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What is the LTV : CAC Ratio?

The LTV : CAC ratio compares how much revenue a customer generates over their lifetime (LTV) versus how much it costs to acquire that customer (CAC).

It answers one brutal question:

“Is this business worth scaling?”

This metric works universally — whether your numbers are in ₹ (INR) or $ (USD).

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LTV : CAC Formula

Lifetime Value (LTV):

LTV = (ARPU × Gross Margin) ÷ Monthly Churn

LTV : CAC Ratio:

LTV : CAC = LTV ÷ CAC

Example:

• ARPU = ₹3,000
• Gross Margin = 70%
• Monthly Churn = 5%
• CAC = ₹12,000

LTV = (3000 × 0.7) ÷ 0.05 = ₹42,000 LTV : CAC = 42,000 ÷ 12,000 = 3.5x

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How to Interpret the LTV : CAC Ratio

Ratio Meaning Reality

< 1.0x - Unviable - You lose money per customer

1.0x – 2.5x - Risky - Growth depends on funding

> 2.5x - Healthy - Sustainable and scalable

Most strong SaaS companies aim for 3x or higher.

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Why This Metric Matters

LTV : CAC is a decision tool, not a vanity metric.

It helps you decide:

• Whether to scale ads
• Whether pricing is broken
• Whether retention needs fixing
• Whether CAC is out of control

High growth with bad LTV : CAC is just accelerated failure.

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Common Mistakes

• Using revenue instead of gross margin
• Ignoring churn
• Underestimating CAC by excluding salaries or tooling
• Optimizing ROAS while LTV : CAC is broken

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Summary

If you track only one metric for growth sustainability, make it LTV : CAC.

This calculator gives you:

• Instant clarity
• No accounting gymnastics
• A hard yes/no signal for growth decisions

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