Summary
Early stage startups should wait to calculate their LTV:CAC ratio, as it is important to have enough data to make an accurate calculation.
1
The LTV:CAC ratio is calculated by summing sales and marketing expenses and dividing them by the total new users acquired.
2
The lifetime value (LTV) of a customer is determined by how long they remain with the company, and the average revenue per year (ARPA) generated by the customer.
2
The margin multiple calculation (discount rate in LTV) accounts for the time value of money and reflects how much a company values receiving payment right now versus at a later date.
2
The customer acquisition cost (CAC) is calculated by summing sales and marketing expenses in a given period and dividing those by the total new users added in that period.
3
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