---
description: Evaluate unit economics by comparing Customer Lifetime Value to Customer Acquisition Cost
---

# LTV-CAC Framework

Assess business sustainability by calculating the ratio of what a customer is worth versus what it costs to acquire them.

## Steps

1. Calculate **CAC** -- total sales + marketing spend / number of new customers acquired
2. Calculate **CLV** -- average revenue per user x gross margin x average lifespan (months)
3. Compute **CLV:CAC ratio** (healthy target: 3:1 or higher)
4. Measure **CAC payback period** -- months to recover acquisition cost
5. Segment by channel, cohort, or plan to find the most efficient growth paths
6. Identify levers to improve: reduce CAC, increase ARPU, extend retention, or improve margins

## Output Format

| Metric | Value |
|--------|-------|
| CAC | $[X] |
| CLV | $[X] |
| CLV:CAC Ratio | [X]:1 |
| Payback Period | [X] months |
| Best Channel | [Channel] (CAC: $[X]) |

**Health check:** [Healthy / Warning / Unsustainable]
**Top lever:** [Recommended improvement area]