LTV/CAC Ratio
The ratio of Customer Lifetime Value to Customer Acquisition Cost, measuring the return on each dollar spent acquiring customers.
Why it matters
This is the single most important metric for assessing SaaS unit economics. A ratio below 3:1 means you're likely spending too much on acquisition; above 5:1 may mean you're underinvesting in growth.
Formula
Simply divide CLV by CAC. A result of 3.0 means you earn $3 for every $1 spent on acquisition.
Calculator
What's a good LTV:CAC?
Below 1:1: Losing money. 1-3:1: Needs improvement. 3-5:1: Healthy. Above 5:1: Consider investing more in growth.
Related metrics
CLV
SaaSThe total revenue a business can expect from a single customer account over the entire duration of their relationship.
CAC
SaaSThe total cost of acquiring a new customer, including all sales and marketing expenses.
Churn Rate
SaaSThe percentage of customers or revenue lost over a given period, typically measured monthly.