Calculating LTV of a brand new SaaS biz or other recurring subscription model?

[eqttrdr]

Goal of any business is to acquire new customers.

That CAC should be based on ultimate LTV of that customer - pretty much standard operating procedure for any biz looking to have a positive ROI

HOWEVER

-- How in the world does any recurring subscription biz owner (coaching/SaaS/subscription boxes, etc) know how much they can afford to pay for a new customer if there's no realistic way to calculate long term LTV for the first 2-3 years????


Unless you are going to run traffic first for 2-3 years to eventually get around to seeing how long the average length of subscription turns out to be, how do you ever know your CAC: to LTV ratio?


MUST be something I am missing as there's no way companies would have a solid business plan and continuing scaling unless they knew with almost certainty their average customer lifetime value..... no?

 

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[Practic]

Goal of any business is to acquire new customers.

That CAC should be based on ultimate LTV of that customer - pretty much standard operating procedure for any biz looking to have a positive ROI

HOWEVER

-- How in the world does any recurring subscription biz owner (coaching/SaaS/subscription boxes, etc) know how much they can afford to pay for a new customer if there's no realistic way to calculate long term LTV for the first 2-3 years????


Unless you are going to run traffic first for 2-3 years to eventually get around to seeing how long the average length of subscription turns out to be, how do you ever know your CAC: to LTV ratio?


MUST be something I am missing as there's no way companies would have a solid business plan and continuing scaling unless they knew with almost certainty their average customer lifetime value..... no?

You can use data from similar businesses or external data providers (Google, etc.) to estimate LTV based on assumption that in your business the data will be similar.