cust.co / Concepts / LTV:CAC vs CAC Payback

LTV:CAC vs CAC Payback - which efficiency metric tells you what?

Both measure unit economics. LTV:CAC is a ratio (how much value per dollar of acquisition). CAC payback is months (how long until breakeven). Use them together.

LTV:CAC Ratio

Lifetime value / acquisition cost. Tells you if customers are profitable in the long run.

LTV / CAC

>3:1 healthy. >5:1 excellent.

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CAC Payback Period

Months for cumulative gross profit to repay acquisition cost. Tells you cash velocity.

CAC / (Monthly ARPU × Gross Margin)

<12 mo top quartile. <24 mo healthy.

Full definition →

When each matters

LTV:CAC is the long-run profitability test. CAC payback is the cash-flow test (how fast you recover the spend before the next acquisition). A company with great LTV:CAC but long payback is profitable but cash-constrained - needs more growth capital. Both must clear thresholds for healthy unit economics.

Related concepts

Glossary terms that show up in this comparison.

Customer Lifetime Value (LTV) →Customer Acquisition Cost (CAC) →Customer Lifetime (months) →

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