evaluating growth economics.
Working record
| Check | What to do | Evidence to retain |
|---|---|---|
| Build a defensible LTV | Choose the customer cohort, revenue or contribution basis, retention period and costs included. Separate observed history from a forecast. | The build a defensible ltv record, its source and the person responsible for resolving missing evidence. |
| Calculate CAC | Divide the selected acquisition costs by new customers acquired in the same scope. Do not substitute lead count for customer count. | The calculate cac record, its source and the person responsible for resolving missing evidence. |
| Read the ratio | Divide the defined lifetime value by acquisition cost. Retain both definitions beside the ratio before comparing cohorts. | The read the ratio record, its source and the person responsible for resolving missing evidence. |
| Check payback and retention | Estimate recovery time from acquisition cost and monthly customer contribution. Review retention evidence rather than assuming every customer remains for the forecast period. | The check payback and retention record, its source and the person responsible for resolving missing evidence. |
Review the decision
Lifetime value and acquisition cost should be analyzed together when evaluating growth economics. Keep build a defensible ltv, calculate cac, read the ratio attached to the conclusion so the next owner can challenge the assumptions. Resolve missing evidence before treating this record as approval.
Continue the decision
How to Build a Project Cost Estimate With Fewer Surprises · Customer Acquisition Cost: A Practical Business Guide.
Calculation and source notes
Keep the displayed formula, input units and model scope with the result. Corrections or questions can be sent through the request section on this page.