Calculate customer lifetime value. LTV determines max CAC. Most businesses underestimate and underspend.
By The Ad Spend
The predicted total revenue a customer will generate over their entire relationship with your business. Also called CLV or CLTV.
Formula
AOV × Purchase Frequency × Customer Lifespan
Benchmark range
Varies entirely by business model. SaaS: monthly value × avg months retained. E-commerce: AOV × orders/year × years active.
Why it matters
LTV determines how much you can afford to pay for a customer. If LTV is $500, spending $100 to acquire (CAC) is profitable. Most businesses underestimate LTV and underspend on acquisition. Calculate by cohort, not average.
