# Forecasted Average LTV

The Forecasted Average LTV panel gives you an estimate of what kind of future LTV performance you can expect based on the historical average performance of the cohorts in your current report. Everhort will also provide CAC (customer acquisition cost) targets and corresponding payback periods derived from each projected LTV value.

### How LTV is Forecasted

The bar chart on the left side shows average LTV projections for 3 future time periods based on the time period selected at the top of the page. For the default time range of 12 months, Everhort will provide 1, 2, and 3 YR LTV forecasts.

The projections are formed by calculating the linear regression of the blended average LTV of recent cohort performance. This is same blended average (red line) that is plotted in the "Average LTV By Cohort" chart on the "LTV Velocity" tab. Think of this as fitting the best possible straight line (shown below as a dotted green line) into the average LTV curve:

Everhort uses this linear regression, or "straight line fit," to project LTV performance by extending the straight line into the future.

### Forecasted LTV Bar Chart

If you have selected any filters at the top of the page, then a second set of bars will be added to the chart:

The light green bars represent the forecast based on the blended baseline (unfiltered) average performance, and the gray bars are based on the blended performance of the filtered cohorts. This allows you to tell at a glance how much better (or worse) future LTV you can expect from your selected subset of customers on average relative to the overall baseline average of all customers.

### CAC Targets

Everhort will provide estimated CAC (customer acquisition cost) targets along with corresponding payback periods for each of the forecasted LTV time periods in the table on the right side. These targets are based on the following general rule of thumb goal:

LTV / CAC = 3

For example, suppose your 2 YR forecasted average LTV is $108. Targeting LTV/CAC = 3 would yield a CAC target of $36 as follows:

$108 / CAC = 3 $108 = 3 * CAC $108 / 3 = CAC $36 = CAC

### Payback Period

Understanding the payback periodâ€“how long it takes to recoup your cost to acquire a customerâ€“is very important when deciding how much to spend on ads or other marketing efforts to acquire new customers.

Everhort uses the LTV forecast to estimate the point at which a given CAC target will be repaid by finding the point on the line where LTV = CAC.

In the example above, it will take just over 1 month to pay back a CAC of $36. A CAC of $46 based on the 3-year LTV will take a little longer, but still less than 2 months to pay back.