Metrics & KPIs
LTV/CAC
Ratio of Lifetime Value to Customer Acquisition Cost. Under 2 means you're a dropshipper; 3-5 means you're a brand that can scale aggressively.
LTV/CAC is the single most predictive metric for whether a store can be scaled. It answers the one question that matters: for every dollar I spend to acquire a customer, how many dollars do I get back over their lifetime?
Rule of thumb:
- < 2: Not a brand — a flip. Scaling will eventually break the P&L.
- 2-3: Viable but tight. Fund growth slowly from cash flow.
- 3-5: Healthy. Room to invest aggressively in acquisition.
- 5+: Brand territory. Retention is compounding returns and CAC has room to climb.
The ratio is useless until you have 100+ customers and at least 90 days of purchase history, because LTV is too noisy before that. Until then, benchmark against your category.
Articles mentioning LTV/CAC