Formula
LTV:CAC = Customer lifetime value ÷ Customer acquisition costReading the ratio
An LTV:CAC ratio of 3× means the selected lifetime value is three times the acquisition cost. It does not mean the cash is received immediately: payback timing still matters.
Consistency matters more than a benchmark
Do not compare gross-profit LTV with a CAC that excludes payroll, or a mature customer cohort with the acquisition cost of a new channel. Both sides should use compatible cohorts and definitions.
Avoid the universal 3:1 rule
A commonly quoted target cannot capture cash constraints, retention risk or growth strategy. Use the ratio alongside payback period, contribution margin and cohort retention.
Assumptions
- LTV and CAC use compatible cohorts and accounting definitions.
Sources and methodology
CalcMotive publishes the formula and assumptions so you can decide whether the estimate fits your use case. See our methodology standards.