What Is LTV:CAC Ratio?

Why LTV:CAC Ratio Is the Core SaaS Efficiency Metric

LTV and CAC are useful on their own, but the ratio between them tells you something neither metric can alone: whether your growth is sustainable. A company spending $5,000 to acquire customers worth $5,000 is growing at breakeven. A company spending $5,000 to acquire customers worth $15,000 has room to scale.

Investors treat LTV:CAC as a shorthand for business health. It answers a simple question: for every dollar you spend on acquisition, how many dollars come back over the customer’s lifetime? That single number reveals whether a company is building durable value or burning cash to manufacture growth.

How to Calculate LTV:CAC Ratio

The formula is straightforward:

LTV:CAC Ratio = Customer Lifetime Value ÷ Customer Acquisition Cost

If your average customer generates $18,000 in lifetime revenue and costs $6,000 to acquire, your LTV:CAC ratio is 3:1. For every dollar spent on acquisition, you earn three dollars back.

Both inputs matter. LTV depends on average revenue per account, gross margin, and how long customers stay. CAC includes all sales and marketing spend — headcount, tools, ad spend, content production — divided by new customers acquired in that period.

What a Good LTV:CAC Ratio Looks Like

The widely cited benchmark for healthy SaaS businesses is a 3:1 ratio — each customer should return at least three times what it cost to acquire them. This benchmark appears consistently across SaaS industry frameworks, from venture capital firm guidance to public company benchmarks.

• Below 1:1 — the business loses money on every customer. Unsustainable at any scale.
• 1:1 to 2:1 — barely breaking even after accounting for operational costs. Growth is fragile.
• 3:1 — the industry standard for a well-run SaaS company. Enough margin to fund operations and reinvest in growth.
• Above 5:1 — healthy, but could indicate underinvestment in growth. The business may be leaving market share on the table by not spending more on acquisition.

Context matters. Early-stage companies often operate below 3:1 while finding product-market fit. Companies with strong net revenue retention can tolerate a higher CAC because expansion revenue pushes LTV up over time.

How BOFU Content Improves LTV:CAC Ratio

LTV:CAC improves in two directions: increase what customers are worth, or decrease what they cost to acquire. BOFU content directly attacks the denominator.

Comparison pages and alternative pages capture buyers who are already evaluating products. These visitors convert at significantly higher rates than top-of-funnel traffic because the intent is commercial, not educational. Higher conversion rates from the same traffic spend means lower CAC.

Organic BOFU content also compounds over time. A comparison page that ranks for “[Product A] vs [Product B]” delivers qualified leads month after month without incremental ad spend — steadily improving the ratio as the content ages and the acquisition cost per customer drops.