Glossary · SaaS metrics
What is the LTV:CAC ratio?
The LTV:CAC ratio compares the lifetime value of a customer with the cost of acquiring them — LTV divided by CAC — to show how much value each dollar of acquisition spend creates.
Also called: LTV to CAC ratio, CLV:CAC
Updated
How is LTV:CAC calculated?
LTV:CAC = customer lifetime value ÷ customer acquisition cost
Use gross-margin LTV and fully loaded CAC from the same customer group and period. Computing it per channel is more useful than one blended number.
LTV:CAC example
Gross-margin LTV is $1,200. Blended CAC is $300: a ratio of 4:1. By channel: content-led customers cost $120 (10:1), paid search customers $600 (2:1). The blended ratio looks great while paid search is marginal — and adding budget there pushes the ratio down further, because each additional customer usually costs more than the last.
What is a good LTV:CAC ratio?
A widely cited rule of thumb is 3:1 or higher. Below about 1:1 you lose money on every customer. Well above 5:1 can mean you're under-investing in growth — you could spend more to win customers faster and still be profitable. Treat these as conventions, not laws: a business with fast payback and plenty of cash can live with a lower ratio.
Limits of LTV:CAC
- LTV is a projection; a young company's ratio is mostly assumption.
- It ignores timing — a 4:1 ratio with a 30-month payback can still starve you of cash. Check CAC payback too.
- Channel ratios depend on the attribution model used to assign customers to channels.
LTV:CAC by channel with VisitTrack
The hard part of a per-channel ratio is knowing each customer's channel. VisitTrack attributes every payment to the visitor's first-touch source (and lets you compare last touch, linear, time decay and position-based), so you can sum revenue and count customers per channel, then divide by that channel's spend. Use the LTV calculator and CAC calculator for the math, and revenue attribution for the data.
Frequently asked questions
Why is 3:1 a good LTV to CAC ratio?
Because after covering acquisition cost and the cost of serving the customer, a 3:1 ratio leaves enough margin for overhead and profit. It's a rule of thumb from SaaS investors, not a strict threshold.
Can the LTV:CAC ratio be too high?
Yes. A very high ratio, such as above 5:1, often means you could spend more on acquisition and grow faster while staying profitable.
Related terms
- Customer lifetime value (LTV)Customer lifetime value (LTV or CLV) is the total revenue — or, more usefully, gross profit — a business can expect from a single customer over the whole time they remain a customer.
- Customer acquisition cost (CAC)Customer acquisition cost (CAC) is the total sales and marketing spend required to acquire one new paying customer over a period — total acquisition costs divided by new customers acquired.
- CAC payback periodCAC payback period is the number of months it takes for a new customer's gross profit to cover the cost of acquiring them.
- Churn rateChurn rate is the percentage of customers (or recurring revenue) that a business loses during a period, out of the customers (or revenue) it had at the start of that period.
- Revenue attributionRevenue attribution is the practice of connecting each payment to the visitor who made it and the marketing sources — referrer, campaign, landing page — that brought that visitor, so you can see how much money each channel actually produced.
Tools and guides
See which channels actually bring paying customers
VisitTrack is cookie-free analytics with revenue attribution built in. One script tag, no consent banner, live in two minutes. 14 days free, no card required.