Financial Model, General Excel Financial Models

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LTV stands for “lifetime value” per customer, and CAC stands for “customer acquisition cost”.

The LTV-to-CAC ratio compares the value of a customer over their lifetime, compared to acquiring them. This metric compares the value of a new customer over its lifetime relative to acquiring it. If the LTV/CAC ratio is less than 1.0, the company is destroying value; if the KPI is greater than 1, it may be creating value, but more analysis is required. Generally speaking, a ratio greater than 3 is considered “good,” but that’s not necessarily the case.

Calculating your LTV-to-CAC ratio is a great way to see if your company is positioned for sustainable growth. This ratio acts as a barometer for determining how much or how little you should spend on marketing and sales to maximize your growth and stay ahead of the competition.

If you want to easily calculate the CAC/LTV ratio, then try this CAC/LTV Calculator. This calculator comes in an Excel Template for where you can customize however you want to adjust the model. Feel free to have a look and check it out now!

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