Metrics
CAC:LTV Ratio
The ratio of customer acquisition cost to lifetime value. A 3:1 ratio (LTV is 3x CAC) is the common benchmark for healthy unit economics. Below 3:1 suggests you're either overspending on acquisition or your product doesn't retain well. Above 5:1 suggests you're underinvesting in growth and could scale faster. The ratio should be calculated at the channel level to identify which acquisition channels produce the most valuable customers, not just the cheapest ones.
Why it matters
It is the standard health check, and the standard 3:1 benchmark is meaningless without a payback period attached. A 3:1 that takes two years to realise can still kill the business.
In practice
Always read it next to payback. The ratio tells you whether the unit works; payback tells you whether you can afford to wait for it.
Related terms