"What's your CAC and LTV?"
If this question makes you sweat, you're not alone. But you need to answer it confidently because it's one of the first things seed investors ask.
Here's how to calculate both—and what numbers investors want to see. This article is going to be very technical so favorite this to come back.
Customer Acquisition Cost (CAC)
What it is: How much it costs to acquire one customer
Formula: CAC = (sales & marketing expenses) / (# of new customers)
How to calculate it:
Step 1: Add up all sales and marketing costs for a period (usually monthly or quarterly)
Include:
Salaries for sales and marketing team
Advertising spend (Google, Meta, LinkedIn, etc.)
Marketing tools (HubSpot, Salesforce, etc.)
Events, conferences, sponsorships
Agency or contractor costs
Content creation costs
Step 2: Count new customers acquired in that same period
Step 3: Divide
Example:
March 2025 S&M spend: $28,000
New customers in March: 14
CAC = $28,000 / 14 = $2,000
Common Mistake: Not including salaries. If you're the CEO and spending 50% of your time on sales, include 50% of your salary (or opportunity cost).
Lifetime Value (LTV)
What it is: How much revenue one customer generates over their entire relationship with you
Formula (for subscription businesses): LTV = Average revenue per customer / churn rate
How to calculate it:
Step 1: Calculate Average Revenue Per Customer (ARPC)
ARPC = Total MRR / # of customers
Step 2: Calculate Monthly Churn Rate
Churn rate = customers lost this month / customers at start of month
Step 3: Divide ARPC by Churn Rate
Example:
Total MRR: $50,000
Customers: 100
ARPC = $500/month
Churned customers last month: 3
Customers at start of month: 100
Churn rate = 3%
LTV = $500 / 0.03 = $16,667
For non-subscription businesses:
If you don't have recurring revenue, use:
LTV = average purchase value x # of repeat purchases x average customer lifespan