Lifetime Value

LTV

The total gross profit you expect from a customer across their whole relationship with you.

How it's calculated

LTV = ARPU × gross margin × average customer lifespan

Why it matters

The classic health check is LTV:CAC ≥ 3. Below 1 and the model is upside down.

Customer Acquisition Cost (CAC)

What it costs, all-in, to win one new customer — ads, sales salaries, tools, the works.

CAC Payback Period

How many months of a customer's payments it takes to earn back what you spent acquiring them.

Gross Margin

The share of revenue left after the direct cost of delivering your product (cost of goods sold).

Contribution Margin

What each sale contributes to fixed costs and profit after all the variable costs of that sale.