LTV:CAC Ratio
Also: LTV to CACLTV/CAC
The ratio of a customer's lifetime value to the cost of acquiring them, the headline test of whether your growth is economically sound.
Why it matters
LTV:CAC answers the central question of a subscription business: are customers worth more than they cost to acquire, and by how much? It is the single clearest signal of unit-economic health. Investors and operators use it to judge whether growth is creating or destroying value.
How it is calculated
LTV:CAC = lifetime value of a customer / cost to acquire that customer
What good looks like
A ratio around 3:1 is the common rule of thumb for a healthy SaaS business: below it suggests acquisition is too expensive or value too low, far above it (5:1 or more) may mean you are under-investing in growth and leaving the market to competitors. The right number depends on your stage and margins.
In the European market
Because both CAC and LTV vary by European market, a blended LTV:CAC can mask wide differences, an efficient home market subsidising an early-stage one that is not yet viable. Compute the ratio per market as you expand, so you can tell the difference between a market that needs more time and one that does not work. A 3:1 blend made of a 5:1 and a 1:1 is two very different stories.
Related terms
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