Strategy and goals
LTV to CAC ratio
Lifetime value divided by acquisition cost: how many times a customer repays what it cost to win them.
What it is
It shows whether growth pays for itself. Above 1, a customer returns more than their cost over time; how far above is enough depends on margins and on how long the payback takes.
Why it matters
For lead generation and e-commerceIt is the quickest check on whether more spend creates or destroys value, and investors ask for it.
How it is measured
Formula
LTV to CAC = lifetime value / acquisition costDivide lifetime value by acquisition cost, for the same group of customers and on the same basis (margin, not revenue).
A common mistake
Both sides are estimates. Lifetime value is a forecast and acquisition cost depends on what is counted, so the ratio says more as a trend than as a single number.