Glossary · Customer Satisfaction
LTV to CAC Ratio
Customer lifetime value divided by acquisition cost. The economic reality check for every growth model.
LTV:CAC in Practice
Calculation
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
Benchmarks
| Ratio | Interpretation |
|---|---|
| Below 1:1 | Losing money on every customer |
| 1:1 to 3:1 | Underperforming, review acquisition or retention |
| 3:1 | Generally considered the healthy benchmark |
| Above 5:1 | Likely under-investing in growth |
The ratio is sensitive to how you calculate LTV. Use a conservative definition - gross margin contribution over realistic customer lifespan - to avoid flattering numbers.
Frequently Asked Questions
Above 5:1 sounds great but often means you are under-investing in growth. You could likely spend more on acquisition and still run profitably. A ratio that is too high is usually a signal to step on the gas, not to celebrate.
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