LTV:CAC ratio

The LTV:CAC Ratio is a fundamental SaaS efficiency metric that compares the Lifetime Value of a customer to the cost incurred to acquire them, essentially quantifying the return on investment for your sales and marketing spend. It answers whether a business can profitably scale; for instance, the widely accepted "golden rule" benchmark is 3:1, meaning the company generates three dollars in lifetime margin for every one dollar spent on acquisition. A ratio below 1:1 indicates the business loses money on every new customer, while a ratio significantly higher (e.g., 5:1) often suggests the company is being too conservative and could grow faster by investing more aggressively in marketing.