--- title: "What Is the LTV:CAC Ratio? Formula and Benchmarks" description: "The LTV:CAC ratio compares what a subscriber is worth with what it cost to acquire them. See the formula, the 3:1 rule of thumb and its limits." url: "https://www.rentanott.com/glossary/ltv-cac-ratio" markdown_url: "https://www.rentanott.com/glossary/ltv-cac-ratio.md" category: "Metrics" updated: "2026-10-05" --- # What is the LTV:CAC ratio? The LTV:CAC ratio is customer lifetime value divided by customer acquisition cost. It shows how many dollars a subscriber returns over their lifetime for each dollar spent winning them. ## How to calculate it Work out lifetime value, preferably on margin, and divide by acquisition cost. A subscriber worth $90 in margin who cost $30 to acquire gives a ratio of 3:1. ## Reading the ratio These thresholds are rules of thumb from subscription businesses generally, not laws. What matters is the direction over time and whether the ratio holds as you spend more. - Below 1:1: each new subscriber loses money - Around 1:1 to 2:1: growth barely pays for itself once other costs are counted - Around 3:1: the commonly cited healthy level - Well above 5:1: you could probably spend more on growth and still profit ## Its limits The ratio says nothing about time. A 4:1 ratio that takes three years to realize can still run a business out of cash. Read it together with payback period, the number of months needed to earn back the acquisition cost. It is also only as good as its inputs. Lifetime value estimated from a few months of data on early, enthusiastic subscribers will be too high, and blended acquisition cost flatters paid campaigns. ## LTV:CAC ratio on RentAnOTT The revenue calculator gives SVOD lifetime value and a break-even month from your price, churn, fees and costs, which is the starting point for judging what you can spend on acquisition. [Try the revenue calculator](https://www.rentanott.com/tools/ott-revenue-calculator). ## Related terms - [LTV](https://www.rentanott.com/glossary/ltv) — LTV (customer lifetime value) is the total revenue, or margin, a service expects to earn from one subscriber over the whole time they stay. It tells you how much you can afford to spend to acquire a customer. - [CAC](https://www.rentanott.com/glossary/cac) — CAC (customer acquisition cost) is the average amount a service spends on marketing and sales to gain one new paying customer. It is total acquisition spending in a period divided by the number of new customers won in that period. - [Churn rate](https://www.rentanott.com/glossary/churn-rate) — Churn rate is the percentage of a streaming service's subscribers who cancel or fail to renew during a period, usually a month. It is the main measure of how well a subscription service keeps its customers. - [ARPU](https://www.rentanott.com/glossary/arpu) — ARPU (average revenue per user) is a service's total revenue in a period divided by the number of users in that period. It shows how much each user is worth on average, across subscriptions, advertising and one-time sales. - [Trial conversion rate](https://www.rentanott.com/glossary/trial-conversion-rate) — Trial conversion rate is the percentage of people who start a free trial and go on to make their first payment. It measures how well a trial turns interest into paying subscribers. - [MRR](https://www.rentanott.com/glossary/mrr) — MRR (monthly recurring revenue) is the subscription income a service can expect every month from its active subscribers, with all plans normalized to a monthly amount. It excludes one-time sales and other irregular income. ## Further reading - [How to start a streaming service](https://www.rentanott.com/blogs/how-to-start-a-streaming-service) - [OTT subscription plans and tiers](https://www.rentanott.com/blogs/ott-subscription-plans) - [Pricing](https://www.rentanott.com/pricing) ## Frequently asked questions ### What is a good LTV:CAC ratio? Three to one is the usual benchmark. Treat it as a guide and check it alongside how quickly acquisition spending is paid back. ### Should LTV be based on revenue or margin? Margin. Delivery, payment fees and store commission come out of every payment, so a revenue-based ratio overstates what acquisition returns. ### How can the ratio be improved? Raise lifetime value by reducing churn or increasing revenue per subscriber, or lower acquisition cost through owned channels, referrals and better trial conversion. All 163 terms: [Streaming and OTT glossary](https://www.rentanott.com/glossary). ## Book a demo Tell RentAnOTT what you are launching. The team walks through the platform and maps the path to go-live around your catalog, markets and revenue model. Book a demo: https://www.rentanott.com/contact ## More from RentAnOTT - [Home](https://www.rentanott.com/index.md) — What RentAnOTT is, what every plan includes, and how launch works - [Features](https://www.rentanott.com/features.md) — Every core feature and optional add-on - [Pricing](https://www.rentanott.com/pricing.md) — Platform tiers, apps, add-ons, usage rates and example bills in INR and USD - [Free tools](https://www.rentanott.com/tools.md) — OTT app builder and calculators for streaming revenue, bandwidth, bitrate and pricing - [Insights](https://www.rentanott.com/blogs.md) — All streaming business articles - [Glossary](https://www.rentanott.com/glossary.md) — Definitions of streaming and OTT terms - [Book a demo](https://www.rentanott.com/contact.md) — Talk to RentAnOTT about your launch Full site in one file: https://www.rentanott.com/llms-full.txt