Glossary Category: Startup Basics

CAC (Customer Acquisition Cost) is calculated by dividing total sales and marketing spend over a period by the number of new customers gained in that same period. It sounds simple, but getting it right requires including every real cost involved — ad spend, sales salaries, promotional discounts, referral bonuses — not just the obvious media buy, or the number will understate how expensive growth actually is.

CAC only means something in relation to what a customer is actually worth (see Lifetime Value) — a high CAC can be perfectly healthy if customers stick around and pay for years, and a low CAC can still sink a company if those customers churn out almost immediately. Founders also distinguish “blended CAC” (average across all channels) from channel-specific CAC, since some acquisition channels are far more efficient than others and blending them together can hide which spending is actually working.

A rising CAC over time is one of the most common signs that a market is getting more competitive or that a company’s easiest, cheapest customers have already been acquired — a pattern nearly every growing consumer app eventually runs into.

🇵🇭 Philippine Example

The Philippines' e-wallet and ride-hailing markets — led by players like GCash, Maya, Grab, and Angkas — are widely known locally for heavy promotional spending (cashback, referral bonuses, fare discounts) to win users in a crowded, price-sensitive market, though none of these companies has publicly disclosed an exact customer acquisition cost figure. This is written as a general market pattern rather than a specific number, since no company-disclosed CAC figure for a Philippine startup could be confirmed through search.

Related Terms

LTV (Lifetime Value), sometimes written CLV (Customer Lifetime Value), estimates the total revenue — or sometimes gross profit — a business will collect from an average customer over the entire relationship, not just their first purchase or first month. For a subscription business, a simple version of the formula is average monthly revenue per customer divided by the monthly churn rate, since a lower churn rate directly means a longer average customer lifespan and therefore a higher LTV.

LTV is almost always discussed alongside CAC, because the relationship between the two — commonly summarized as an LTV:CAC ratio, with 3:1 or higher often cited as a healthy benchmark — is one of the clearest single signals of whether a business model actually works at scale. A company can have great revenue growth and still be fundamentally broken if it costs more to acquire a customer than that customer will ever pay back.

LTV is an estimate, not a guarantee — it depends on assumptions about future retention and pricing that can change, which is why mature companies revisit their LTV assumptions regularly rather than treating an early calculation as permanent.

🇵🇭 Philippine Example

No specific, verified lifetime-value figure for a named Philippine startup could be confirmed via search — LTV calculations are rarely disclosed publicly, even by companies that are otherwise transparent about revenue or user numbers. In general, Philippine subscription and fintech businesses face the same LTV pressure as anywhere else: in a market where switching between apps is easy and free, keeping churn low is what makes LTV — and the whole business model — work.

Related Terms

Churn measures how many customers (or how much revenue) a business loses over a given period, usually expressed as a monthly or annual percentage. “Customer churn” counts the number of customers who leave; “revenue churn” (or dollar churn) weights that by how much they were paying, which matters because losing one large customer can hurt more than losing ten small ones even though customer churn looks the same either way.

Churn is deceptively powerful over time because it compounds: a business losing 5% of its customers every month looks fine in any single month, but that adds up to losing more than half its customer base within a year if nothing offsets it — which is why even small differences in monthly churn rate have an outsized effect on long-term growth and LTV.

Reducing churn is often cheaper and more effective than acquiring new customers to replace those who left, which is why mature companies invest heavily in customer success, onboarding, and product improvements specifically aimed at retention, not just growth.

🇵🇭 Philippine Example

Kumu's own early history is a real, documented example of extreme churn in action: of the first few thousand people who downloaded the app in its earliest version, only around twenty or thirty stuck around — a churn rate of well over 99% — before the team identified what those remaining users actually valued and rebuilt around it.

Related Terms

Unit economics strips a business down to its smallest repeatable unit — one customer, one order, one ride — and asks a simple question: does this single unit generate more revenue than it costs to serve, once you include acquisition cost, direct delivery cost, and support cost? A company can have impressive total revenue and still have broken unit economics if every individual unit loses money, because growth in that case just means losing money faster at a larger scale.

Unit economics is why growth alone was never proof of a good business — a company subsidizing every transaction to grow user numbers can look impressive on a chart while quietly burning through investor cash with no clear path to the math ever working, unless costs come down or prices go up as the company scales (through better technology, negotiating power, or efficiency gains).

Investors distinguish “contribution margin positive” unit economics (each unit earns more than its direct costs, even if the company overall isn’t profitable yet due to fixed costs) from genuinely negative unit economics, where scale alone can never fix the problem — the second is a far more serious warning sign than the first.

🇵🇭 Philippine Example

Angkas' 2025 financials — a net loss margin of about -79%, meaning it spent nearly ₱5 for every ₱1 of revenue earned — is a real, publicly documented illustration of unit economics that don't yet work at the level of an individual ride, independent of the company's overall scale or brand strength.

Related Terms