LTV/CAC Ratio
By: A Staff Writer
Updated on: Jul 19, 2024
What: Compares how much revenue a customer generates (LTV) to the cost of acquiring them (CAC). An ideal ratio is 3:1 or higher.
Who: No single inventor, but a crucial metric for customer-focused businesses.
Why: Forces entrepreneurs to look beyond the immediate sale and consider long-term profitability.
When: During growth planning, assessing marketing channels, or when deciding where to invest resources.
How:
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- Calculation of LTV can be complex.
- Use your ratio to evaluate different acquisition strategies.