The CAC, LTV, and Retention Triangle

I’ve had a couple of great conversations with two friends this past week. One friend is about to launch her business next month and already has pre-launch sign-ups rolling in. My other friend, a successful business owner, is working on a new system entirely focused on customer retention. While one is just starting out and the other is refining, both are tackling challenges that matter. Knowing their stories inspired me to break down some acronyms and numbers every business owner should know. The CAC, LTV and CRC. Let’s begin!

What's CAC? (Customer Acquisition Cost)

Think about what it costs to acquire a new customer: ads, sales calls, equipment, promotions.

The Math:

CAC = Total Marketing + Sales Spend / New Customers

For example:

• Spend $1,000 and get 10 customers = $100 CAC.

• That means it costs $100 to acquire each customer.

Now that we know our CAC, the next step is understanding the value each customer brings.

What's LTV? (Customer Lifetime Value)

LTV measures how much money one customer brings in during their entire relationship with you.

Examples:

• SaaS company charging $100/month for 12 months = $1,200 LTV

• Gym charging $100/month and members stay 18 months = $1,800 LTV

• One-off sales? If people buy three times at $50 each = $150 LTV

The Golden Rule: LTV to CAC Ratio

A healthy business generally aims for an LTV**:CAC**** ratio of 3:1**. This means your customer’s lifetime value should be at least 3x what it costs to acquire them.

If CAC = $100, you want LTV = $300 or more.

• 1:1 ratio? You’re breaking even or losing money.

Why it Matters

Let's say you’ve put in the effort and money to acquire customers. If they bounce after a month, that’s a lot of hard work and time lost.

This is where Customer Retention Cost (CRC) comes in.

What's CRC? (Customer Retention Cost)

CRC includes everything you spend to keep a customer happy and engaged, like loyalty programs, emails, customer service, and special offers.

The Stats:

• It’s 5 to 25x cheaper to retain a customer than find a new one (Google search if you don’t believe me. But really, providing great service and simple communications goes a long way.)

• CRC on average ranges from $1 to $30 per retained customer, depending on your approach.

Why Retention is a Smart Play

• These people already trust you.

• You can focus on serving instead of selling.

• Happy customers refer to friends, which drops your CAC over time!

Big picture example:

• CAC: $100

• LTV: $1,200

• CRC: $10–$30 per year (emails, thank you cards, customer check-ins)

That small retention investment? Totally worth it!

Here are some tried-and-true strategies to show your customers you appreciate their business:

• Email Series: Don’t just say thanks. Provide helpful tips, referral bonuses, or coupons. Show them how to get the best results from what they’ve bought. Think value.

• Monthly Check-ins: A simple “Hey, how’s everything working for you?” email, call, or text.

• Personalized thank you: Sending a general thank you to your email list without even providing the first name won’t fly. Show that you took the time and personalize the email with including first name and mentioning actual experience with that customer. Let them know that you are thinking of them and wish the best. 

Last note

Think of when you started your business and you got your very first paying customer. Not your mom, dad, or friend. But your actual very first customer. How grateful did it make you feel? Use that same feeling to thank your one-thousand customer like your first. And I promise you, your business LTV and CAC will thank you too. 

Not sure what your CAC, LTV, or retention costs are? Visit 36cero.com to learn how we can help you!