This ratio is a key growth metric, especially for SaaS and subscription businesses.
- LTV (Customer Lifetime Value) estimates the total revenue a customer generates over their entire relationship with a business.
- CAC (Customer Acquisition Cost) measures how much it costs to acquire one customer (including marketing and sales expenses).
The LTV:CAC ratio tells you how sustainable your growth is.
For example, if your LTV is $900 and CAC is $300, your ratio is 3:1, which is generally considered healthy.
A ratio below 1:1 indicates you’re losing money on every acquisition, while extremely high ratios may suggest you’re under-investing in growth.