Lifetime gross profit per customer works best.
Sales and marketing cost per new customer.
LTV:CAC ratio
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The LTV:CAC ratio formula
LTV:CAC ratio = customer lifetime value ÷ customer acquisition cost
Example: A customer brings $900 of gross profit over their lifetime and costs $300 to win: $900 ÷ $300 = 3, a 3:1 ratio. To keep 3:1 with a $600 lifetime value, you can pay at most $200 per customer.
What is the LTV:CAC ratio?
The LTV:CAC ratio shows whether growth pays. A ratio of 1:1 means you spend as much winning a customer as they will ever bring; below that, every new customer loses money.
A common rule of thumb in subscription businesses is to aim for about 3:1. Much higher can mean you are spending too little and growing slower than you could.
Use gross profit LTV rather than revenue, or the ratio will look better than the business is.
What is a good LTV:CAC ratio?
Ratios from recent studies of software companies and online shops. Studies define LTV differently, so compare with care.
| Where | Typical | Source |
|---|---|---|
| Vertical B2B SaaS, median 342 B2B SaaS and AI companies, full-year 2025 | 5.6:1 | Benchmarkit and Aleph, 2026 SaaS & AI Performance Benchmarks |
| Horizontal B2B SaaS, median 342 B2B SaaS and AI companies, full-year 2025 | 4.1:1 | Benchmarkit and Aleph, 2026 SaaS & AI Performance Benchmarks |
| Shopify DTC brands, median 2025 data from 77M customers | 2.4:1 | AMP, 2025 DTC Mega Report |
How to improve your LTV:CAC ratio
- Cut CAC: put budget into the channels whose customers cost least and stay longest.
- Raise LTV: better onboarding, fewer reasons to cancel, and plans that grow with the customer.
- Compare the ratio by channel. A channel with a cheap CAC and short-lived customers can be worse than an expensive one.
What the LTV:CAC ratio doesn't tell you
- LTV is a forecast and CAC is history, so the ratio mixes a guess with a fact. Recheck it as real customer lifetimes come in.
- The ratio says nothing about cash. A 5:1 ratio that takes three years to earn back can still run a company out of money; check the CAC payback period too.
OneLence helps marketing teams find growth opportunities, know what to do next, and grow more efficiently without simply spending more. It puts ads, search, AI assistants and affiliate partners side by side, with the visitors and sales each one brings, and says where to invest, hold or cut back. See how it works.
Frequently asked questions
How do you calculate the LTV:CAC ratio?
Divide customer lifetime value by customer acquisition cost. $900 ÷ $300 = 3, written 3:1.
What is a good LTV to CAC ratio?
A common target in subscription businesses is about 3:1. Below 1:1 each customer loses money; far above 3:1 can mean you could spend more to grow faster.
Should LTV use revenue or profit?
Gross profit. Revenue includes the cost of the goods or service, which isn't money you can spend on winning customers.
How much can I spend to acquire a customer?
Divide lifetime value by the ratio you want. With a $600 gross profit LTV and a 3:1 target, CAC can be up to $600 ÷ 3 = $200.
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