LTV to CAC Ratio
Definition
The ratio of lifetime value to customer acquisition cost, calculated as gross-profit-based lifetime value divided by fully loaded customer acquisition cost. An LTV to CAC ratio of three or above is the commonly cited benchmark for a sustainable unit economics profile in a recurring revenue business at Growth Stage. Both numerator and denominator must use consistent methodologies: lifetime value calculated on a gross profit basis and customer acquisition cost calculated on a fully loaded basis.
Common Misapplication
The most common misapplication is calculating the ratio using revenue-based lifetime value and partial customer acquisition cost, which produces an inflated ratio. An LTV to CAC ratio calculated with revenue-based lifetime value and salary-only acquisition cost may be three to five times higher than the correctly calculated ratio for the same business.
FFI Standard Reference
This term is defined and applied in Book 2, Section 2.2: The Unit Economics Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: LTV to CAC Ratio. https://ffistandard.org/glossary/ltv-to-cac-ratio/. 2026.