Definition
What it means.
The LTV to CAC ratio compares customer lifetime value to customer acquisition cost, stating how many dollars of value each acquisition dollar buys. A commonly used planning benchmark is 3 to 1, but it is not a universal break-even point. Profitability also depends on whether value means revenue or gross profit, the costs included and when
Worked example
In practice.
A business has an LTV to CAC ratio below its 3 to 1 target. The team checks its assumptions, margins and payback period, then compares changes to acquisition cost, pricing and retention. Crossing the target improves that ratio; it does not by itself establish profit or prove that more spend will perform the
Where this work happens:
Put it in context.
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