What is the LTV:CAC ratio?
The LTV:CAC ratio compares a customer's lifetime value with the cost of acquiring them. To find it, divide LTV by CAC. For acquisition economics, use contribution-based LTV after the variable cost of serving the customer. A ratio of 3x then means lifetime contribution before acquisition cost is three times CAC.
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How to calculate LTV:CAC ratio
Divide contribution-based customer lifetime value by customer acquisition cost.
Why the ratio matters
The ratio shows whether growth pays off. A ratio below 1x means you spend more to win customers than they return, and the higher the ratio, the more room you have to invest.
It also helps decide where to put budget. Channels or segments with a stronger ratio usually deserve more of it.
How to read it
You'll often hear 3x quoted as a rule of thumb for contribution- or gross-profit-based LTV, but it's only a guide. The right level depends on payback period, cash, and how sure you are of your LTV. A revenue-based ratio is a different measure and should be labeled separately.
A very high ratio can also mean you're underinvesting in growth. Look at it next to payback period.
Keep the inputs consistent
Use contribution-based LTV before acquisition cost with a clearly scoped CAC. Do not subtract CAC inside LTV and then compare it again. For example, this page's calculator uses $600 of LTV. If that $600 is lifetime revenue at a 40% contribution margin, contribution LTV is $240, and with $200 CAC the ratio is 1.2x, not 3x.
Disclaimer
This calculator is for informational purposes only, and we don't guarantee the accuracy of its results. You're responsible for verifying any results before relying on them. See our terms of use.
Common questions
How do you calculate the LTV:CAC ratio?
Divide contribution-based LTV by CAC. For example, $600 in expected lifetime contribution before acquisition cost divided by $200 CAC gives a ratio of 3x.
What is a good LTV:CAC ratio?
Around 3x is a common guide when LTV reflects contribution or gross profit before acquisition cost, not revenue alone. The right target depends on cash flow, growth goals, uncertainty, and CAC payback period.
What if the ratio is too low?
Lower CAC by improving conversion or targeting, or raise LTV through retention, upsells, and better pricing. Check that the inputs are accurate too.
Why is the ratio written LTV:CAC?
It follows the ratio notation of comparing two values, as in 3:1. It can be shown as 3:1 or 3x, which mean the same.
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