All termsMETRICS & KPIS

LTV/CAC Ratio

Also known as: LTV to CAC · LTV/CAC

DEFINITION

The ratio of Customer Lifetime Value to Customer Acquisition Cost — the single most important signal of SaaS profitability.

In depth

LTV/CAC tells you whether your growth machine is a profit engine or a leaky bucket. Below 1:1 you're losing money on every customer. Around 1:1–2:1 you're break-even but not scalable. 3:1 is the industry gold standard. Above 5:1 you might be underspending on growth.

Track LTV/CAC by channel, by segment, and by cohort. A 3:1 blended ratio can hide a 1:1 paid channel that's silently killing margins.

Formula & example

LTV/CAC = Lifetime Value ÷ Customer Acquisition Cost
EXAMPLELTV $4,000, CAC $800 → LTV/CAC = 5:1 (healthy).

Rules of thumb

  • 3:1 = industry standard. Below that, fix CAC or churn.
  • Above 5:1? You might be underspending on growth. Push harder.
  • Measure separately per channel — blended ratios lie.

Put it into practice

tool
LTV/CAC Calculator

Related terms

LTV
The total revenue a single customer generates across their entire relationship with your SaaS.
CAC
The fully-loaded cost of acquiring one paying customer, including sales + marketing + tooling.
Payback Period
The number of months required to recover the cost of acquiring a customer through that customer's gross profit.

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Last reviewed 14 April 2026 by Abhi Verma.