LTV:CAC (Lifetime value to acquisition cost ratio)

Worked example (made-up numbers)

Customers from your Reddit ads cost $100 each (CAC). A customer is worth $250 over the next 12 months (LTV). LTV:CAC is 250 ÷ 100 = 2.5.

Customers from a newsletter sponsorship cost $420 each and are worth the same $250: LTV:CAC is 0.6. Every customer that channel brings loses you $170 over a year.

Why it matters when you’re starting out

It answers the question behind “should I spend more on this channel?”. A ratio under 1 means the channel loses money on every customer, however good its signup numbers look. Between 1 and 3 the margin is thin once you count your time, support and payment fees. At 3 or more, which is a common rule of thumb, the channel pays for itself with room to spare.

How to read it honestly

• Look at the sample. With two customers from a channel, one cancellation can move the ratio a lot. Treat any ratio built on a handful of customers as a first sign.
• Use the same currency. Compare spend and revenue in one currency only.
• Pair it with payback. A ratio of 3 that takes two years to pay back can still run you out of cash; see payback period.
• Don’t forget free channels. A community post has no money CAC, so it has no ratio; its cost is your time.

How to measure it

1. Work out CAC per channel: spend divided by the paying customers it brought.
2. Work out LTV for the same customers or the whole product, over a sensible horizon.
3. Divide, per channel, and look at how many customers each ratio rests on.

In Nordva Launch

The Insights sources table shows an LTV:CAC badge for every source with recorded spend: under 1 is marked as losing money, 1 to 3 as thin, 3 or more as paying for itself, with “few” when fewer than five customers are behind it. It needs the Indie plan and a connected Stripe account.