CAC…CLTV…MRR….SAAS…B2B buzzword bingo

CAC: Customer Acquisition Costs (also known as COCA in some places)
CLTV: Customer Life Time Value
MRR: Monthly Returning Revenue

CAC is usually associated with SAAS (Software as a Service) and B2B (Business to Business) software sales and especially startups. Knowing about CAC and your ratios (CAC:MRR) will be important when trying to raise finance from a venture capital firm. Divide your CAC by the units sold and you have an individualised aggregate cost for the product. Why’s this important? Well, it’s important when you consider monthly returning revenue.

Customer Life Time Value is really only the relevant part of Customer Lifecycle Management. This represents the entire mass of cash you’re going to make from that customer. Take away your individual CAC. And should also be reduced by costs incurred by the process and maintenance, including server costs.

Customer Churn is the inverse of life time value. Worth nothing. A pretty negative way of looking at the world.

CAC:MRR or CAC:CLTV are the metrics to look for. The ratio of your CAC to the revenue you get from them; monthly (which indicates cash flow) or aggregated (which implies profit).

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