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How to improve a low LTV:CAC ratio ๐Ÿ“ˆ
How to improve a low LTV:CAC ratio ๐Ÿ“ˆ

If your model has a LTV:CAC ratio lower than 3 you might want to revise. Here are some suggestions...

John Brett avatar
Written by John Brett
Updated over a week ago

If your model has a LTV:CAC (Lifetime over Customer Acquisition Cost) ratio lower than 3 you could consider revising your numbers.

LTV:CAC ratio is a measure of profitability per customer.

LTV = Lifetime Value

CAC = Customer Acquisition Cost

A good benchmark is to have a LTV:CAC ratio higher than 3.

You might want to consider making sure your customers are using your product for longer. It could be done by reducing your Churn rate in the 'Revenue' section of your financial model or by reducing the cost of the Sales & Marketing in the'Team' and 'Expense' sections.

Another alternative could be to increase your prices (ARPU) in the โ€˜Revenueโ€™ section, but be careful as it might backfire by increasing your Churn rate later on (customers usually don't like spending more than what they already spend!).

Remember, when you edit your numbers you should feel confident in them. You might have a reason for a low LTV:CAC ratio and want to keep it at this level.

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