CAC-LTV-Ratio
Revision as of 16:47, 4 December 2022 by Steven Morell (talk | contribs) (Created page with "The CAC Ratio looks at how much Sales & Marketing expense you spend to buy $1 of new ARR. It’s the inverse of the Magic Number, which measures how much new ARR is created for each $1 of Sales & Marketing expenses. == Definition == CAC Ratio = last period’s Sales & Marketing expense / this period’s new ARR <math> CAC(\Delta t)=\frac{S_x+M_x}ARR </math> == Details == ;Sales Expenses (S<sub>x</sub>) include * the wages of all of the personnel in Sales, in...")
The CAC Ratio looks at how much Sales & Marketing expense you spend to buy $1 of new ARR. It’s the inverse of the Magic Number, which measures how much new ARR is created for each $1 of Sales & Marketing expenses.
Definition
CAC Ratio = last period’s Sales & Marketing expense / this period’s new ARR
Details
- Sales Expenses (Sx) include
- the wages of all of the personnel in Sales, including commissions
- all expenses for tools used by this personnel
- excluding company-wide tools like email, chat, data storage, etc.
- Marketing Expenses (Mx) include
- the wages all of the personnel in Marketing
- all expenses for tools uses by this personnel
- excluding company-wide tools like email, chat, data storage etc.
- including Ad Spend in the given time period Δt
Standardization Status
Request for Comments (RFC): 22/0002 - CAC-LTV-Ratio
Type: metric
Version: 0.9
Status:proposal