Result
LTV / CAC
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
LTV/CAC = customer lifetime value ÷ cost of acquiring them. A value of 3 means a customer brings in three times more profit over their lifetime than it cost to acquire them.
A ratio below 1 is an unambiguous warning sign: the business spends more acquiring a customer than it will ever get back from them, even before other operating costs. That doesn't work as a business model regardless of industry.
In startup and SaaS circles, 3:1 or higher is often cited as a sign of healthy unit economics — but that's a rule of thumb, not a universal law: it assumes specific margin and cost-structure conditions that don't fit every business model. The ratio is best read alongside CAC payback period — if LTV/CAC is high but a customer only pays back after three years, the business may still lack the working capital to grow into that outcome.