Why that LTV:CAC ratio actually matters (with real numbers)
Original: Why Do Investors Care So Much About LTV : CAC?
Summary
Explains how the LTV:CAC ratio connects to startup valuation and reinvestment.
Who This Is For
Founders
Growth Marketers
Business Analysts
Key Takeaways
- Companies with 3x LTV:CAC ratios achieve 33% operating margins vs 16% for 2x ratios
- R&D and G&A spending stays consistent at ~20% and 14% of gross profit across companies
- Sales and marketing efficiency is the primary driver of long-term profitability
- Improving LTV:CAC from 2x to 3x can nearly triple your company's valuation
- Higher LTV:CAC ratios create more reinvestment capacity for product development
Tools & Technologies
Sell-side equity analyst coverage data Monthly customer cohort tracking Financial modeling tools
Topics Covered
ltv-cac metrics investors valuation
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