LTV to CAC ratio
LTV:CAC Ratio Calculator
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LTV:CAC = LTV ÷ CAC
The single best health check for a growth business. Below 1:1 you lose money on every customer; 3:1 or better is the goal.
Healthy
LTV : CAC
4.0:1
Every $1 of acquisition cost returns $4.00 in lifetime value, a healthy 3:1 or better.
LTV$720
CAC$180
Frequently asked questions
- What is the LTV:CAC ratio?
- LTV:CAC is lifetime value divided by customer acquisition cost: how much a customer is worth over their lifetime against what it cost to win them. A 4:1 ratio means every 1 you spend acquiring a customer returns 4 in lifetime value. It is the fastest read on whether your unit economics work.
- What is a good LTV to CAC ratio?
- Around 3:1 is the common rule of thumb for a healthy growth business: you earn back about three times what you spend to acquire a customer, with room to cover overhead and fund growth. Under 1:1 you lose money on every customer; above about 5:1 you may be under-investing in growth. These are conventions, not laws.
- Why is 3:1 considered the golden ratio?
- At 1:1 you only break even on acquisition, before any other cost, so you need a multiple to cover overhead, support and the slow return of cash. Three times acquisition cost is the level most operators treat as enough headroom to profit and still reinvest. It is a convention that tends to hold across subscription and ecommerce businesses, not a number the maths forces.
- How do you calculate the LTV:CAC ratio?
- Divide lifetime value by customer acquisition cost. With an LTV of 720 and a CAC of 180, the ratio is 720 ÷ 180 = 4.0:1. Work out each input first if you need to: LTV is average order value times orders per year times customer lifespan; CAC is total acquisition spend divided by new customers won.
- Can the LTV:CAC ratio be too high?
- It can signal a missed opportunity. A very high ratio, above about 5:1, often means you are spending too little on acquisition and could win more customers profitably. Treat it as a prompt to test more spend, not a hard ceiling.