What LTV to CAC ratio is generally considered good?

• A. 4 or higher
• B. A result of 2 or higher; ideally around 3
• C. 1
• D. 0.5

Answer: (B)

In this topic, you’re looking at how much value a customer brings over their lifetime relative to what it costs to acquire them. LTV is the expected gross profit from a customer over how long they stay with you, and CAC is the average spend to win that customer. When this ratio is around 2 or higher, you’re earning roughly twice what you spent to acquire the customer, which supports sustainable growth and cash flow. An ideal target around 3:1 gives a healthy cushion for overhead, product development, and profit, and 4:1 would be even stronger. Ratios at or below 1 mean you’re not recouping acquisition costs from lifetime value, and 0.5:1 is a poor unit economics situation. The exact target can vary with margins and churn, but the commonly good range is at least 2:1, with an optimal around 3:1.