Customer LTV & Retention
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What this tool does
Lifetime value, LTV:CAC, what five more points of retention is worth per year, and whether a win-back campaign pays.
Other tools for this stage
- Ops CopilotDescribe what's going wrong in the unit; get causes, this week's actions, and metrics.
- Multi-Unit BenchmarkPut your units side by side — find the drag, and what closing the gap is worth.
- FDD Builder AIFor franchisors: your disclosure outline, the data to gather, and the earnings-claim call.
- Break-Even CalculatorThe revenue — and customer count — a unit needs each month before it makes a cent.
- Working Capital & RunwayModel the ramp-up: the working capital a unit burns before break-even, and whether your reserve survives it.
- Occupancy Cost RatioCheck rent + occupancy as a share of revenue against healthy benchmarks, and your max sustainable rent.
What this calculates
Four connected numbers: the lifetime value of a customer, the ratio of that value to what you spend acquiring one, what a five-point improvement in retention would be worth to you per year, and whether a win-back campaign aimed at lapsed customers would pay for itself.
What you will need
Average transaction value and frequency. How much and how often, from actual transaction data rather than impression. Frequency is the input people misjudge most.
Retention rate. The share of customers still active after a defined period. Define the period explicitly and keep it consistent, or the comparison over time is meaningless.
Acquisition cost. Total marketing spend divided by new customers acquired, including any promotional discount used to win them.
How to read the result
The ratio of lifetime value to acquisition cost tells you whether growth is affordable: if acquiring a customer costs close to what they will ever be worth, more marketing spend makes the problem larger rather than smaller. The retention figure is usually the better lever — because it compounds, a few points of improvement is often worth more than the same effort spent on acquisition, and it costs less. Use the win-back result to decide whether lapsed customers are worth pursuing before you spend on a campaign.
Questions about this tool
What LTV to CAC ratio is healthy?
Comfortably above 1, with enough margin to cover your operating costs and the customers who never return. Rather than chasing a published multiple, track your own ratio over time — the direction tells you more than the level.
Why is retention worth more than acquisition?
Because retained customers cost nothing to acquire again and tend to spend more over time, so improvements compound. Acquisition has to be paid for every single time.
How do I measure retention in a walk-in business?
Through whatever identifies a repeat customer — loyalty sign-ups, card tokens, an app, or booking records. If nothing identifies them, that is the first thing to fix, since you cannot manage a number you cannot see.
For reference only; not legal, tax, or investment advice. Results depend entirely on the figures you enter — check them against your own quotes and your franchise agreement before acting on them.