The short version
LTV:CAC compares customer lifetime value with customer acquisition cost. If it costs too much to acquire customers compared with what they are worth, growth can destroy cash instead of creating value.
A common benchmark
Many SaaS teams aim for an LTV:CAC ratio around 3:1. Lower than that can signal inefficient acquisition, while much higher can sometimes mean the business is underinvesting in growth.
Use it with payback period
LTV:CAC is stronger when paired with CAC payback. A good lifetime ratio still causes cash strain if it takes too long to recover acquisition spend.