LTV:CAC Ratio with $1,500 LTV and $1,000 CAC
An LTV:CAC ratio of 1.5:1 signals that acquisition costs are too high relative to lifetime value and the business model needs improvement.
How to use this tool
- Enter your customer lifetime value (use gross-margin LTV for the most honest figure).
- Enter your fully-loaded customer acquisition cost.
- Optionally enter the monthly gross margin per customer to estimate CAC payback.
- Read the ratio, net value per customer, payback period, and verdict.
When LTV is only 1.5x the CAC the business spends too much to acquire each customer relative to the revenue they generate over their lifetime.
Frequently asked questions
- What is a good LTV:CAC ratio?
- A ratio around 3x is the common SaaS benchmark — about $3 of lifetime value per $1 of acquisition cost. Below 1x you lose money on each customer; much above 5x can mean you are under-investing in growth and leaving expansion on the table.
- Should LTV be revenue or gross margin?
- Gross-margin LTV is more conservative and more defensible because it reflects money you actually keep after the cost of serving the customer. If you use revenue LTV, your ratio will look better than the economics really are.
- How is this different from CAC payback?
- LTV:CAC measures lifetime efficiency; CAC payback measures speed — how many months it takes to earn back the acquisition cost. A strong business usually wants a high ratio and a short payback (often cited as under 12 months).