SaaS Company Benchmarks - LTV/CAC Ratio

The Capchase Team
The Capchase Team
Posted on
August 30, 2022
min read
SaaS Company Benchmarks - LTV/CAC Ratio

Understanding growth benchmarks, both how they are calculated and why they are important indicators of your company’s success, is important for long-term growth. Companies that are successful and grow faster than their peers often have an easier time raising capital, hiring, and getting press. Below, we define LTV/CAC Ratio, explain its importance, and share the rates that you need to be at to be in the top quartile of same-stage SaaS companies.

LTV/CAC Ratio Defined

Before analyzing the ratio of LTV/CAC and how your company’s LTV/CAC ratio compares to that of other similar-stage SaaS companies, it is important to understand how it is calculated:

*Lifetime Value is calculated over 5 years

LTV/CAC Ratio answers the question “Do I make more profit from my customers than it costs me to acquire them?”. As such, it’s a key measure of whether your SaaS business is viable or not.

At a minimum, a SaaS business needs to have an LTV of at least 3x CAC.

Comparing LTV/CAC Ratio by Company Stage

If you are looking to benchmark your company’s LTV/CAC Ratio against that of other SaaS companies, there are a few important trends to understand:

  • LTV/CAC is highest at the growth stage ($10-15m)
  • There was no meaningful difference between the top quartile and median performance for LTV/CAC ratio
A comparison of LTV/CAC Ratio from a private analysis of over 400 SaaS companies with $1 - $15m in Annual Recurring Revenue.

About Our Data & SaaS Company Benchmark Report

Whether you’re planning to raise funding or preparing your worst-case scenario, it’s more important than ever to have a razor-sharp understanding of what good performance looks like and which metrics are the markers of a healthy SaaS business. You can view the entire benchmark report, including which companies we analyzed, here.

For this report, we analyzed 439 private SaaS companies with $1 - 15m Annual Recurring Revenue. The data reflects actual financial performance, sourced directly from companies’ own records. We believe it is the largest dataset of its kind that is based on financial actuals, rather than survey data.

We then compared the performance of these private companies against 43 SaaS businesses that went public in 2020 and 2021. Data on public SaaS performance was sourced from their S-1 filings.

Or, for more analyses of important SaaS benchmarks, see our findings on: