LTV/CAC formula
Gross-profit LTV = ARPA x gross margin x customer lifetime
LTV/CAC = gross-profit LTV / CAC
Gross margin matters because delivery costs reduce the economic value of each customer.
Why LTV/CAC can be misleading
A high ratio is not enough if payback is too slow, churn is worsening, or CAC is calculated without all acquisition costs.
Pair it with CAC payback
LTV/CAC shows long-term value, while CAC payback shows cash recovery speed. Subscription teams should watch both.