LTV/CAC Ratio LTV:CAC / CLV:CAC
How many dollars of lifetime customer value the company earns for each dollar it spends acquiring a customer.
The fork, why two teams get different numbers
LTV is where the disagreement lives. Revenue-based LTV vs gross-margin-based LTV
(the only defensible one) vs contribution-margin LTV differ by the full cost of
service. Lifetime = 1 ÷ churn rate, but which churn (logo vs revenue, monthly vs
annual) and whether expansion is folded in changes the number severalfold. Some
teams discount future value to present value; most do not. CAC forks the same way
it does in payback. The "3x is healthy" rule of thumb gets quoted against wildly
different LTV definitions.
The trap
Revenue-based LTV (no gross margin) inflates the ratio by the entire cost of delivery, a 3x on revenue-LTV may be barely 1x on the profit that matters.
- The full trap, worked on a real export
- Every formula variant, spelled out
- The reconciliation anchor, what to tie it to and when to refuse
Reference: Non-GAAP unit-economics metric, no authoritative standard