Customer acquisition cost (CAC) and lifetime value (LTV) ratio is the key metric determining whether your marketing is profitable. Most small businesses don't track this carefully and spend on marketing without knowing if it's working.
How to calculate
CAC: total marketing and sales spend in period ÷ new customers acquired. LTV: average revenue per customer × average customer lifetime. Healthy ratio: LTV at least 3x CAC.
What this enables
Confident scaling of marketing channels that work. Cutting channels that don't. Pricing decisions based on real economics. Investor conversations grounded in real data.
Spend an hour calculating yours. Most businesses are surprised by the result — either CAC much higher than thought, or LTV much higher (suggesting underinvestment in marketing). Either way, the data changes decisions.