The most important metric for subscription and SaaS businesses
What is LTV:CAC? This ratio tells you how much revenue a customer generates over their lifetime (LTV) relative to what you spent to acquire them (CAC). It's the fundamental measure of whether your business model works.
The benchmark: A healthy LTV:CAC is 3:1 or higher. Below 1:1 means you're losing money on every customer. Between 1:1 and 3:1 means you're growing but not profitable. Above 5:1 may mean you're under-investing in growth.
Who it's for: SaaS founders, subscription businesses, e-commerce brands, and investors evaluating unit economics.
Customer Acquisition
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Customer Revenue
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Unit Economics
Customer CAC
—
cost to acquire
Customer LTV
—
lifetime value
LTV:CAC Ratio
—
target: 3:1 or higher
Gross Profit/Customer
—
per customer
Avg Customer Lifespan
—
months
Payback Period
—
months to recover CAC
Verdict
LTV calculation uses a simplified model. Actual LTV depends on pricing changes, expansion revenue, and cost to serve. Use for strategic planning, not precise financial forecasting.