Why SaaS LTV Matters
In the high-stakes world of SaaS, your LTV to CAC ratio is the ultimate truth. It tells you if your customer acquisition is sustainable or if you're burning cash on a leaky bucket.
Understanding the Formula
- ARPU: Average Revenue Per User.
- Churn: The percentage of customers leaving each month.
- LTV: ARPU / Churn Rate.
Healthy Ratios
- 1:1: You are losing money on every customer.
- 3:1: The gold standard for profitable scaling.
- 5:1: You might be under-investing in growth.