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Get startedLTV:CAC ratio
Lifetime value divided by acquisition cost — the core unit-economics health check.
The LTV:CAC ratio compares what a customer is worth (LTV) to what they cost to acquire (CAC). Around 3:1 is a common healthy target — you earn roughly three times what you spend to acquire. Below 1:1 you lose money on each customer; far above 3:1 you may be under-investing in growth.
Formula
LTV:CAC = LTV ÷ CAC
Example: $75 LTV ÷ $25 CAC = 3:1.
What a good result depends on
≈3:1 is the rule of thumb; the right number depends on payback time and cash.
Common mistakes
- Using revenue-based LTV, which inflates the ratio.
- Ignoring how long it takes to realise the LTV (payback period).