LTV:CAC vs Rule of 40: Customer Economics vs Company Health
Compare LTV:CAC ratio with Rule of 40. Customer-level unit economics versus company-level growth and profitability balance.
Quick Verdict
LTV:CAC operates at the customer level — is each customer profitable? Rule of 40 operates at the company level — are we balancing growth and profitability? Present LTV:CAC to your marketing team and Rule of 40 to your board.
Use LTV:CAC for marketing and sales efficiency conversations, customer segmentation decisions, and channel-level ROI analysis.
Use Rule of 40 for board presentations, investor updates, and strategic planning discussions about the trade-off between growth investment and profitability.
Side-by-Side Comparison
| Attribute | ⚡LTV:CAC Ratio | 📏Rule of 40 Calculator |
|---|---|---|
| Category | SaaS Metrics | SaaS Metrics |
| Complexity | Quick | Quick |
| Best For | Senior PM, Head of Product, VP Product, CPO | Head of Product, VP Product, CPO |
| Use Cases | Track Metrics, Plan Strategy | Track Metrics, Plan Strategy |
| What You Enter | Customer LTV ($), customer acquisition cost ($) | Revenue growth rate (%), profit margin (%) |
| What You Get | LTV:CAC ratio, payback period (months), health assessment, benchmark comparison | Rule of 40 score, pass/fail, benchmark comparison, strategic guidance |
| Leadership Use Case | Evaluate go-to-market efficiency and determine if your business model scales. | Evaluate the growth vs. profitability balance for board and investor discussions. |
Comparison
LTV:CAC Ratio
QuickRule of 40 Calculator
QuickDetailed Breakdown
LTV:CAC Ratio
QuickLTV:CAC ratio is the single most important unit economics metric for SaaS businesses. A ratio of 3:1 or higher indicates healthy economics; below that, you are spending too much to acquire customers relative to their value. Product leaders use this metric to evaluate go-to-market efficiency, negotiate marketing budgets, and determine whether the business model is sustainable at scale.
Senior PM, Head of Product, VP Product, CPO
Evaluate go-to-market efficiency and determine if your business model scales.
Rule of 40 Calculator
QuickThe Rule of 40 states that a healthy SaaS company should have its revenue growth rate plus profit margin equal or exceed 40%. It measures the trade-off between growth and profitability that every scaling company faces. Product leaders use this benchmark in board discussions and strategic planning to evaluate whether the company is balancing investment in growth with path-to-profitability expectations.
Head of Product, VP Product, CPO
Evaluate the growth vs. profitability balance for board and investor discussions.
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