← Guides · November 8, 2026
What Is a Good LTV:CAC Ratio? A Worked Example
Investors and founders quote LTV:CAC constantly. Here is how it is built, step by step, with one example.
The example
A SaaS with $50 ARPA, 80% gross margin, 4% monthly churn, and $12,000 spent on sales and marketing to win 60 new customers a month.
- Gross profit per customer per month: $50 × 80% = $40
- Customer lifetime: 1 ÷ 4% = 25 months
- LTV: $40 ÷ 4% = $1,000
- CAC: $12,000 ÷ 60 = $200
- LTV:CAC: $1,000 ÷ $200 = 5x
- CAC payback: $200 ÷ $40 = 5 months
How to read it
| Ratio | Meaning |
|---|---|
| Below 1.5 | You likely lose money on each customer |
| 3 or more | The usual healthy target |
| Above 5 | Very efficient, you may be able to spend more on growth |
Payback matters as much as the ratio. A 5x ratio with a 30-month payback can still starve a young company of cash.
The fastest lever
Look at the churn term. At 3% churn instead of 4%, LTV rises from $1,000 to about $1,333, and the ratio from 5x to 6.7x, without spending a dollar more on acquisition.
Try your own numbers in the SaaS metrics calculator.