← Glossary Marketing

LTV:CAC Ratio

How many dollars of customer lifetime value you get per dollar of acquisition cost.

Explained simply.

LTV:CAC = lifetime value ÷ customer acquisition cost. The single most important ratio in marketing. Under 1:1, you're losing money on every customer, unsustainable. 1:1 to 3:1 is survive mode. 3:1+ is healthy. 5:1+ you have a machine, pour fuel in. Above 8:1 you're probably under-investing in growth and should spend more.

An example.

LTV $3,000, CAC $1,000 → 3:1. That's the classic 'healthy SaaS' benchmark. LTV $500, CAC $300 → 1.67:1. That's tight, one bad quarter eats the margin. LTV $10k, CAC $800 → 12.5:1. Spend more; you can afford it.

Why it matters.

This ratio tells you whether your business model works at all. Track it quarterly. If it's drifting down, either CAC is creeping up or retention is slipping. Both matter; both are fixable. Don't pretend the number doesn't exist.