Client Lifetime Value to CAC Ratio
The gross margin a typical client produces over its lifetime, divided by the cost of acquiring that client.
Formula
(Monthly revenue per client × Gross margin % × Lifetime in months) ÷ Customer acquisition cost
Why Track It
It answers whether the MSP can afford to spend more to grow. A high ratio says sales is underfunded; a low one says clients are too cheap to win or too quick to leave.
How It Is Measured
Lifetime value is average monthly revenue per client times managed services gross margin times average client lifetime in months (1 divided by monthly logo churn). Customer acquisition cost is sales and marketing spend divided by new clients won, over the same trailing period. Sources: accounting, PSA agreements and CRM.
Constraints
Built on three estimates (margin, lifetime, acquisition cost), so small errors compound. Treat it as a quarterly direction check, not a precise figure.
Measurement Note
Crewhu calls 4:1 the industry gold standard. Lifetime is an estimate from churn, and a young MSP with little churn history can produce an absurdly high ratio. Below 1:1 each client loses money over its whole life.
Referenced In
Related KPIs
Glossary and Answers
More in Sales and Growth
How efficiently the MSP turns opportunities into new recurring revenue. These numbers show whether the pipeline can carry the growth target and what each new client costs to win.
- CAC Payback PeriodOwner
- Managed Services Revenue GrowthOwner
- Pipeline CoverageSales Manager
- Sales Cycle LengthSales Manager
- Win RateSales Manager