CLV vs. CAC Analysis Template - Google Sheets

What Is CLV?

Customer Lifetime Value (CLV) is a metric that measures the total revenue a customer will generate for a company over the course of their relationship.

How to Calculate Customer Lifetime Value (CLV)?

To calculate CLV, you need to know three things:

1. 1. The average purchase value (APV)
2. 2. The average number of purchases per year (PPY)
3. 3. The average customer lifespan (CLS)

CLV Formula

Once you have this information, you can calculate CLV using the following formula:

CLV = APV x PPY x CLS

Customer Lifetime Value (CLV) Example

For example, let's say that a company's APV is $100, its PPY is 2, and its CLS is 5 years. Using the formula above, we can calculate that company's CLV to be $1,000.

What Is CAC?

Customer Acquisition Costs (CAC) is a metric that measures the costs associated with acquiring a new customer. This can include advertising costs, marketing costs, sales costs, etc.

How to Calculate Customer Acquisition Costs (CAC)?

To calculate CAC, you need to know two things:

1. 1. The total amount of money spent on customer acquisition
2. 2. The total number of new customers acquired

CAC Formula

Once you have this information, you can calculate CAC using the following formula:

CAC = Total customer acquisition costs / Total number of new customers

Customer Acquisition Costs (CAC) Example

For example, let's say that a company spends $1,000 on customer acquisition and acquires 10 new customers. Using the formula above, we can calculate that company's CAC to be $100.

What Is CLV to CAC Ratio?

The CLV to CAC ratio is a metric that measures the relationship between a company's customer lifetime value (CLV) and its customer acquisition costs (CAC).

A high CLV to CAC ratio indicates that a company is efficient at acquiring new customers and generating revenue from them. On the other hand, a low CLV to CAC ratio indicates that a company is inefficient at acquiring new customers and generating revenue from them.

How to Calculate CLV to CAC Ratio?

To calculate the CLV to CAC ratio, you need to know two things:

1. 1. The company's CLV
2. 2. The company's CAC

CLV to CAC Ratio Formula

Once you have this information, you can calculate the CLV to CAC ratio using the following formula:

CLV to CAC ratio = CLV / CAC

CLV to CAC Ratio Example

For example, let's say that a company has a CLV of $1,000 and a CAC of $100. Using the formula above, we can calculate the company's CLV to CAC ratio to be 10.

Why Is the CLV to CAC Ratio Important?

The CLV to CAC metric is essential for companies to track because it can give them insights into how efficiently they acquire new customers and generate revenue from them. If a company has a low CLV to CAC ratio, it may need to reevaluate its customer acquisition strategy to become more efficient and generate more revenue.

What Is the Ideal CLV/CAC Ratio?

There is no ideal CLV to CAC ratio, as it will vary from company to company depending on factors such as their industry, business model, and overall strategy. However, a higher CLV to CAC ratio is generally better than a lower one, as it indicates that a company is more efficient at acquiring new customers and generating revenue from them.

How Can I Improve My CLV to CAC Ratio?

If you want to improve your CLV to CAC ratio, there are a few things you can do:

1. 1. Evaluate your customer acquisition strategy: Are you using the most effective channels to reach your target audience? Are you offering incentives that are appealing to your target customers? Are you making it easy for customers to find your product or service and make a purchase?
2. 2. Evaluate your pricing strategy: Is your pricing too high? Too low? Just right? Make sure that your pricing is in line with the perceived value of your product or service.
3. 3. Evaluate your product or service: Is there anything you can do to improve it? Can you add any features or benefits that would appeal to your target customers?
4. 4. Evaluate your customer retention strategy: Are you doing everything you can to keep your customers happy? Are you offering them discounts, coupons, or other incentives to keep them coming back? Are you resolving any issues they have in a timely and efficient manner?

By evaluating your customer acquisition, pricing, product, and retention strategies, you can make changes that will improve your CLV to CAC ratio.

What Is a CLV to CAC Template?

A CLV vs. CAC Analysis template allows you to enter values needed to calculate a company's CLV and CAC into the respective fields. The template will then calculate the company's CLV to CAC ratio and provide a visual representation of how efficient it is at acquiring new customers and generating revenue from them.