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What is the difference?

CAC Payback Period vs LTV:CAC Ratio

CAC Payback Period

Lifetime Value to Cost of Acquisition Ratio

What is it?

CAC Payback Period is the time it takes for a company to earn back their customer acquisition costs. The value depends on how high the Customer Acquisition Cost (CAC) is and how much a customer contributes in revenue each month or each year.

The Lifetime Value to Cost of Acquisition (LTV/CAC) Ratio tells you if the theoretical lifetime revenue you get from a customer is higher or lower than the sales and marketing costs needed to acquire that customer.

Formula

ƒ Average(CAC per customer) / Average(ARR per customer)
ƒ (Customer Lifetime Value) / (Customer Acquisition Cost)

Published and updated dates

Date created: Feb 12, 2020

Latest update: Jun 9, 2021

Date created: Feb 20, 2019

Latest update: Mar 29, 2021