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unless I'm misunderstanding, isn't this double counting the costs? wouldn't the margin (revenue-costs / revenue) already take into account the cost of acquiring
by brey 11y ago
unless I'm misunderstanding, isn't this double counting the costs? wouldn't the margin (revenue-costs / revenue) already take into account the cost of acquiring customers?
in their example, 52% margin and a $400 CAC:
LTV/CAC = 0.25 years x $2160/year x 52% / $400 = 0.70x
- robzyb 11y ago> wouldn't the margin (revenue-costs / revenue) already take into account the cost of acquiring customers? Not necessarily. The word "margin" is very ambiguous because it could relate to many different types of margins. In this case I think its safe to assume that "margin" meant the difference between the customer's price and the direct cost of supplying that particular unit of product, ignoring overheads.
- brey 11y agoah, yes, good point. if margin only includes cost of production, that's valid.