Post by account_disabled on Jan 25, 2024 8:55:37 GMT 1
The industry consensus on an ideal LTVCAC ratio for SaaS businesses seems to be between and . So if your LTV is and your CAC is you’re right in the middle of those ratios. But because business models differ you should try to run the numbers yourself to see how your other business costs and margins fit into such a ratio. The to range seems rather arbitrary as I didn’t find any data or case studies to back this up.
So to illustrate how business costs might affect things I created a few hypothetical scenarios SIDENOTE. *business expenses besides CAC like staff and infrastructure. By including these you can get net LTV and the breakpoint in Phone Number List months when you cover CAC and start making a profit. Judging by the numbers alone all of these business models seem to make sense even though the LTVCAC ratios fall outside of the to benchmark for two of them. However regardless of these numbers we need to dive into marketing spend effectiveness to make any rational decisions based on CAC. Why Because reducing your CAC and being more effective in marketing don’t necessarily go hand-in-hand.
If CAC is too low you’re limiting your exposure and under-spending on your marketing activities. That might look good on a paper in the short-term but you’d be missing out on substantial growth opportunities in the long run. CAC can also grow much faster in terms of percentage than your LTV while you remain more profitable. CAC to LTV is technically worse than CAC to LTV.
So to illustrate how business costs might affect things I created a few hypothetical scenarios SIDENOTE. *business expenses besides CAC like staff and infrastructure. By including these you can get net LTV and the breakpoint in Phone Number List months when you cover CAC and start making a profit. Judging by the numbers alone all of these business models seem to make sense even though the LTVCAC ratios fall outside of the to benchmark for two of them. However regardless of these numbers we need to dive into marketing spend effectiveness to make any rational decisions based on CAC. Why Because reducing your CAC and being more effective in marketing don’t necessarily go hand-in-hand.
If CAC is too low you’re limiting your exposure and under-spending on your marketing activities. That might look good on a paper in the short-term but you’d be missing out on substantial growth opportunities in the long run. CAC can also grow much faster in terms of percentage than your LTV while you remain more profitable. CAC to LTV is technically worse than CAC to LTV.