What is LTV:CAC Ratio?
Nexa Consultancy | Startup & Finance Glossary
The LTV:CAC ratio is a critical SaaS metric that measures the relationship between the Lifetime Value (LTV) of a customer and the Cost of Acquiring (CAC) that customer. It is the ultimate indicator of the long-term profitability and scalability of a SaaS business.
For Startups: Proving a healthy LTV:CAC ratio is essential for raising venture capital. It shows investors that the business has a viable model where each new customer generates more value than they cost to acquire. Use our SaaS Calculator to measure your ratio.
For SaaS: A ratio of 3:1 is considered a healthy benchmark. A ratio below 1:1 is unsustainable. A ratio above 5:1 might indicate underinvestment in marketing.
Calculation: LTV:CAC Ratio = Customer Lifetime Value / Customer Acquisition Cost
Example: If a customer's LTV is ₹30,000 and the CAC is ₹10,000, the LTV:CAC ratio is 3:1.