CAC vs LTV
CAC measures acquisition cost; LTV estimates customer value over a relationship. Their relationship is useful only when the cost and value describe comparable customers. Acquisition cost is usually more observable than a lifetime that has not yet occurred, so the confidence of the comparison depends heavily on retention evidence.
Key differences
| Question | CAC | LTV |
|---|---|---|
| What does it measure? | The cost allocated to acquiring a new paying account. | Modeled revenue or gross profit over a customer relationship. |
| When does it occur? | Mostly before or around acquisition, with attribution lag. | Over many future periods, subject to churn and spending changes. |
| What makes it uncertain? | Cost allocation, attribution, sales-cycle timing. | Lifetime, gross margin, expansion, and discounting assumptions. |
One scenario, two measures
Hypothetical worked scenario
A fictional team spends $60,000 acquiring 10 accounts. Each account pays $1,000 monthly, has an 80% gross margin, and is modeled with 4% monthly customer churn.
CAC = $60,000 ÷ 10 = $6,000. Revenue LTV = $1,000 ÷ 0.04 = $25,000. Gross profit LTV = $20,000. Gross profit LTV/CAC ≈ 3.33×; simple CAC payback = 7.5 months.
If churn doubles to 8%, gross profit LTV falls to $10,000 and the ratio to about 1.67×. The steady monthly payback calculation stays 7.5 months, but fewer customers may survive long enough to reach it.
Which should you use?
- Use CAC to diagnose the acquisition process: cost pool, conversion, and channel mix. Keep cohort or sales-cycle lag visible when spending changes quickly.
- Use LTV to test the value assumption behind that acquisition spend. Compare the model with realized cumulative contribution from older customer cohorts.
- Use both with a cash plan. A lifetime ratio cannot show whether the company has enough cash to fund several months of acquisition before customers repay it.
Where comparisons can mislead
- This site’s LTV calculator returns a revenue estimate. Convert to gross profit if that is the basis of your comparison.
- Do not combine enterprise LTV with blended CAC dominated by low-cost self-service customers.
Explore the full guides: CAC and LTV.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- Stripe: CAC in SaaS
Sales and marketing cost scope, new paying customers, and segmentation by acquisition channel.
- Bessemer: Scaling to $100 Million
Gross margin adjusted CAC payback and segment differences; historical research, not a current market benchmark.
- Stripe: Customer lifetime value
Lifetime value methods and the role of gross margin.
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