How do you calculate LTV:CAC ratio?

LTV:CAC = customer lifetime value ÷ customer acquisition cost. For example: First-year LTV of ₹1,800 against a CAC of ₹600 is a ratio of 3:1.

What Is LTV:CAC ratio? Definition, Formula and Example

What is LTV:CAC ratio?

The LTV:CAC ratio compares what a customer is worth with what it cost to acquire them. A commonly used target is about 3:1.

FormulaLTV:CAC = customer lifetime value ÷ customer acquisition cost

A ratio below 1:1 means each new customer loses money over their lifetime. A very high ratio can mean the brand is under-investing in growth it could afford.

State the time window. First-year LTV against CAC is a safer basis for budget decisions than an open-ended lifetime.

Example

First-year LTV of ₹1,800 against a CAC of ₹600 is a ratio of 3:1.

Loading Glimmio…