ARR vs LTV to CAC Ratio
What is the difference between ARR and LTV to CAC Ratio? Side-by-side definitions, formulas, and benchmarks for two of the most-watched SaaS metrics.
Definitions
What is ARR?
ARR is annual recurring revenue, the annualized subscription revenue base of a SaaS company.
What is LTV to CAC Ratio?
LTV to CAC Ratio compares customer lifetime value against customer acquisition cost to evaluate acquisition efficiency.
ARR vs LTV to CAC Ratio at a Glance
| ARR | LTV to CAC Ratio | |
|---|---|---|
| Category | Metrics | Metrics |
| Formula | ARR = MRR × 12 | LTV:CAC Ratio = LTV / CAC |
| Benchmarks | — | good: 3 x; great: 6 x |
| Calculator | ARR calculator | LTV to CAC Ratio calculator |
When Each Matters
ARR and LTV to CAC Ratio answer different questions. ARR is annual recurring revenue, the annualized subscription revenue base of a SaaS company. LTV to CAC Ratio compares customer lifetime value against customer acquisition cost to evaluate acquisition efficiency. In practice, healthy SaaS operators watch both, because each one catches failure modes the other misses.