CAC vs CLV: Why Every Business Leader Needs to Master These Two Metrics

If you don’t know what it costs to get a customer—and what they’re worth to your business—you’re not planning. You’re guessing.

CAC vs CLV: Why Every Business Leader Needs to Master These Two Metrics

When I work with leaders, we often talk about strategy. Vision. Culture. Big ideas.

But here’s the truth that separates good businesses from great ones: the best leaders know their numbers.

And the two numbers that too many leaders pretend to understand—but don’t—are:

These two numbers—just two—can make or break your strategy.

Why CAC Matters

If it costs you $1,200 to acquire a customer who only brings in $900 in revenue, you don’t have a marketing problem. You have a business model problem.

CAC includes everything: ad spend, labour, sales commissions, overhead—every cost associated with winning a new client. Too many companies chase growth without calculating if their growth is profitable.

You’re not just spending money. You’re placing bets.

And if you’re not tracking the odds, the house always wins—and the house is never yours.

Why CLV Matters Even More

Now here’s where it gets juicy.

If a customer pays you $1,000 upfront, you might be tempted to stop there. But if that same customer would’ve happily paid $10,000 over five years with proper support, upsells, and engagement—then you’re leaving money on the table.

CLV tells you how much value your customer wants to give you—if you keep showing up with value for them.

Retention, service quality, and recurring offers all matter here.

CLV forces you to stop thinking about transactions and start building relationships.

The Sweet Spot: CAC < CLV

It sounds obvious, but this is the golden equation:

Not a little higher. Not “about the same.” Significantly higher.

In most service businesses, a 3:1 ratio is healthy. Spend $1 to make $3. And if you can get it to 5:1 or higher? That’s where sustainable profit lives.

This is how you plan strategically—not emotionally. Not reactively. Not based on “gut feelings.” (Although yes, your gut still matters.)

Here's How I Use It in My Work

When I price my keynote offerings, coaching packages, and business strategy engagements, I use CAC and CLV thinking.

This thinking gives me confidence to raise my rates—and offer more.

It gives me confidence to say “no” to low-value leads and “yes” to long-term partnerships.

And it helps me stay grounded when the temptation is to “do more” instead of “do better.”

Final Thought

If you don’t measure what your customers cost and what they’re worth, you’re not running a business—you’re playing a game you don’t understand.

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Adam Kreek is on a mission to positively impact organizational cultures and leaders who make things happen.

Kreek is an Executive Business Coach who lives in Victoria, BC, near Vancouver, British Columbia, Canada, and Seattle, Washington, USA, in the Pacific Northwest. He works with clients globally, often travelling to California in the San Francisco Bay Area, Atlanta, Georgia, Toronto, Ontario and Montreal, Quebec. He is an Olympic Gold Medalist, a storied adventurer and a father.

He authored the bestselling business book, The Responsibility Ethic: 12 Strategies Exceptional People Use to Do the Work and Make Success Happen. 

Discover our thoughts on Values here.

Want to increase your leadership achievement? Learn more about Kreek’s coaching here.

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