The fastest-scaling businesses lean on lifetime value.

Measurement is a headache, and it only gets worse as you scale. More metrics, more channels, more noise.

For all the business owners reading this, we know what matters.

Revenue that grows over time, and bringing in new customers without breaking the bank. That's why Customer Acquisition Cost (CAC) should be your leading metric. 

So, what is CAC?

CAC is essentially how much you invest to get a new customer through the door.

Spend £1000, get 100 customers, and your CAC is £10. 

It can also be the biggest inhibitor to scaling up your business.

With this in mind, let me explain why measuring and focusing on Lifetime Value could be the most important measurement change you’ll ever make.

The Maths 📐

Say your CAC is £30, and average order value is £50. Just about profitable with COGS, shipping and your profit margin factored in, but not setting the world on fire. 

CAC can shift fast, and for many reasons outside of your control. Ad fatigue, seasonality, competitors, algorithm changes like Google's recent update. That profitable CAC can slip away overnight.

But if you have a grasp on your lifetime value, you can ground your CAC in the revenue that will come into the business over time, not just their first order. 

Let's change the above scene.

You take the same £50 average order value and apply it to three orders from the same customer. That means you know you'll have an average £150 from that customer, not just £50. Taking into account three times more hypothetical shipping, margin & COGS, you could still be profitable at a CAC of £70!

Suddenly, the picture is very different. Targeting the same margin, you've gone from being on the brink of losing your profit margin into security.

If you had ambitious growth targets, and were acquiring customers for £30 of a £70 target, what would you do?

Here's what lifetime value unlocks: 🔓

• Faster growth, with confidence to raise your CAC targets.

• Room to experiment. The mad ideas are often the best ones.

• The ability to prioritise high-value customers, not just volume.

• Easier repeat sales. The first purchase is hardest, and every one after compounds profit.

• Stronger proof of business health, if you're considering investment.

Sounds like a sensible approach, right?

The businesses that are able to scale most aggressively rely heavily on lifetime value measurement, and here's how you can get started:

• Check if your CRM or ecommerce platform tracks it automatically.

• Find your average lifetime value and compare it to your current CAC.

• If cash flow allows, set CAC targets based on lifetime value, not first purchase.

If you need a hand with any of the above, or in building the repeat purchase engine that drives lifetime value up, we'd love to help. 

Book a call here to get in touch!