What is the LTV:CAC ratio?
Lifetime value divided by acquisition cost. It shows how many times over a customer repays the cost of winning them, the headline test of unit economics.
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CAC Impact Simulator
Simulate unit-economics health — the LTV:CAC ratio (3:1 is a common target) and the months to pay back acquisition cost — as CAC changes.
LTV:CAC ratio = LTV / CAC ; payback months = CAC / (ARPU × margin)
Frequently asked questions
Why is 3:1 a common target?
Because it leaves room for all the other costs of running the business while still profiting per customer. Below 3:1 is often seen as thin; below 1:1 means you lose money on each customer.
What is payback period?
How many months of a customer's margin it takes to recover their acquisition cost. Shorter is better, since cash comes back faster to fund more growth.
Can a ratio be too high?
Possibly. A very high ratio can mean you are underspending on growth and could profitably acquire more customers. It is a balance, not a maximise-at-all-costs number.
How do I improve these?
Lower CAC through better targeting and conversion, or raise LTV by cutting churn and lifting margin. The simulator lets you see each move's effect on the ratio and payback.