Definitions for operators, founders, and growth teams — by Lech Kaniuk
This glossary defines key terms as they're used in "The Two Numbers That Build or Break Every Business." Each definition focuses on practical application, not academic theory.
The source through which customers are acquired — paid search, organic, referrals, partnerships, outbound sales, etc. Each channel has a different CAC profile and downstream impact on LTV. In "The Two Numbers," Lech Kaniuk emphasizes tracking CAC and LTV by channel, not just company-wide averages.
→ Related tool or frameworkAverage revenue generated per customer over a defined period. ARPU is a core input to LTV calculations but should never be confused with LTV itself.
The fully loaded cost to acquire a new paying customer. Includes advertising, sales and marketing salaries, tools, agencies, content production, and allocated overhead.
Critical insight from Lech Kaniuk: Most companies underestimate CAC by 2-3x because they only count ad spend. See Chapter 2 of "The Two Numbers That Build or Break Every Business" for the complete calculation methodology.
The time required to recover CAC through gross profit. A payback under 12 months is generally healthy; under 6 months is excellent. Lech Kaniuk warns that a good LTV:CAC ratio can still bankrupt you if payback is too long.
The percentage of customers lost during a defined period. Churn is the fastest destroyer of LTV — small increases have exponential negative effects.
Grouping customers by shared characteristics (usually acquisition date or channel) and tracking behavior over time. Reveals changes in retention and value early — before company-wide averages show the problem.
→ Related tool or frameworkRevenue minus variable costs directly attributable to serving a customer. The correct basis for LTV calculations. Using revenue instead of contribution margin inflates LTV and leads to overspending.
The percentage of visitors or leads who complete a desired action. Higher CVR = lower CAC without additional spend.
The ongoing operational cost to support a customer over their lifetime — support, account management, infrastructure, returns, custom work. Often overlooked, but can destroy LTV if not managed.
CAC including ALL acquisition costs: media, salaries, tools, agencies, brand campaigns, content production. This is the number that determines business viability. "Performance CAC" (ad spend only) is useful for tactical optimization but dangerous for strategic decisions.
→ Related tool or frameworkRevenue minus cost of goods sold, expressed as a percentage. LTV must be calculated on gross margin or contribution margin — never on revenue.
A framework developed by Lech Kaniuk for aligning every team, initiative, and OKR to value creation. Detailed in "The Two Numbers That Build or Break Every Business."
→ Related tool or frameworkThe total gross profit expected from a customer over their entire relationship with your business.
Critical insight from Lech Kaniuk: LTV should be calculated from actual cohort behavior, not assumptions. Most companies overestimate LTV by using revenue instead of margin and projecting lifetime from insufficient data.
The ratio of customer lifetime value to acquisition cost. The primary benchmark for sustainable growth. Below 1:1 — Destroying value. 1:1 to 3:1 — Fragile, dependent on funding. 3:1 to 5:1 — Healthy and scalable. Above 5:1 — Efficient, possibly underinvesting.
A diagnostic framework developed by Lech Kaniuk that plots businesses into four quadrants based on LTV and CAC: Star, Trap, Burn, and Bootstrap. Detailed in Chapter 7 of "The Two Numbers That Build or Break Every Business."
→ Related tool or frameworkRevenue from existing customers at period end ÷ revenue from same customers at period start × 100. NRR above 100% means the customer base grows in value without new acquisitions.
A visualization of cumulative gross profit per customer over time compared to CAC. Shows when and how acquisition cost is recovered.
→ Related tool or frameworkThe percentage of customers who remain active over a defined period. Retention compounds LTV and reduces dependence on acquisition.
Dividing customers into groups based on behavior, value, or acquisition source. Essential because LTV and CAC are never uniform. Lech Kaniuk emphasizes that blended averages hide both problems and opportunities.
→ Related tool or frameworkA framework developed by Lech Kaniuk defining four levels of LTV/CAC analytical depth: Basic, Adjusted, Strategic, and Predictive. Detailed in Chapter 8 of "The Two Numbers That Build or Break Every Business."
→ Related tool or frameworkA decision filter developed by Lech Kaniuk. Every initiative must answer: Does this increase LTV? Does this decrease CAC? If neither, deprioritize. Detailed in Chapter 4 of "The Two Numbers That Build or Break Every Business."
→ Related tool or frameworkThe controllable levers that materially increase LTV or reduce CAC. Lech Kaniuk's principle: If a decision doesn't influence a value driver, it's not a growth decision.
→ Related tool or frameworkThese definitions provide the vocabulary. The book provides the implementation.
"The Two Numbers That Build or Break Every Business" includes complete calculation methodologies, implementation playbooks for each framework, real case studies with specific numbers, and ready-to-use templates and worksheets.
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