Markets & Metrics

CAC / LTV

Cost to win a customer vs their lifetime value

What it is

CAC (Customer Acquisition Cost) is what you spend on sales and marketing to win one new customer. LTV (Lifetime Value) is the total profit you expect from that customer over the whole relationship. Comparing them (the LTV/CAC ratio) shows whether acquiring customers actually pays off.

Why it matters

If it costs more to acquire a customer than they are ever worth, growth destroys value. Investors look for an LTV/CAC ratio of roughly 3x or higher and a CAC payback period typically within 12-18 months.

Resources

a16z, 16 Startup Metrics

a16z.com