GuideThe numbers leadership asks about
LTV:CAC
Definition
Lifetime value divided by customer acquisition cost: how many kroner of gross profit a customer eventually returns for each krone spent winning them. The ratio inherits every assumption inside both of its inputs.
How it’s calculated
Divide LTV by CAC, computed on the same customers over the same period. Anything that flatters an input flatters the ratio: an LTV built on revenue, or a CAC missing salaries, lifts it with no improvement in the business. You will hear 3:1 quoted as the level to aim for. The quote travels because it is easy to remember; it knows nothing about your margins or your runway. What the ratio does tell you is whether a customer returns more than they cost. What it omits is timing: an LTV collected over five years and one collected in six months can produce the same ratio, and only one of them funds next quarter. Read it beside CAC payback.
What to watch for
The ratio says nothing about months; when a deck shows it without payback, ask for the months alongside. If the ratio rises while new customers per quarter fall, spend has retreated to the cheapest customers and the improvement measures the retreat. Treat a very high ratio as a question about spend level: if the marginal customer still returns well above cost, the company is buying fewer customers than it could. And confirm both inputs still carry the same definitions as last quarter, because the ratio moves whenever either definition does.
The question you ask
“Over how many months does the LTV side of that ratio arrive?”