What Is LTV:CAC Ratio?
The ratio of customer lifetime value to acquisition cost — measures unit economics efficiency.
The ratio of customer lifetime value to acquisition cost — measures unit economics efficiency.
The LTV:CAC ratio compares how much a customer is worth (LTV) to how much it costs to acquire them (CAC). It's the single most important unit economics metric for SaaS businesses.
The benchmark is 3:1 — each customer should generate 3x what you spend to acquire them. Below 1:1 means you're losing money on every customer; above 5:1 may mean you're under-investing in growth.
This ratio helps answer the fundamental question: is your business model sustainable? A healthy LTV:CAC ratio, combined with a reasonable payback period, signals a scalable and profitable growth engine.
Formula
LTV:CAC Ratio = Customer Lifetime Value ÷ Customer Acquisition Cost
Example
LTV of $6,000 and CAC of $1,500 = LTV:CAC ratio of 4:1.
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