Definition
LTV:CAC compares the lifetime value you earn to the cost to acquire a customer.
Benchmarks (rule of thumb)
- ~3:1 is a common target for many SaaS businesses.
- Very high ratios can mean you're under-investing in growth.
- Lower ratios can be acceptable with short payback and strong retention.
Common pitfalls
- Using inconsistent definitions for CAC (fully-loaded vs paid-only).
- Using revenue LTV but comparing to fully-loaded CAC (mismatched bases).
- Ignoring payback period and cash constraints.