GTM Glossary · Metrics
LTV:CAC Ratio
The relationship between the lifetime gross profit of a customer and what it cost to acquire them.
[01]What It Means
A ratio around 3:1 is the common benchmark for a healthy B2B model. Much lower means acquisition is destroying value; much higher usually means the company is underinvesting in growth rather than being exceptionally efficient.
[02]Why It Matters
It is the single clearest test of whether an expansion should be funded, and it travels well to boards and investors who will not read a funnel report.
[03]Where It Goes Wrong
Reporting a strong ratio built on a fragile LTV assumption.Ignoring payback, so a good ratio hides a cash problem.Averaging across segments, which conceals one profitable segment subsidising several unprofitable ones.
[04]Related Terms