Guide
Marketing metrics that matter: CAC, LTV and ROAS explained
Customer acquisition cost, lifetime value, return on ad spend and payback period in plain language, with worked examples for a service business and the mistakes to avoid.
VAULT 33|27 · Updated 12 November 2026 · Reviewed 12 November 2026 · 2 min read
The four numbers
| Metric | Formula | What it tells you |
|---|---|---|
| CAC: customer acquisition cost | Marketing and sales spend ÷ new clients | What one new client costs you |
| LTV: lifetime value | Average revenue per client × average number of purchases, ideally using gross profit | What a client is worth over time |
| ROAS: return on ad spend | Revenue from ads ÷ ad spend | Revenue per pound or euro of ads |
| Payback period | CAC ÷ monthly gross profit per client | How long until a new client has paid back their cost |
A worked example
A dental clinic spends £3,000 a month on ads and SEO and wins 12 new patients.
- CAC = £3,000 ÷ 12 = £250 per patient.
- Each patient spends £600 in the first year and typically returns for two more years: LTV of revenue around £1,500. If gross profit is 60%, profit LTV is about £900.
- LTV to CAC = £900 ÷ £250 = 3.6. Each patient is worth well over three times what they cost to win.
- If £2,000 of the spend was ads producing £9,000 of first-year revenue, ROAS = 4.5.
These figures are illustrative. Use your own numbers in the cost per enquiry calculator.
Rules of thumb, used carefully
- An LTV to CAC ratio comfortably above 1 means acquisition is profitable over time; the higher, the more room to grow spend.
- Short payback periods matter more when cash is tight.
- ROAS that looks good on revenue can still lose money if margins are thin. Judge on profit where you can.
Mistakes to avoid
- Counting only ad spend in CAC. Include agency fees, tools and the sales time it takes.
- Using revenue instead of profit for LTV. Inflates the picture.
- Judging channels on first purchase only when clients come back for years.
- Mixing new and returning clients in CAC.
Where the data comes from
Spend from invoices and ad accounts; new clients and revenue by source from your CRM. If your CRM cannot give revenue by source, start with tracking and attribution.
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