LTV to CAC Ratio LTV:CAC
How many dollars of lifetime customer profit you get back for each dollar spent acquiring the customer.
The fork, why two teams get different numbers
The ratio inherits every fork of its two inputs, and the abuse is mixing bases. The defensible ratio puts gross-margin LTV over fully-loaded CAC. The flattering one puts revenue (no-margin) LTV over blended CAC, combining the two exaggerations can lift a real 1.5:1 to a reported 6:1. There is no standards body; the "3:1 is healthy" rule is convention, not law, and it silently assumes gross-margin LTV over fully-loaded CAC. Teams also disagree on whether expansion belongs in the LTV numerator, and whether CAC includes CS/onboarding cost.
The trap
Basis mismatch is invisible in the final number: 6:1 looks the same whether it was computed honestly or by pairing a margin-free LTV with an organics-diluted CAC.
- 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: SaaS operating-metric convention (no single standards body)