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CMA Final · Entrepreneurship and Startup · Types of New Age Business

Case: Pixelnest, a Pune startup, offers accounting software to small traders on a monthly fee. It spends ₹1,200 to acquire a customer, who pays ₹300 per month and stays for 10 months on average. The gross margin on the fee is 80%. What is the customer lifetime value (on gross margin basis) and the resulting LTV to CAC ratio?

Lifetime value on a gross margin basis is ₹2,400 and the LTV to CAC ratio is 2.0. Revenue per customer is ₹300 times 10 months, or ₹3,000; at an 80% margin this is ₹2,400, which divided by the ₹1,200 acquisition cost gives 2.0.

  1. ALTV ₹2,400; ratio 2.0Correct
  2. BLTV ₹3,000; ratio 2.5
  3. CLTV ₹2,400; ratio 0.5
  4. DLTV ₹3,000; ratio 0.4

Explanation

Revenue per customer = 300 x 10 = ₹3,000. On gross margin of 80% LTV = 3,000 x 0.8 = ₹2,400. Ratio = 2,400 / 1,200 = 2.0. The option showing ₹3,000 uses revenue, ignoring margin, and the 0.5 option inverts the ratio.

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