| name | ltv-and-cac-relationship |
| description | Use when evaluating marketing spend efficiency. LTV/CAC ratio = unit economics health.
|
LTV and CAC Relationship
LTV/CAC > 3 = healthy. < 1 = unsustainable. Spend up to 1/3 of LTV per customer for acquisition.
Calculating LTV
LTV (Lifetime Value) = average revenue per customer over their lifetime
Simple: ARPU × average customer lifespan (months/years)
Detailed: cohort-based, accounts for retention curve, upgrades, referrals
For CardPrepAI: $30/mo × 18 months avg = $540 LTV
Calculating CAC
CAC (Customer Acquisition Cost) = total marketing spend / new customers acquired
Include:
- Paid ad spend
- Content production (proportional)
- SEO investment (proportional)
- Sales team cost (if applicable)
- Marketing tools subscription
For CardPrepAI: monthly marketing budget / new customers/month.
Decision framework
| LTV/CAC | Status |
|---|
| <1 | Losing money on every customer |
| 1-2 | Break-even, no growth |
| 2-3 | Healthy, sustainable |
| 3-4 | Strong, scale spending |
| 5+ | Under-investing in marketing |
Target 3:1 minimum. 5:1 = invest more in marketing.
Where this fits in the X3 empire
Unit economics framework for CardPrepAI.