---
title: "What is LTV:CAC ratio? | Chargezen"
description: "A comparison of what a customer is worth over their whole relationship with you against what it cost to win them."
url: "https://chargezen.com/glossary/ltv-cac-ratio"
lang: "en"
---

Canonical URL: https://chargezen.com/glossary/ltv-cac-ratio

# LTV:CAC ratio

Lifetime value to customer acquisition cost ratio

Revenue

A comparison of what a customer is worth over their whole relationship with you against what it cost to win them.

## What is LTV:CAC ratio?

The LTV:CAC ratio puts two numbers side by side: **customer lifetime value** (the gross profit a customer brings in before they leave) and **the cost of winning a customer** (ad spend, discounts, creator fees and sales costs, divided by the customers they brought in). **How to read it:** - **Below 1:1** you lose money on every customer you win. - **Around 1:1** you break even, with nothing left for overhead or growth. - **3:1** is a rule of thumb many founders and investors quote as healthy. It's a starting point, not a law: a brand with cheap repeat orders and fast payback can run lower. - **Very high** can mean you are underspending on growth. **Use gross profit, not revenue.** A $40 customer cost against $120 of lifetime revenue looks like 3:1, but at a 50% margin it's really 1.5:1. **For subscriptions, watch payback too.** The ratio says whether a customer pays off eventually. Payback time says when. A subscriber who needs nine renewals to cover their cost is at risk if many cancel by order four. **How Chargezen handles it:** Chargezen Subscriptions analytics track lifetime revenue for your subscribers, and the free lifetime value calculator works out the ratio from your own numbers.

## Formula

LTV:CAC = Customer lifetime value (gross profit) ÷ Customer acquisition cost

## Example

A coffee brand spends $30 to win a subscriber. The average subscriber stays 8 months at $20 a month with a 45% gross margin, so lifetime value is 8 × $20 × 0.45 = $72. The ratio is $72 ÷ $30 = 2.4:1.

## Why LTV:CAC ratio Matters

It tells you how much you can afford to spend to win a customer, and whether growth is making you money or burning it.

## Explore More Terms

Browse our complete glossary of e-commerce and subscription terms.

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