Question 1

What is a CAC vs LTV chart?

Accepted Answer

A CAC vs LTV chart compares two fundamental SaaS metrics side by side: Customer Acquisition Cost (how much you spend to acquire one customer) and Lifetime Value (how much revenue that customer generates over their relationship with you). Plotting them together shows whether your unit economics are healthy — LTV should be significantly higher than CAC.

Question 2

What is a healthy LTV to CAC ratio?

Accepted Answer

A 3:1 LTV:CAC ratio is the widely cited benchmark for a healthy SaaS business — meaning a customer generates three times what it cost to acquire them. A ratio below 1:1 means you're spending more to acquire customers than they're worth. Above 5:1 may signal underinvestment in growth. Most investors look for 3:1 or better.

Question 3

How do I calculate CAC?

Accepted Answer

CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired. Use the same time period for both figures (e.g., monthly or quarterly). Make sure to include all sales and marketing costs: salaries, ad spend, tools, commissions, and any other acquisition-related expenses.

Question 4

How do I calculate LTV?

Accepted Answer

LTV = Average Revenue per Account (ARPA) ÷ Customer Churn Rate. For example, if ARPA is $200/month and monthly churn is 2%, LTV = $200 ÷ 0.02 = $10,000. You can also calculate it as Average Purchase Value × Purchase Frequency × Average Customer Lifespan.

Question 5

Why should I track CAC and LTV over time?

Accepted Answer

Tracking these metrics over time reveals whether your business is becoming more or less efficient at acquiring and retaining customers. Improving LTV:CAC ratio signals healthy scaling. Deteriorating ratios early in a growth phase are a warning sign to investigate — it might mean a saturating acquisition channel, rising ad costs, or worsening retention.

CAC vs LTV Chart

Related Examples

FAQ: CAC vs LTV Chart