LTV CAC Ratio
A measure of a business's health that compares the lifetime value of a customer to the cost of acquiring them.
Keywords:
ltv to cac, ltv/cac
Contents
Deep Dive
Metaphysical Synthesis & Analysis
The Synthesis
The LTV:CAC ratio measures how much customer lifetime value you get per dollar of acquisition cost. David Skok's research shows that 3:1 is the minimum for healthy SaaS; 5:1+ is excellent. For PMs, this ratio determines whether growth is profitable. If LTV:CAC < 1, you lose money on every customer. The best improvements come from increasing retention (LTV) rather than just reducing acquisition costs.
Metaphysical Foundation
LTV:CAC is the fundamental economics of growth. It determines whether scaling is sustainable.
Evolutionary Path
From simple ratios to cohort-based calculations to predictive models, LTV:CAC analysis has become more sophisticated.
Strategic Interplays
LTV:CAC validates Unit Economics and business-model. It is improved through Retention and efficient Acquisition.
Key Episodes
Dan Hockenmaier
Developing a growth model + marketplace growth strategy | Dan Hockenmaier
Patrick Campbell
10 lessons on bootstrapping a $200m business | Patrick Campbell (ProfitWell)
Timothy Davis
The ultimate guide to paid growth | Timothy Davis (Shopify)
Tom Conrad
Billion dollar failures, and billion dollar success | Tom Conrad (Quibi, Pandora...
Sri Batchu
Lessons from scaling Ramp | Sri Batchu (Ramp, Instacart, Opendoor)
Jonathan Becker