Formula
LTV : CAC = lifetime value / customer acquisition cost
LTV:CAC ratio
The LTV:CAC ratio compares the lifetime gross profit of a customer with the cost of acquiring them.
Benchmark
3:1 is the widely used target. Below 1:1 every customer loses money. Above 5:1 often means underspending on growth.
The ratio judges whether acquisition is economically sound, but it says nothing about timing. A 4:1 ratio built on a five-year payback is not fundable by a company with ten months of runway.
That is why CAC payback usually matters more to an early company: it is measured in cash and time you actually have.
Related terms
Keep this number live
Plainhub computes ltv:cac ratio from money you record in plain words, so it is current when you need it rather than the night before a board meeting.
Build your model