The LTV:CAC ratio compares the lifetime profit of a customer to the cost of acquiring them. About 3:1is healthy; below 1:1 you lose money on every customer, while a very high ratio can mean you’re under-investing in growth.
LTV:CAC ratio
Ratio
3.0:1
Bar fills to the 3:1 healthy target.
At or above 3:1 — healthy unit economics. A very high ratio can mean you're under-investing in growth.
Use a profit-based LTV (contribution margin), not revenue, so the ratio reflects real unit economics. A healthy ecommerce business keeps LTV at least three times CAC.
How to improve the ratio
Raise LTV (higher AOV, more repeat purchases, lower churn, better margins) or lower CAC through cheaper, better-targeted acquisition. Improving retention usually moves the ratio fastest, because it lifts both order frequency and customer lifespan at once. Use a profit-based LTV so the ratio reflects real economics, not revenue.
Frequently asked questions
What does the LTV:CAC ratio tell you?+
The LTV:CAC ratio compares the lifetime profit of a customer to the cost of acquiring them. About 3:1 is healthy; below 1:1 means you lose money on each customer, while a very high ratio may mean you're spending too little to grow.
What is a good LTV:CAC ratio?+
A healthy LTV:CAC ratio is about 3:1 — each customer returns roughly three times what they cost to acquire. Below 1:1 you lose money on every customer; far above 3:1 can signal you're under-investing in growth.
How do I improve my LTV:CAC ratio?+
Raise LTV — higher AOV, more repeat purchases, lower churn, better margins — or lower CAC through cheaper, better-targeted acquisition. Improving retention usually moves the ratio fastest, because it lifts both order frequency and customer lifespan at once.
How do I calculate customer lifetime value?+
A common LTV formula is average order value × purchases per year × customer lifespan in years × contribution margin. A $60 AOV, 3 orders a year, a 2-year lifespan, and a 50% margin give an LTV of $180. Using margin keeps LTV a profit figure.
