Distinct from CAC payback period, which measures how fast CAC is recovered — this measures the total magnitude of return over a customer’s lifetime relative to acquisition cost.
How it works
Customer lifetime value divided by customer acquisition cost gives the LTV:CAC ratio — a ratio of 3:1 or higher is a commonly cited healthy benchmark for SaaS and subscription businesses.
What this does not include
This computes a single ratio from whatever LTV and CAC figures are entered — this site’s separate customer-lifetime-value and customer-acquisition-cost calculators compute those two inputs individually if needed first.
How to use this calculator
- Enter customer lifetime value (LTV) and customer acquisition cost (CAC).
A worked example
Customer lifetime value $3,000 against customer acquisition cost $200: LTV:CAC ratio = 3,000 ÷ 200 = 15 — well above the commonly cited healthy benchmark of 3.
LTV $300 against CAC $200: ratio = 1.5 — a warning sign, since acquisition cost is eating up most of the customer’s lifetime value.
What the variables mean
| Variable | Meaning |
|---|---|
| LTV | Total revenue expected from a customer over their relationship with the business |
| CAC | Cost to acquire that customer |
Edge cases worth knowing
A ratio around 3 is often cited as a healthy target — high enough to be profitable after accounting for overhead, but a very high ratio can also signal underinvestment in growth rather than pure efficiency.
Zero CAC makes the ratio undefined — there’s no acquisition cost to compare lifetime value against, so the calculator declines to show a result.
Frequently asked questions
Why is 3:1 commonly cited as a healthy benchmark?
It balances profitability against growth — a ratio much higher than 3:1 might suggest under-investing in growth, while a ratio much lower suggests acquisition spend isn’t generating proportionate value.
Do top-performing SaaS companies exceed 3:1?
Often yes — some benchmark reports cite top-quartile companies reaching 4:1 to 6:1, though the “right” ratio depends on growth stage and strategy.
Does this ratio account for how quickly CAC is recovered?
No — this site’s separate CAC payback period calculator addresses the timing question; LTV:CAC addresses total magnitude, and the two are best read together.
