Stop 11 · Business Acumen & Domain KnowledgeTopics · 1/8

Understanding Business Metrics (Revenue, Churn, CAC, LTV)

In short

Founders and managers talk in four words: revenue, churn, CAC and LTV. If you can calculate them and explain what moves them, you sound like you belong in the room.

The recurring vocabulary of any business conversation — revenue, churn rate, customer acquisition cost, lifetime value — knowing these cold lets you connect your analysis to what leadership actually cares about.

The jaadu counts coins into a steel tin at a small chai stall with glasses of tea lined up.

Think of it like this

The chai stall's money tin

Raju bhaiya sells chai near the college gate. Coins in the tin are revenue. Regulars who stopped coming are churn. The cost of the flyers that brought new students is CAC. What one loyal student spends over three years of college is LTV.

Watch it happen

A customer's life, told in four metrics

Acquire

Pay

Stay

Leave

Lifetime

1/5You spend Rs 1,50,000 on ads and get 300 new customers. CAC is Rs 500 per customer.

The big ideas

What you need to know

Revenue is the top line

Money coming in from customers. Always ask: total, per customer, or recurring every month? Those are three different numbers.

Churn is the leak

The share of customers who leave in a period. A small monthly churn adds up fast over a year.

CAC is the price of a customer

Customer Acquisition Cost: marketing and sales spend divided by new customers gained in the same period.

LTV vs CAC decides survival

Lifetime Value is the profit one customer brings before leaving. If LTV is lower than CAC, growth burns money.

See it in code

Walk through the code

excel

1# Inputs2B1  2,000      customers at start of month3B2  120        customers lost this month4B3  1,50,000   marketing spend (Rs)5B4  300        new customers from that spend6B5  400        revenue per customer per month (Rs)7B6  60%        gross margin8 9# Formulas10B8  =B2/B1      churn = 6%11B9  =B3/B4      CAC = Rs 50012B10 =B5*B6/B8   LTV = Rs 4,00013B11 =B10/B9     LTV to CAC = 8

1/3These are the raw inputs. In a real company each one comes from a query on the orders or marketing tables.

A tiny sheet that turns six inputs into the four numbers every founder asks about. The LTV formula here is the simple version.

Save yourself the pain

Common mistakes

Oops

Calculating CAC with this month's spend but last quarter's new customers.

Do this instead

Match the time window for spend and new customers, or the number means nothing.

Oops

Using revenue instead of margin in LTV, which makes customers look far more valuable.

Do this instead

Multiply by gross margin. A customer who pays Rs 400 but costs Rs 300 to serve is worth much less.

Your mission

Run the numbers for a made-up gym

~25 min

Quick check

Monthly churn goes from 5% to 10% while everything else stays the same. What happens to simple LTV?

Go deeper

1Define each of these 4 metrics in your own words, with a formula where relevant.
2Find these metrics (if public) for a company you're interested in and sanity-check them.
3Practice explaining why a metric moved in terms leadership would care about.