Definition
LTV:CAC compares lifetime value to acquisition cost. It's a unit economics sanity check, but can mislead if definitions mismatch.
Formula
LTV:CAC = LTV / CAC
Example
If LTV is $5,400 and CAC is $600, LTV:CAC = $5,400 / $600 = 9.0.
Common mistakes
- Comparing revenue-based LTV to fully-loaded CAC (mismatch).
- Ignoring payback and cash constraints.
Measured as
LTV:CAC = LTV / CAC
Misused when
- Comparing revenue-based LTV to fully-loaded CAC (mismatch).
- Ignoring payback and cash constraints.
Operator takeaway
- Keep LTV:CAC Ratio consistent by cohort, segment, and period before you use it as a decision signal in planning or reporting.
- Interpret the metric alongside retention, margin, or payback so one ratio does not hide the real operating trade-off.
Next decision
- Quantify the impact with LTV:CAC Calculator if you need to turn the definition into an operating assumption.
- Read LTV:CAC ratio: how to interpret the ratio (and avoid mistakes) if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- LTV:CAC Calculator: Compute LTV:CAC ratio and CAC payback using ARPA, gross margin, churn, and CAC.
- Unit Economics Calculator: Model CAC, payback, LTV, and LTV:CAC together from ARPA, gross margin, and churn.
Guides
- LTV:CAC ratio: how to interpret the ratio (and avoid mistakes): Learn what LTV:CAC tells you, rough benchmarks, and how churn and payback change what 'good' looks like.
- Unit economics: CAC, payback, LTV, and LTV:CAC (how to model them): A practical unit economics guide: consistent definitions for CAC and LTV, how to calculate CAC payback period, and how to interpret LTV:CAC.
- Unit economics hub: CAC, LTV, payback, and runway (a practical stack): A practical hub for unit economics: CAC, fully-loaded CAC, LTV, payback, margin impacts, burn multiple, and runway planning.