What is LTV:CAC Ratio?
Lifetime value of a customer relative to the cost of acquiring them.
How to calculate it
Calculate LTV:CAC Ratio as: Customer Lifetime Value / Customer Acquisition Cost. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
$2,000 LTV / $500 CAC = 4:1, which is healthy. Below 1:1 means you lose money on every customer.
Example 2
A SaaS firm with $2,400 LTV and $600 CAC has a 4:1 ratio, comfortably in healthy territory and a signal it could afford to spend more to grow faster.
Why it matters
The LTV:CAC ratio compares the lifetime value of a customer to the cost of acquiring them, making it arguably the single best gauge of go-to-market efficiency. It tells investors and operators whether the unit economics support scaling spend or whether growth is destroying value. The ratio is only as trustworthy as the retention assumptions feeding the LTV side.
Benchmark context
3:1 is the widely cited healthy target; below 1:1 is unsustainable, while well above 5:1 can mean you are underinvesting in growth. Pair it with CAC payback period for a fuller picture.
Common pitfalls
Overstating LTV with optimistic retention assumptions.
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