What is the LTV:CAC Ratio?
The LTV:CAC Ratio compares how much revenue a customer generates over their lifetime to how much it cost to acquire them. It’s the ultimate litmus test for whether your growth is profitable.
Why It Matters
A healthy LTV:CAC ratio means your business generates more value from customers than it spends to get them. It’s the clearest signal of sustainable growth.
How to Calculate It
LTV:CAC Ratio = Customer Lifetime Value ÷ Customer Acquisition Cost
Benchmarks
- < 1:1 — You’re losing money on every customer. Unsustainable.
- 1:1 to 2:1 — Barely breaking even. Margins are razor-thin.
- 3:1 — The gold standard. Strong unit economics.
- 5:1+ — You may be under-investing in growth. Time to scale.
Common Pitfalls
- Using predicted (not actual) LTV without validating the model
- Excluding hidden acquisition costs (creative, agency fees, team time)
- Comparing blended LTV against paid-only CAC
- Not segmenting by channel — your Meta LTV:CAC may be very different from your Google Shopping LTV:CAC