LTV:CAC is the metric I care about the most

19/03/2023 • If I were to define a true north star metric in B2B SaaS marketing, this'd be it.


There’s no metric that I love more than a good old LTV:CAC. I’ve yet to find a (marketing) metric in B2B SaaS that gives me a more accurate snapshot of the funnel performance and the business, or one that speaks as honestly to how much impact a marketing/growth team has on a business.

It’s a great measure to measure the cost-efficiency of the company’s sales and marketing approach, and to understand the long-term feasibility of it’s business model. All the fun metrics like CPL, Churn, CVRs, pipeline velocity, HR costs, etc., end up coming together to define the LTV:CAC of a company since the LTV unifies everything “the company makes” for as long as customers are customers (AOV, MRR, Added Revenues, etc.), and CAC unifies everything they “spent to get there” until then (Ad costs, HR costs, Churn, etc.).

While technically any LTV:CAC of 1+ is good for sustainable growth, here’s a nice benchmarking template put forward by geckoboard:

A ratio of 1:1 means you lose money the more you sell. A good benchmark for LTV to CAC ratio is 3:1 or better. Generally, 4:1 or higher indicates a great business model. If your ratio is 5:1 or higher, you could be growing faster and are likely under-investing in marketing.

Other valuable metrics that I find don’t get as much credit as they deserve are sales velocity, channel-driven win rate, MoM % increase in TOFU AOV/ACV, and net churn prevented.


← Back home