The relationship between these two metrics provides a simple, yet serviceable indicator of your financial health.
For example, an LTV:CAC Ratio of:
- 3:1 is good, earning $3 in revenue for every $1 in customer acquisition cost.
- 1:3 is bad, earning $1 in revenue for every $3 in customer acquisition cost.
However, the individual and combined simplicity of these two metrics belies the complexity required to calculate them. There are as many as 12 underlying measures required to generate a holistic view of CLTV, CAC, and LTV:CAC ratio. That said, the information provided is well worth the investment.