Definition
The ratio of customer lifetime value to customer acquisition cost, used as a shorthand for whether growth spend is sustainable.
Why it matters for growth
A commonly cited healthy benchmark is 3:1 or higher; a ratio near 1:1 means the company is barely breaking even on every customer it acquires.
Example
A company with $1,200 LTV and $300 CAC has a 4:1 ratio, generally considered a healthy, scalable relationship.
FAQ
- What is LTV:CAC Ratio?
- The ratio of customer lifetime value to customer acquisition cost, used as a shorthand for whether growth spend is sustainable.
- Why does LTV:CAC Ratio matter for growth?
- A commonly cited healthy benchmark is 3:1 or higher; a ratio near 1:1 means the company is barely breaking even on every customer it acquires.
- What is an example of LTV:CAC Ratio?
- A company with $1,200 LTV and $300 CAC has a 4:1 ratio, generally considered a healthy, scalable relationship.