TMT (Tech, Media & Telecom)
How do you calculate LTV and LTV/CAC? A customer pays $12,000 per year, gross margin is 75%, annual churn is 15%, and CAC is $15,000.
Model answer
The standard formula is LTV = ARPA x gross margin / churn rate. Here: $12,000 x 75% = $9,000 of annual gross profit per customer; with 15% annual churn the expected customer lifetime is 1 / 0.15 =…
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