CAC vs LTV
CAC and LTV are the two numbers every SaaS board obsesses over. CAC tells you what you paid to win a customer; LTV tells you what that customer is worth across the whole relationship.
The key difference: CAC is a cost you incur today; LTV is revenue you expect to collect over years. The ratio between them is how the business gets graded.
| Dimension | CAC | LTV |
|---|---|---|
| What it measures | Cost to acquire one customer | Total revenue from one customer over their lifetime |
| Time horizon | Spent now, in the period | Earned over months or years |
| Who owns it | Marketing + sales | Product + customer success + finance |
| Healthy benchmark | As low as the channel allows | At least 3× CAC for venture-backed SaaS |
| Direction you want | Down | Up |
When to use CAC
Use CAC when you're evaluating channels, paid spend, or sales-team efficiency.
When to use LTV
Use LTV when you're pricing, deciding retention investments, or defending a payback period to the board.
FAQs
Is a higher LTV always better than a lower CAC?
Not on its own. What matters is the LTV:CAC ratio and payback period. A high LTV with an even higher CAC is still a bad business.
What is a good LTV:CAC ratio?
Most venture-backed SaaS businesses aim for 3:1 or higher, with CAC payback inside 12–18 months. Below 1:1 you're losing money on every customer.
Do CAC and LTV apply outside SaaS?
Yes — any business with repeat customers (DTC, marketplaces, services) uses the same logic. Only the time horizons and margin assumptions change.