What is a good LTV to CAC ratio for a small B2B SaaS?
Aim for 3:1 or better, so each customer brings in at least three times what it cost to win them. Below 1.5:1 growth burns cash; well above 5:1 you may be underinvesting.
Lifetime value (LTV) is the gross profit a customer brings over the whole relationship, and customer acquisition cost (CAC) is everything you spent to win them. Our guide to calculating CAC treats 3:1 or higher as healthy, and that rule holds well for small SaaS companies on monthly subscriptions.
A worked example: a product at €49 a month with an average customer life of 8 months has a revenue LTV of €392, the figure used in our PPC guide for SaaS. With an 80% gross margin, LTV on profit is about €314, so at 3:1 you can spend up to roughly €105 to win each customer. If paid search costs you €260 per customer, the ratio is 1.2:1 and every new sign-up loses money.
The ratio alone hides timing. A 4:1 ratio that only pays back after 30 months strains a young company's cash. Many founders therefore also watch the payback period and try to keep it under 12 months, so that acquisition spend returns within the first year.
Ways to improve the ratio
- Keep customers longerEach extra month a customer stays adds straight to LTV. Better onboarding is often the cheapest lever.
- Price by valueA modest price rise for new customers lifts LTV without touching CAC.
- Cut paid wastePause campaigns and keywords whose cost per customer is higher than a third of LTV.
- Talk to buyers directlyMeetcatcher lets you meet decision makers on short calls and pay only for calls that take place, a lower-cost way to win early customers than paid ads.
- Grow existing accountsUpgrades to more seats or a higher plan raise LTV at almost no acquisition cost.
Calculate the ratio per channel, not only overall: a blended 3:1 can hide one channel at 6:1 and another at 1:1. To work on the CAC side, start with your website conversion rate, since more sign-ups from the same traffic lower the cost of every customer.