What’s a Good LTV To CAC Ratio? How To Calculate LTV To CAC

Summary

The episode explains how to calculate the customer lifetime value (LTV) to customer acquisition cost (CAC) ratio and why it matters for measuring marketing efficiency. It walks listeners through the formulas for LTV (average purchase value × frequency × lifespan) and CAC (total sales/marketing spend ÷ new customers) and shows how to derive the ratio, using a 3:1 example as a healthy benchmark. The host outlines what constitutes a good ratio for SaaS (≥3:1) and ecommerce (2:1‑4:1), warns against ratios that are too low or excessively high, and offers tactics to improve the ratio by boosting retention, lowering churn, and acquiring customers more cost‑effectively.