LTV : CAC

Is each customer worth what you pay for them?

LTV:CAC is the simplest health check for a go-to-market engine. Spend $1 to get $3 back? Good. Spend $1 to get $1 back? You’re running to stand still.

The move

Ratio = LTV ÷ CAC. Around 3:1 is the classic benchmark. Under 1 is losing money. Way above 5 can mean you’re under-investing in growth.

Worked example

LTV $4,500, CAC $1,500

  1. 4,500 ÷ 1,500 = 3
  2. A 3:1 ratio. Healthy.
  • Use gross-margin LTV for an honest ratio.
  • Two ways to improve it: lower CAC, or raise LTV (price, expansion, retention).