Tool 07

LTV & CAC.

Quick check on whether ad spend (or sales CAC) is sustainable: lifetime value, the LTV∶CAC ratio, and how many months to earn back acquisition cost.

ARPU

Average revenue per user (or account) per month.

Churn

Share of customers who leave each month. Lower churn → longer lifetime → higher LTV.

CAC

What you spend to win one customer (ads, sales, onboarding).

Payback

Months of contribution margin to recover CAC. Shorter is kinder to cash.

Example

ARPU $49, churn 4%, CAC $200, margin 80% → LTV ≈ $980, ratio ≈ 4.9∶1, payback ≈ 5.1 months.

Why include gross margin?

LTV should reflect contribution, not top-line revenue. Hosting and payment costs mean $49 of ARPU isn’t $49 of profit. Use 100% only if you want a revenue LTV on purpose.

What’s a “good” LTV∶CAC?

A common SaaS rule of thumb is ≥ 3∶1 with payback under ~12 months. Context matters (growth stage, capital, sales cycle).

Monthly vs annual churn?

This tool expects monthly churn. If you only know annual churn, approximate monthly ≈ annual ÷ 12 (rough; compounding is more precise).