L/C
LTV/CAC Ratio
The Customer Lifetime Value to Customer Acquisition (LTV:CAC) ratio measures the relationship between the lifetime value of a customer, and the cost of acquiring that customer. The metric is computed by dividing LTV by CAC. It is a signal of customer profitability, and of sales and marketing efficiency.
The ideal LTV:CAC ratio should be 3:1 or greater. The value of a customer should be three times more than the cost of acquiring them. If the ratio is close, you are spending too much. [1] [2] [3] [4]
[1] Klipfolio.com. Retrieved May 21, 2021, from https://www.klipfolio.com/resources/kpi-examples/saas/customer-lifetime-value-to-customer-acquisition-cost
[2] KAPLAN, S.N., and STRÖMBERG, P. 2004. Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses. . https://doi.org/10.1111/j.1540-6261.2004.00696.x
[3] Maxwell, A. L., Jeffrey, S. A., & Lévesque, M. (2011). Business angel early stage decision making. Journal of Business Venturing, 26(2), 212–225. https://doi.org/10.1016/j.jbusvent.2009.09.002
[4] Chang, W., Chang, C., & Li, Q. (2012). Customer Lifetime Value: A Review. Social Behavior and Personality: An International Journal, 40(7), 1057–1064. https://doi.org/10.2224/sbp.2012.40.7.1057
[5] Startup Metrics You Need to Monitor, https://visible.vc/blog/startup-metrics/