What is ltv:cac ratio?
The ratio of customer lifetime value to customer acquisition cost. Indicates whether your unit economics are healthy. The gold standard is 3:1 or higher.
Formula
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
Why it matters
This ratio tells you if your business model works. Below 1:1 = losing money. 1-3:1 = break-even to thin margins. 3:1+ = healthy. Higher isn't always better (might mean you're under-investing in growth).
How to improve
Increase LTV through better retention and expansion revenue. Decrease CAC through viral growth, SEO, and conversion optimization. The best companies work on both sides simultaneously.
Related playbooks
Bundle more value into the subscription
Add things to your subscription so canceling means losing multiple things they use.
Make your product visible to non-users
Every time someone uses your product, someone who doesn't have it sees it working. That's the best ad you'll ever run.
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