LTV:CAC Ratio
01 Definition
LTV:CAC Ratio meaning: A comparison of a customer's lifetime value to the cost of acquiring them.
The LTV:CAC ratio divides expected lifetime value by customer acquisition cost. A higher ratio suggests customers are worth more than they cost to win. Many teams treat roughly 3 to 1 as healthy, but the right target depends on margins and growth stage.
Also called
LTV to CACLTV/CAC
Why it matters
How LTV:CAC Ratio fits the work
It links spending on acquisition to the long term value customers create, making it a core gauge of whether a growth model is sustainable.
In context
A customer worth 900 dollars over their lifetime, acquired for 300 dollars, gives an LTV:CAC ratio of 3 to 1.
Practical note
Lifetime value rests on churn and margin assumptions that can be optimistic. Recheck the inputs before trusting a flattering ratio.