LTV:CAC Ratio

LTV:CAC compares how much revenue a customer generates over their lifetime to how much it costs to acquire them. A ratio of 3:1 or higher is generally considered healthy for SaaS businesses, meaning each dollar spent on acquisition returns three dollars in value.

If the ratio is too low, the business is spending more to acquire customers than they are worth. If it is too high, the company may be under-investing in growth and leaving market share on the table.

This metric is most useful when segmented by channel, cohort, or customer tier. Some channels may have a 5:1 ratio while others sit below 1:1, making the blended number misleading without segmentation.