LTV:CAC Ratio

The LTV:CAC (Lifetime Value to Customer Acquisition Cost) ratio is a business metric that compares the long-term value a customer brings to your company (LTV) to the cost of acquiring that customer (CAC). In simple terms, it helps you evaluate whether the money you spend on acquiring customers is a good investment.Here's how it works:LTV (Lifetime Value): This represents the total revenue a customer is expected to generate over the duration of their relationship with your business. It includes all their purchases, subscriptions, or transactions.CAC (Customer Acquisition Cost): This is the cost of marketing, sales, and other expenses incurred to acquire a new customer.By dividing LTV by CAC, you get a ratio. A ratio greater than 1 indicates that the value a customer brings is higher than what you spent to acquire them, which is a positive sign. It suggests that your customer acquisition efforts are profitable and that you're likely to see a return on your investment over time.