Essay
Why Early-Stage Startups Should Wait to Calculate LTV:CAC, and How They Should Use It When They Do
Jared Sleeper and David Skok · For Entrepreneurs (David Skok) Free Intermediate
This is the piece that answers the second half of your question head on: when is it too early to even care. Skok's site is the reference explainer for LTV, CAC, and payback, and this follow-up argues that the ratio is meaningless until your sales process is repeatable and scalable, so founder-closed early deals should not be run through the formula at all. It gives you the 3x rule and the payback lens without pretending a pre-repeatability number means anything.
- Do not compute LTV:CAC until your go-to-market is repeatable, scalable, and profitable. Early founder-closed or relationship deals do not predict future economics.
- The industry rule of thumb is LTV greater than 3x CAC for a healthy SaaS business, but months to recover CAC often matters more in the early days because it sets your cash needs.
- Even before you can trust the ratio, you can reverse-engineer minimum pricing from your gross margins, sales cost, and expected close rate.
