LTV to CAC Ratio
What is LTV to CAC Ratio?
The LTV to CAC Ratio compares the lifetime value of a customer to the cost of acquiring them. A common benchmark for a healthy SaaS business is a ratio of 3:1, meaning the customer provides three times more value than it cost to bring them on board.
Why It Matters
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It serves as a primary indicator of the long-term sustainability and profitability of acquisition channels.
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A low ratio suggests that the company is spending too much to acquire customers relative to the revenue they generate.
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A very high ratio might indicate that the company is underinvesting in growth and could afford to spend more on marketing.
