Jan 6, 2026
LTV:CAC Ratio
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The ratio comparing customer lifetime value to acquisition cost. Primary metric for unit economics and business sustainability.
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Formula:
LTV ÷ CAC
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Benchmarks
Healthy SaaS: 3:1 or higher. Below 1:1 = losing money per customer. Above 5:1 = potentially underinvesting in growth.
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Why It Matters
3:1 means you earn $3 for every $1 acquiring customers. Below 3:1: either increase LTV (pricing, retention, upsells) or decrease CAC (better targeting, conversion optimization). Above 5:1 might mean you're leaving growth on the table.
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