Marketing · Guide
What is a good LTV:CAC ratio?
The 3:1 LTV:CAC benchmark is repeated everywhere. It's a useful starting point, but it's a heuristic, not a law. Below 3:1 you're usually buying growth at a loss. Above 5:1, you might actually be underspending on acquisition.
Last reviewed: April 2026
Where 3:1 comes from
The rule of thumb assumes roughly a third of LTV covers the cost to acquire a customer, a third covers cost to serve, and a third is profit. It's a crude split — but it's a defensible long-run target for subscription and recurring-revenue businesses.
When the rule breaks
Ratios above 5:1 often signal you're under-investing in acquisition — competitors will outspend you and take share. A startup hitting 8:1 should usually be pushing more spend into channels that work.
Ratios below 1:1 mean you're losing money on every customer. That's only acceptable if you have strong evidence the LTV will improve materially through retention work, expansion revenue, or pricing changes.
Payback period matters too
LTV:CAC ignores time. A 4:1 ratio recovered over 36 months is much riskier than a 3:1 ratio recovered in 8 months. Track CAC payback period alongside the ratio.
Calculate it cleanly
Use the ROAS / CAC / LTV calculator to compute all three values from spend, revenue, and retention inputs in one place.