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Financial Mastery

Investor question 16 of 50 · Unit economics & retention

“What's your LTV : CAC?”

Short answer: the investor is really asking does each customer create value? Answer in three steps: (1) use gross-margin LTV, not revenue LTV; (2) cap customer lifetime at 3-5 years; (3) explain how it changes as you scale.

What they're really asking

Does each customer create value? Investors rarely care about the question on its own. They're testing whether you know your numbers cold, whether your assumptions are honest, and whether you can explain them simply.

How to answer, step by step

  1. Use gross-margin LTV, not revenue LTV.
  2. Cap customer lifetime at 3-5 years.
  3. Explain how it changes as you scale.

An example answer

Conservative LTV : CAC is about 6.9x using a five-year lifetime cap. We expect it to settle near 4-5x as paid spend grows.

Figures are from Loopdesk, the fictional SaaS company in our sample files. Swap in your own numbers and keep the structure.

The answer that loses trust

Avoid

Using revenue instead of gross profit.

Where the proof lives

Before the meeting, find the number behind your answer. In our workbooks it lives in: LTV & Payback. If you can open that tab and point to it, the follow-up question is easy.