--- title: "LTV:CAC Ratio: Definition, Formula and Example | MarginFix" description: "LTV:CAC compares a customer's lifetime value with what it cost to win them. Why it misleads when LTV is built on revenue, and how an audit rebuilds it." url: https://marginfix.ai/glossary/ltv-cac/ lastmod: 2026-10-11 --- Your number See this page in your own figures: industry, spend and the estimated leak. [Run the estimator →](/estimator/) [Home](/) › [Glossary](/glossary/) › LTV:CAC Glossary · Unit economics # LTV:CAC Lifetime value to customer acquisition cost, a headline health metric that misleads when LTV is built on revenue instead of contribution margin. - Reviewed Oct 2026 - 3 min read - Part of the 14 term glossary - Median finding $58k a year across 74 audits 01 ## What LTV:CAC means LTV:CAC is the ratio of a customer's LTV, lifetime value, to the CAC it took to acquire them. It is the headline unit economics metric of most growth plans. The formula is simple: a ratio well above one says each customer returns more than they cost, and the business can afford to buy more of them. The ratio is only as honest as its two inputs, and both are easy to inflate. Lifetime value is often built on revenue rather than on the contribution margin a customer produces, which can multiply it. CAC is often built on media spend alone. Put a revenue LTV over a media only CAC and a business that loses money on every customer can show a ratio that looks comfortable. 02 ## The LTV:CAC formula and a worked example The formula and an illustration; the corpus line is the audited figure behind it. LTV:CAC = **lifetime contribution margin per customer** ÷ **CAC** Worked example *Illustration, not a client figure* $1,800 of lifetime revenue at a 40% contribution margin is $720 of lifetime margin. Against a $400 CAC that is 1.8 to 1, not the 4.5 to 1 the revenue version shows. 03 ## Why LTV:CAC matters in an audit In an audit, LTV:CAC is rebuilt from both ends before it is read. Lifetime value becomes lifetime contribution margin: revenue per customer over the period they actually stay, multiplied by the contribution margin rate. CAC becomes fully loaded. The rebuilt ratio is regularly a fraction of the one in the plan, and the difference is the clearest single number in the report. The second step is to split it by cohort and by channel. A healthy average ratio can contain a segment acquired well above its lifetime value, carried by a cheaper segment beside it. Because the plan scales the whole budget on the average, the next increment of spend often goes to exactly the segment that does not pay, and the average ratio keeps reading well while it does. Lifetime value is also a forecast, which makes it the easiest number in the model to stretch. The audit bases it on observed retention in real cohorts rather than on an assumed lifetime, and states how long the observation runs. Subsidies, discounts and win back offers justified on a lifetime value that the cohorts never reach are a recurring finding in the published cases. 04 ## LTV:CAC in the audited cases Published cases where a customer was worth less over their lifetime, or cost more to win, than the ratio assumed, each with the audited annual figure. - /cases/cac-looked-fine-until-we-split-it-by-cohort/Marketplace ### CAC looked fine, until we split it by cohort - +$82k a year, findings in 7 days. - Read the case → - /cases/growth-spend-was-outrunning-retention/Subscription ### Growth spend was outrunning retention - +$51k a year, findings in 5 days. - Read the case → - /cases/buyer-subsidies-outran-the-repeat-gmv-they-were-meant-to-unl/Marketplace ### Buyer subsidies outran the repeat GMV they were meant to unlock - +$66k a year, findings in 7 days. - Read the case → - /cases/the-cheapest-leads-were-the-most-expensive-customers/B2B SaaS ### The cheapest leads were the most expensive customers - $68k a year, findings in 6 days. - Read the case → - /cases/annual-plans-were-discounted-below-their-retention-value/Subscription ### Annual plans were discounted below their retention value - +$57k a year, findings in 6 days. - Read the case → - /cases/incentive-spend-acquired-users-who-never-funded/Fintech ### Incentive spend acquired users who never funded - −$96k a year, findings in 7 days. - Read the case → - /cases/acquisition-ignored-default-rate-by-channel/Fintech ### Acquisition ignored default rate by channel - +$88k a year, findings in 7 days. - Read the case → 05 ## Terms and guides related to LTV:CAC ### Related terms - [CAC](/glossary/cac/) The fully loaded cost to win one customer: acquisition spend divided by new customers. - [Payback period](/glossary/payback-period/) The time for a customer's contribution margin to repay their acquisition cost. - [Contribution margin](/glossary/contribution-margin/) Revenue minus every variable cost per order or unit: cost of goods, shipping, payment fees, returns. - [Dunning](/glossary/dunning/) The process of retrying failed recurring payments. - [Take rate](/glossary/take-rate/) The percentage a marketplace keeps from each transaction. - [MER](/glossary/mer/) Total revenue divided by total marketing spend, a blended, platform independent efficiency measure. - [Margin leak](/glossary/margin-leak/) A recurring, usually invisible loss of marketing margin, whether wasted paid spend, mispriced offers or retention drop off, that a healthy looking blended metric conceals. - [Marketing and margin audit](/glossary/marketing-and-margin-audit/) An independent, evidenced review of marketing spend and unit economics that finds where budget leaks, quantifies the recoverable margin and hands over a prioritized fix list. ### Guides that use this term - [What good looks like by spend band](/insights/smb-marketing-spend-benchmarks/) Leak share, attribution gap and the median finding from $10k to $250k a month. - [Marketplace marketing audit](/industries/marketplace/) Where marketplace budgets leak, among them buyers acquired above their lifetime value. - [Subscription marketing audit](/industries/subscription/) Where subscription budgets leak, from the published subscription cases. - [How to audit your agency](/insights/how-to-audit-your-marketing-agency/) The questions that test the unit economics an agency report shows. - [Audit or in house review](/compare/marketing-audit-vs-in-house-review/) What your own team can rebuild, and what an outside read adds. - [All 74 findings, ranked](/findings/) Every published leak by annual value, $58k median. 06 ## Questions about LTV:CAC ### What is LTV:CAC? LTV:CAC is the ratio of a customer's lifetime value to the cost of acquiring them. Built honestly, lifetime value is lifetime contribution margin, not lifetime revenue, and CAC is fully loaded, not media alone. ### How do you calculate LTV:CAC? Divide lifetime contribution margin per customer by CAC. $1,800 of lifetime revenue at a 40% contribution margin is $720 of lifetime margin; against a $400 CAC that is 1.8 to 1, not the 4.5 to 1 the revenue version shows. ### What is a good LTV:CAC ratio? A ratio built on contribution margin and observed retention needs to stay comfortably above one once the payback period is counted, because the cash spent today comes back over months. A ratio built on revenue can look strong while the business loses money on each customer, so the inputs matter more than any benchmark. [Read the payback period page →](/glossary/payback-period/) ## Know the term. Now measure it in your own numbers. LTV:CAC, measured against your own accounts in 5 to 7 working days. $10k to $50k of findings, or your money back. [Book the audit](/book/) [Back to the glossary](/glossary/) Fixed fee. No retainer. NDA first. Go deeper ## LTV:CAC and the wider audit evidence - [All 14 terms The full glossary: every term with a formula and a worked example.](/glossary/) - [All 74 findings Ranked by annual value, $58k median, each one a real case.](/findings/) - [The benchmark Where 74 SMB marketing budgets leaked, by share of spend and by industry.](/benchmark/) - [Margin leaks The five leak patterns in depth: what each one is and how an audit finds it.](/margin-leaks/) - [Marketing audit checklist Thirty checks across paid media, attribution, pricing, retention and reporting.](/marketing-audit-checklist/) - [What an audit costs The 2026 market ranges with sources, against the fixed fee tiers.](/marketing-audit-cost/)