📈 Metrics

LTV : CAC ratio

Is a customer worth more than it cost to get them?

Formula

LTV ÷ CAC

The ratio compares what a customer is worth with what you paid to acquire them.

A common rule of thumb is 3:1 or better. Below 1:1, the business loses money on every customer it wins.

🧮 Example

LTV ₹8,000 and CAC ₹2,000 → ratio of 4:1, a healthy business to grow.

🎯 Interview tip

Pair it with payback period — a 4:1 ratio that takes 3 years to pay back can still run out of cash.

Used in

Learn next

Lifetime value (LTV)

The total profit a customer brings before they leave.

Customer acquisition cost (CAC)

How much you spend to win one new customer.

Payback period

How long until an investment earns back what it cost.

The Case Flex weekly

One concept. One case breakdown. One practice prompt. Every week, in simple words.

An AI interviewer runs you through a case, pushes back, and scores your reasoning. Free to start.