LTV:CAC Ratio

LTV:CAC is a unit-economics ratio: estimated customer lifetime value (LTV) divided by customer acquisition cost (CAC). It helps a business ask whether acquiring a typical customer is economically worthwhile, not merely whether a campaign produces inquiries. CAC should capture the acquisition costs relevant to the chosen measurement period, while LTV should reflect the contribution expected over a customer's relationship with the business. Using gross revenue for LTV but fully loaded cost for CAC can make the comparison misleading.

For an illustrative calculation, if the expected contribution from one acquired customer is $900 and attributable acquisition cost is $300, LTV:CAC is 3:1. That is a description of the assumptions, not proof of profitability. Overhead, cash collection, refunds, financing, and service capacity may still change the decision. For a one-time repair business, repeat purchase behavior may look very different from subscription retention.

Use cohorts, consistent gross-margin assumptions, and a stated observation period. Compare the ratio with payback time and cash flow rather than treating any universal benchmark as a pass/fail rule.