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Marketing

Lifetime value to CAC ratio

Compares the contribution a customer returns against the cost of winning them. Around 3 to 1 is the usual floor; below 1 destroys value.

The Formula

LTV : CAC = LTV / CAC

Compares the contribution a customer returns against the cost of winning them. Around 3 to 1 is the usual floor; below 1 destroys value.

SymbolMeaning
Lifetime valueContribution over the customer's whole life
CACAverage cost of winning one paying customer

What Each Symbol Means

Lifetime valuecurrency

Contribution over the customer's whole life

Here 875.0, from a 35.0 monthly contribution over 25.0 months.

CACcurrency

Average cost of winning one paying customer

Here 250, giving 875.0 / 250 = 3.5.

See It Worked With Real Numbers

A formula on its own does not tell you which number goes where. The how to calculate customer lifetime value page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.

Where This Formula Appears

This equation is the working core of How To Calculate Customer Lifetime Value, filed under Business. Every number the guide produces comes from substituting into this one line.