LTV:CAC ratio
The LTV:CAC ratio divides expected customer lifetime value by fully loaded customer acquisition cost. It is a unit-economics test: a ratio near one means growth destroys value, while a very high ratio usually means the business is underinvesting in acquisition rather than excelling at it.
How it is calculated
LTV:CAC = Lifetime value / Fully loaded acquisition cost
Load CAC with everything: media, incentives, sales, onboarding. Partial CAC is the most common way this ratio flatters a business.
Why it matters for ARPU
Lifting ARPU improves the numerator without spending more on media, which is the cheapest route to healthier unit economics in a mature base.
Related terms
Lifetime valueLifetime value is the discounted margin a business expects from a customer over the whole relationship.Payback periodPayback period is the time taken for the gross margin generated by a customer to repay the cost of acquiring them.ARPUARPU, average revenue per user, is total revenue in a period divided by the average number of active users in that period.Contribution margin per userContribution margin per user is revenue per user minus the variable costs of serving that user: delivery, payment fees, support, content or bandwidth, and any incentive granted.