What is a healthy LTV:CAC ratio?

A ratio of 3:1 or higher is generally considered healthy. Below 1:1 means you are spending more to acquire a customer than they are worth. Above 5:1 may indicate underinvestment in growth.

What is a good monthly churn rate for a SaaS business?

Best-in-class SaaS businesses target below 1% monthly churn. 2–5% monthly churn is common for early-stage businesses but significantly erodes annual recurring revenue.

What counts as marketing spend for CAC?

Include all sales and marketing costs: paid ads, agency fees, salaries of sales staff, tools, and any other customer acquisition costs. Divide by the number of new customers in the same period.

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How it's calculated

Churn Rate = Customers Lost ÷ Customers at Start
CAC = Marketing Spend ÷ New Customers
LTV = Avg Order × Purchase Frequency × Customer Lifespan
LTV:CAC Ratio = LTV ÷ CAC

Frequently Asked Questions

What is a healthy LTV:CAC ratio?: A ratio of 3:1 or higher is generally considered healthy. Below 1:1 means you are spending more to acquire a customer than they are worth. Above 5:1 may indicate underinvestment in growth.
What is a good monthly churn rate for a SaaS business?: Best-in-class SaaS businesses target below 1% monthly churn. 2–5% monthly churn is common for early-stage businesses but significantly erodes annual recurring revenue.
What counts as marketing spend for CAC?: Include all sales and marketing costs: paid ads, agency fees, salaries of sales staff, tools, and any other customer acquisition costs. Divide by the number of new customers in the same period.