LTV:CAC Ratio

Definition

Lifetime Value divided by Customer Acquisition Cost, measuring whether a customer is profitable over their lifetime. If it's under 3:1, you're losing money on every sale.

Example Usage

Our LTV:CAC ratio is 4:1, which means every dollar we spend acquiring customers returns four dollars over their lifetime.

Origin

SaaS unit economics terminology from the 2000s

Fun Fact

A 3:1 LTV:CAC is considered the minimum viable ratio for sustainable SaaS growth

Source: SaaS unit economics terminology

Related Terms

Beginner

founder dilution

The reduction in founders' ownership percentage that occurs each time the company raises money or issues new equity. It's the slow, inevitable erosion of ownership that founders signed up for when they took outside capital.

🚀 Startup / VC

Intermediate

fully diluted

A calculation of ownership percentages that includes all possible shares—options, warrants, convertible notes, and that napkin the founder signed in 2009. The number that reveals how little of the company you actually own.

🚀 Startup / VC

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vested

The magical moment when stock options or retirement contributions officially become yours to keep, transforming from corporate dangling carrot into actual ownership. It's the golden handcuffs' lock clicking shut, ensuring you'll think twice before rage-quitting. The startup world's version of 'you must be this loyal to ride this rocket ship.'

🚀 Startup / VC

Intermediate

tender offer

When a company or investor offers to buy shares from existing shareholders at a set price, providing liquidity without a full exit. A release valve for the equity pressure cooker.

🚀 Startup / VC

Advanced

Cap Table

A spreadsheet that tracks who owns what percentage of a company, growing increasingly depressing with each funding round as the founders' share shrinks like a wool sweater in a dryer. It's the scoreboard of startup capitalism.

🚀 Startup / VC

Beginner

Raising Money

The process of convincing strangers to give you money based on PowerPoint slides and promises of future glory. It typically consumes 50% of a CEO's time and results in 30% dilution per round.

🚀 Startup / VC

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