roi, cac, ltv: the numbers leadership needs.
A reasoned glossary of the metrics a CEO should ask for before signing off a marketing budget.
In this article
Three letters at a time
ROI (Return on Investment): for every euro invested, how many come back. It's the final number, but on its own it says little: a high ROI on a tiny investment grows nobody. CAC (Customer Acquisition Cost): what it costs you, all in, to acquire a client. LTV (Lifetime Value): what that client is worth over time, across repeat purchases and word of mouth. The health of a sales system lies in the ratio: LTV must exceed CAC with room to spare — as a rule of thumb, by at least three times.
Why CAC deceives
The "campaign CAC" (advertising spend alone divided by clients) is almost always underestimated: it leaves out the cost of producing content, the website, sales time. The true CAC is calculated on the full cost of the system. It's a less flattering number — and a far more useful one.
LTV is the most underrated metric
Two businesses with the same turnover can have opposite values: the one whose clients come back can afford double the CAC — meaning it can buy growth where the other cannot. That's why retention, email marketing and community are not "communications": they are levers that raise the ceiling on how much you can invest to grow.
The questions to ask at the next report
What does a client cost us today, all included? What are they worth over time? Which channel has the lowest CAC for the same client quality? If the report you receive doesn't answer these three questions, you're looking at communications — not the business.
- LTV ≥ 3× CAC: the practical rule of sustainability.
- The true CAC includes every cost of the system, not just advertising.
- Raising LTV means being able to afford more growth.
- A report without CAC and LTV talks about communications, not business.
quick answers.
What are CAC and LTV?
CAC is what it costs to acquire a client; LTV is what that client is worth over time. They are the two numbers that say whether marketing is an investment or an expense.
What is a good LTV to CAC ratio?
As a benchmark, an LTV of at least 3 times CAC indicates a healthy, scalable acquisition system.
How do you calculate marketing ROI?
By comparing the margin generated by acquired clients with the total spend to acquire them, over a horizon that includes repeat purchases, not just the first.
