The LTV/CAC ratio compares a company’s customer lifetime value (LTV) to its average customer acquisition cost (CAC). To break each term down a bit further, lifetime value is the average dollar amount a person spends with a business over the course of their customer lifetime. Meanwhile, CAC indicates the amount of money a business spends to acquire customers on average—this includes sales and marketing costs and other expenses. If a company’s marketing and sales expenses and other acquisition costs are greater than its average customer lifetime value, the business cannot be viable.