Efficiency Terms Efficiency
LTV (Customer Lifetime Value)
LTV (Customer Lifetime Value): Total profit expected from a customer over their lifetime. Calculated with gross margin.
Related Terms
Other definitions in Efficiency Terms:
CAC (Customer Acquisition Cost)
Total cost to acquire a new customer.
Marketing CAC
Marketing-only portion of CAC (excludes sales costs).
LTV:CAC Ratio
Ratio of customer lifetime value to acquisition cost.
CAC Payback Period
Time required to recover customer acquisition cost.
Gross Margin
Revenue minus cost of goods sold, as percentage of revenue.
Rule of 40
ARR Growth Rate (YoY %) + EBITDA Margin (%).
Magic Number
Sales efficiency metric: QoQ ARR growth divided by prior quarter S&M spend.
Burn Multiple
Capital efficiency metric: Net burn divided by net new ARR. Popularized by David Sacks.