Enter order value, purchase frequency, lifespan and margin to get LTV, plus the maximum CAC you can afford.
Divide profit LTV by three and you have a defensible ceiling on customer acquisition cost. The three comes from the conventional 3:1 LTV to CAC ratio – enough headroom for overhead, forecast error and the customers who churn early.
With a profit LTV of $374, a maximum CAC of about $125 is supportable. That single number does more work than any dashboard: it decides which channels are viable, which campaigns get paused, and what you can afford to bid.
A 2.5-year LTV is a forecast. First-year value is close to a fact, and it is what your cash flow runs on.
Averaging across segments.
Averaging across segments. A blended LTV hides that your top decile is worth ten times your median. Acquisition should be priced against the segment you are buying, not the mean.
Optimistic lifespan. It is the least knowable input and the one with the largest effect. If your business is under three years old, you do not have lifespan data – you have an assumption. Halve it and see whether the model still works.
Ignoring discounting. Revenue arriving in year three is worth less than revenue today. For long lifespans, discount future cash flows or you will overpay for customers now against money you may never see.