CAC, LTV, and Churn: The Only 3 Metrics That Matter
If LTV represents the value of a user and CAC represents the cost to get them, you want LTV > 3x CAC. If not, your marketing is lighting money on fire.
What is LTV:CAC Ratio?
LTV:CAC Ratio is The Golden Ratio of SaaS. (Lifetime Value) divided by (Customer Acquisition Cost).
The 3 Core Benefits
Predictable Growth
Once you know your CAC is stable ($50), you can scale ad spend with confidence. Spend $50k -> Get 1,000 users.
Investor Confidence
Investors look at Unit Economics first. If your machine works ($1 in -> $3 out), they will pour money into it.
Pricing Power
Understanding LTV helps you raise prices. If LTV is too low, you either need to charge more or fix retention (Churn).
The Math Class
Calculate CAC
Total Marketing Spend / New Customers. (Ex: $1,000 Ads / 10 Users = $100 CAC).
Calculate Churn
% of users who leave each month. (Ex: 5%). This means average lifetime is 1/0.05 = 20 Months.
Calculate LTV
ARPU (Average Revenue Per User) * Lifetime. (Ex: $20/mo * 20 months = $400 LTV).
Check the Ratio
$400 LTV / $100 CAC = 4:1. This is healthy! You can afford to spend more on marketing.
Mesh Impact
Mesh lowers your CAC. Since Mesh traffic is "Organic/Network," it costs $0. This dilutes your Paid CAC and boosts your ratio massively.
Guessing vs. Unit Economics
| Feature | Guessing | Unit Economics |
|---|---|---|
| Marketing | Spray and Pray | Targeted ROI |
| Sustainability | Unknown | Calculated |
| Scale | Dangerous | Safe |
Frequently Asked Questions
What includes "Marketing Spend"?
Everything. Ad spend, tools, salaries of marketing team. Don't cheat yourself by excluding salaries.
What is a good Payback Period?
Time to recover CAC. Ideally < 12 months. If it takes 2 years to make back the ad spend, you run out of cash.
Does this apply to free users?
No. CAC/LTV is for PAID users only. Free users are a channel, not a customer.
What makes a launch channel high intent?
High-intent channels have users actively searching for solutions, not just browsing a feed.
How many channels should I launch on?
Start with 3-5 strong channels, measure conversions, then expand to 10-12 over time.
How do I avoid launch fatigue?
Stagger your launches and reuse assets so each channel gets a focused push.
What should I measure after launch?
Track qualified signups, backlinks, and demo requests, not just raw traffic.
How does Mesh of Growth fit with other platforms?
Use Mesh for compounding reviews and backlinks while other platforms provide short-term spikes.
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