Plain-language questions
Ask for LTV:CAC ratio per month, customer or product in the SQL Explorer with AI. The AI writes the SQL, you see the query and run it yourself; the AI only receives metadata.
KPI · Subscriptions and SaaS
LTV:CAC ratio: formula and example.
The LTV:CAC ratio is a customer's lifetime value (LTV) divided by the cost of acquiring that customer (CAC). It shows whether your investment in marketing and sales pays for itself. A ratio below 1 means a customer brings in less than they cost to win.
LTV:CAC ratio formula
LTV ÷ CAC, where LTV = ARPA × gross margin % ÷ monthly revenue churn
Worked example
At Acme's subscription service, ARPA is €95 a month, gross margin is 80% and revenue churn averages 2.5% a month. LTV is €95 × 80% ÷ 2.5% = €76 ÷ 0.025 = €3,040. CAC is €950. The LTV:CAC ratio is €3,040 ÷ €950 = 3.2.
Fictitious figures for Acme Groothandel, a sample wholesaler.
How to read this KPI
A higher ratio means each customer acquired brings in more relative to what they cost. A very high ratio can also mean you are under-investing in growth. Compare the ratio by acquisition channel and customer segment, and read it alongside CAC payback period, as a healthy ratio with a long payback still ties up a lot of cash.
Pitfalls with LTV:CAC ratio
- Calculating LTV on revenue rather than gross margin, which flatters the ratio.
- Counting only ad spend in CAC and forgetting marketing and sales salaries.
- Using low churn from a short history, which makes LTV unrealistically high.
SQL & DAX
Calculating LTV:CAC ratio in SQL and DAX
Two examples on a fictitious data warehouse for Acme Groothandel: a PostgreSQL query and a measure for a Power BI model. Adjust table and column names to your own model.
WITH params AS (SELECT 0.80 AS gross_margin, 0.025 AS monthly_revenue_churn),
active AS (
SELECT SUM(mrr) / NULLIF(COUNT(DISTINCT customer_id), 0) AS arpa
FROM subscriptions
WHERE started_at <= current_date AND (ended_at IS NULL OR ended_at > current_date)
),
acquisition AS (
SELECT (SELECT SUM(amount) FROM marketing_costs
WHERE month >= date_trunc('month', current_date) - interval '12 months')
/ NULLIF(COUNT(DISTINCT customer_id), 0) AS cac
FROM subscriptions
WHERE started_at >= date_trunc('month', current_date) - interval '12 months'
)
SELECT ROUND(a.arpa * p.gross_margin / p.monthly_revenue_churn, 0) AS ltv,
ROUND(c.cac, 0) AS cac,
ROUND(a.arpa * p.gross_margin / p.monthly_revenue_churn / NULLIF(c.cac, 0), 1) AS ltv_cac_ratio
FROM active a, acquisition c, params p;LTV =
DIVIDE([ARPA] * [Gross Margin %], [Revenue Churn %])
LTV:CAC Ratio =
DIVIDE([LTV], [CAC])In ENABLE
Tracking this KPI in ENABLE
In your Power BI dashboard
Define the KPI as a measure in your Power BI model and show it in the portal, with "Last refreshed" next to it. Access profiles and optional row-level security decide who sees which figures.
Custom dashboards (pilot)
Add the KPI as a tile to a custom dashboard, compared with last year. The Dashboard Builder is a pilot and can be switched on per client.
Monthly targets
With the built-in Targets app you set a target for the KPI per month, so you see actuals and target side by side.
FAQ
Frequently asked questions
How do you calculate the LTV:CAC ratio?
First calculate LTV, for example ARPA × gross margin ÷ monthly revenue churn, then divide it by the average acquisition cost per new customer. With LTV of €2,400 and CAC of €800, the ratio is 3. Use the same period and customer group for both.
Which costs belong in CAC?
CAC includes every cost of winning new customers: advertising, marketing tools, events and the salaries of marketing and sales staff insofar as they focus on new business. Divide the total by the number of new customers in the same period. Record what you include so the ratio stays comparable over time.
What is a good LTV:CAC ratio?
A rule of thumb is often quoted, but there is no fixed good value: it depends on your margin, cash position and growth ambitions. What matters more is that the ratio sits comfortably above 1, stays stable per channel and, together with payback period, fits the cash you have.
Further reading
- KPI librarySaaS KPIs: MRR, churn and more explainedSubscription KPIs track recurring revenue: what comes in, what grows and what drops away. The data comes from your subscription or payment system and your CRM.Read more
- ResourcesHow to build a KPI dashboard: steps and examplesA KPI dashboard is an overview of the key figures you use to steer towards your goals, such as revenue, margin, on-time delivery or absenteeism. A good KPI dashboard does not start with the software, but with the decisions it needs to support. You then choose a limited number of KPIs, define them, sketch the dashboard and only then build it.Read more
- SolutionPower BI dashboard portal: share dashboards securelyShare your Power BI dashboards securely in your own portal, with role-based access.Read more
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