LTV to CAC (agency)
LTV to CAC is the gross profit a client produces over their full tenure divided by what it cost to acquire them. Lifetime value for a retainer client is monthly fee times gross margin times months retained, so the ratio moves with retention and margin at least as much as with sales spend.
The retention term is the one agencies estimate rather than measure. Pull the real median tenure from the last three years of churned accounts, because a lifetime value built on the clients who stayed is a lifetime value built on survivors.
The ratio answers whether acquisition is worth funding at all. Payback period answers whether the business can afford to fund it from cash, and an agency needs both answers before it spends on pipeline.
Covered in depth
Predictable lead generation for agencies: what makes pipeline forecastable instead of luckyNot sure which of these is capping you?
Six questions, two minutes, and the diagnostic names the one constraint worth working on first.