The world of start-ups is filled with metrics that sound as if they came from an alien language.

I was as confused as you might be when I thought of transitioning to the ecosystem, and the first couple of prep articles I read starting throwing LTV, CAC, and ARR at me.

Once you start to understand them though, things start becoming so much simpler. In the end, these are all indicators of a company's health and growth trajectory. You should try to understand them accordingly.

Founders want to keep track of how much they are making overall, and how has that been growing and where it is headed. Often, it's simpler to break it down at a unit level so you understand:

• What you would need to do to add more of these units (here comes the CAC, or Customer Acquisition Cost, which is the marketing and sales spend per converted customer)
• How do you keep more of these units (let's face it, customers have options and can go elsewhere - so how would you maximize their lifetime on your platform, which takes you to LTV or Lifetime value of a customer)
• Are you even making money, per unit (LTV/CAC matters here - because if you're not making more from a customer over their lifetime than you paid to acquire them - you'll eventually burn through your cash in bank. There are further nuances based on how you define LTV).
• How can you make more, per *unit *****(here's where revenue per customer, average order value and average number of orders/period of a customer matter)

<aside> 📶 Something to point out here - I have typically seen LTV as being calculated from the revenue. Be sure to ask if this is LTV based on revenue, gross margin or net profit, and evaluate accordingly.

</aside>

Many of these terms matter more at the overall level. ARR can mean different things depending on who you ask:

• General mode of greeting in certain circles (ARR-ARR, mate)
• Annual recurring revenue - which is the recurring component of revenue while ignoring one off earnings
• Annual run-rate - which is the run-rate (if your company continued to earn similarly) of your current monthly or quarterly revenue - just multiply the corresponding one by 12 or 4