LTV / CAC ratio · acquisition health
The LTV / CAC ratio compares what a customer brings in (LTV) to what they cost to acquire (CAC). A 3 to 1 ratio is the benchmark of healthy acquisition.
The formula
Ratio = Customer lifetime value (LTV) ÷ Acquisition cost (CAC)
A concrete example
Example
An LTV of $720 for a CAC of $240 gives a ratio of 720 ÷ 240 = 3. Every dollar invested in acquisition returns three.
Why it matters
Below 1, you lose money on every customer. Around 3, acquisition is healthy and fundable. Well above that, you may be under-investing and leaving market share to competitors.