How much of my revenue does each customer actually bring back?
Efri · 1 min read
(Rewritten from "LTV:CAC ratio")
In short
- 1.Two numbers you need
- 2.What it costs you to get one customer
- 3.And what one customer is worth over their lifetime
- 4.If you're new and you don't know how long people stay, don't guess big
Two numbers you need.
What it costs you to get one customer. All your marketing spend for a period, divided by the number of customers you got in that period. Not just ad spend. Everything.
And what one customer is worth over their lifetime. What they pay you, times how many times they pay you, before they leave.
Then divide. If a customer is worth three times what it costs to get them, you're in reasonable shape. If it's less than double, you're working very hard to break even.
If you're new and you don't know how long people stay, don't guess big. Use the shortest period you've actually observed. Everyone overestimates this number and then spends against the overestimate.