CAC, LTV, Conversion Rate & Churn

What are CAC, LTV, Conversion Rate & Churn, and how do you calculate them? 

Unit economics are a way to simplify a company’s financial operations and are used to understand its profitability. The most common metrics are CAC, LTV, conversion rate, and churn.

• The CAC (Customer Acquisition Cost) is the cost of acquiring a customer, calculated by dividing the amount spent on sales efforts by the number of customers acquired.
• The LTV (Lifetime Value) is the lifetime value of a customer and refers to how much revenue an acquired user will generate over the course of their relationship with the company.
• The conversion rate is the rate at which users convert into customers
• The churn refers to the percentage of customers who stopped paying for your product during a given period, usually one month.