Customer Lifetime Value to Customer Acquisition Cost (CLTV to CAC; LTV/CAC)

The Customer Lifetime Value to Customer Acquisition (CLTV/CAC) ratio is a SaaS metric used to measure a company’s sales efficiency using the relationship between the lifetime value of an average customer and the average cost of acquiring that customer. The metric, computed by dividing LTV by CAC, is a signal of customer profitability and of sales and marketing efficiency. A ratio greater than 1.0 implies that the company is generating value. Inversely, a ratio below 1.0 implies that the company is destroying value. Investors’ expectations are that the CLTV/CAC ratio should fall within the 0.8 to 1.3 range with a clear path to achieving a ratio above 3.0x. However, the top performing companies achieve 3.0x to 5.0x.

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