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Metrics

LTV to CAC Ratio

LTV to CAC Ratio compares the lifetime value of a customer to the cost of acquiring that customer, measuring the efficiency of customer acquisition.

The LTV to CAC Ratio is calculated by dividing the customer lifetime value (LTV) by the customer acquisition cost (CAC). A ratio above 3 is typically considered healthy, indicating that the revenue from a customer significantly exceeds the cost to acquire them. A ratio below 1 suggests the company is spending more to acquire customers than they will ever generate in profit, which is unsustainable.
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