SaaS LTV/CAC — Lifetime Value to Customer Acquisition Cost Ratio
Definition: The ratio of customer lifetime value to the cost of acquiring them. The single most-watched SaaS health metric.
Example
LTV of $9,000 and CAC of $3,000 = 3:1 ratio. The benchmark: 3:1 is healthy, 5:1+ is elite, below 1:1 is unsustainable.
When you'll hear it
SaaS LTV/CAC shows up most often in board meetings, quarterly business reviews, and strategy off-sites. When someone uses it, they're usually referring to lifetime value to customer acquisition cost ratio — and they expect the room to already know what that means.
FAQs
What does SaaS LTV/CAC stand for?
SaaS LTV/CAC stands for Lifetime Value to Customer Acquisition Cost Ratio.
What does SaaS LTV/CAC mean in business and finance?
The ratio of customer lifetime value to the cost of acquiring them. The single most-watched SaaS health metric.
Where will I hear SaaS LTV/CAC used at work?
SaaS LTV/CAC comes up most often in board meetings, quarterly business reviews, and strategy off-sites. It's used as shorthand for lifetime value to customer acquisition cost ratio, so people assume you already know the term.