cust.co / Glossary / LTV:CAC Ratio

LTV:CAC Ratio

How many dollars of customer lifetime value you gain per dollar of acquisition spend.

Also known as: LTV to CAC, Lifetime Value to CAC

Definition

LTV:CAC measures the efficiency of your acquisition motion. >3:1 is widely considered healthy SaaS. >5:1 is excellent. <1:1 means each customer is unprofitable at acquisition and your unit economics don't work. Ratio depends heavily on retention - higher NRR/lower churn extends LTV indefinitely. CS leaders should know their company's LTV:CAC because it's the lever they most directly control.

Formula

LTV / CAC

Example

$80K LTV / $20K CAC = 4:1.

Related terms

Benchmark your LTV:CAC Ratio

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