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Unit economics & SaaS
LTV to CAC ratio
Lifetime value divided by acquisition cost — how many dollars of gross profit each dollar of acquisition spend buys. Three is the usual healthy benchmark.
Owned by: Senior analystTest band: Senior analyst
The formula
LTV:CAC = LTV ÷ CAC
In practice
Below one, every customer loses money. Above five, you are probably under-investing in growth. The ratio says nothing about how long the payback takes.
The kind of thing the test asks
- LTV:CAC is 4:1 but CAC payback is 30 months. The concern is…
More in unit economics & saas
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