Best Practice Report

Calculating Lifetime Value (LTV) And Customer Acquisition Costs (CAC)

October 17th, 2019

Summary

Lifetime value (LTV), customer acquisition costs (CAC) and LTV:CAC calculations provide business viability measures and illuminate sales and marketing efficiency. Choose the best LTV calculation method based on the company’s data and product lifecycle. Calculating LTV, CAC and LTV:CAC requires collaboration and alignment between finance, sales leadership, marketing, and sales or revenue operations. In this report, we describe different methodologies for calculating LTV, a step-by-step approach to calculating CAC, and how to apply the LTV:CAC ratio to a business, product, or territory.

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