Also called: LTV to CAC, LTV/CAC
TL;DR
The ratio of customer lifetime value to customer acquisition cost, a headline measure of unit economics health.
LTV:CAC measures how many times the cost of acquiring a customer the company eventually earns back in margin. Ratios above 3:1 are considered healthy in SaaS; below 1:1 the business burns money on every customer; above 5:1 often means the company is underinvesting in growth.
The ratio depends on credible LTV and CAC inputs. If churn isn't stable or CAC isn't fully loaded, the ratio is meaningless. The combination of LTV:CAC and CAC payback period gives the most honest view.
LTV:CAC = LTV ÷ CAC
3× is the canonical SaaS benchmark. <1× = unprofitable acquisition; >5× = likely under-investing in growth.
LTV $4,500, CAC $900. LTV:CAC = 5.0×, investors will ask 'why aren't you spending more on growth?' A spend of 2× S&M to drop ratio to 3.5× while doubling new logos is the typical recommendation.
Standard on the Unit Economics slide alongside payback and gross margin.
LTV:CAC Ratio shows up most often in these scoring rubrics and investor profiles, jump straight to who cares about it and how to pitch them.
Lifetime Value, the total margin a customer is expected to generate over their entire relationship with the company.
Customer Acquisition Cost, the total sales and marketing spend required to acquire one new paying customer over a given period.
The number of months required for the gross profit from a customer to repay the cost of acquiring them.
The percentage of revenue remaining after subtracting cost of goods sold (COGS), reflecting the unit economics of delivering the product.
A SaaS sales-efficiency ratio: net new ARR divided by sales and marketing spend in the prior period.
Long-form deep dives on the slides LTV:CAC Ratio most often shows up on.
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