Marketing reports are full of numbers: impressions, clicks, followers, open rates. Most of them describe activity. Only a few tell you whether the activity is making money. If you track nothing else, track these three.

CAC: what it costs to win a customer

Customer acquisition cost (CAC) is how much you spend to gain one new paying customer.

CAC = total marketing and sales spend ÷ number of new customers

If you spent $12,000 last quarter on ads, agency fees, tools and the sales time spent on new business, and won 40 new customers, your CAC is $300.

Common mistake: counting only ad spend. Include the people, tools and fees it takes to win the customer, or the number will look better than reality.

LTV: what a customer is worth

Lifetime value (LTV) is how much gross profit an average customer brings in over the whole relationship.

LTV = average order value × purchases per year × years as a customer × gross margin

A client who spends $500 a month, stays for two years and earns you a 60% margin is worth about $7,200 in gross profit ($500 × 24 × 0.6).

Common mistake: using revenue instead of profit. A $1,000 sale with a 20% margin is worth $200 to you, not $1,000.

The ratio that matters: LTV to CAC

Put the two together and you have the clearest test of whether growth is healthy.

LTV ÷ CAC

Using the examples above: $7,200 ÷ $300 = 24. Every dollar spent winning a customer comes back many times over.

A widely used rule of thumb is to aim for at least 3 to 1. Below that, you may be paying too much to win customers or not keeping them long enough. Far above it, you may be under-investing and leaving growth on the table. Treat it as a guide, not a law: your cash flow, margins and how quickly customers pay you back all matter too.

ROAS: is this campaign paying for itself?

Return on ad spend (ROAS) measures the revenue a specific campaign or channel brings in for each dollar spent on ads.

ROAS = revenue from ads ÷ ad spend

$4,000 in ad spend that produces $16,000 in sales is a ROAS of 4 (often written 4x or 400%).

ROAS is useful for comparing campaigns week to week. But it has limits:

  • It's revenue, not profit. A 4x ROAS on a product with a 20% margin loses money once you count product costs.
  • It depends on tracking. Ad platforms tend to give themselves credit generously. Compare what the platform reports with what actually shows up in your sales.
  • It ignores repeat purchases. A campaign that looks weak on day one may win customers who come back for years. That's where LTV comes in.

How to use these numbers

  1. Work out your break-even ROAS. Divide 1 by your gross margin. With a 40% margin, you need at least 2.5x just to cover product costs before overheads.
  2. Check LTV:CAC quarterly. It's the big-picture health check.
  3. Watch ROAS weekly. It's the steering wheel for day-to-day ad decisions.
  4. Fix the inputs, not just the spend. You can lower CAC by improving your website and follow-up, and raise LTV by keeping customers longer — often more cheaply than buying more ads.

The short version

  • CAC tells you what a customer costs.
  • LTV tells you what a customer is worth.
  • ROAS tells you whether a campaign is pulling its weight.

If you know all three, you can make marketing decisions the way you make every other business decision: on the numbers.

Not sure what your numbers are? Let's connect and we'll help you work them out.