Contracted CAC to CLTV Ratio

What it measures

This ratio divides your blended sales and marketing spend per new customer organization (CAC per Logo) by the total revenue you expect to collect over that customer's contract term (Contracted CLTV). It answers one question: for every dollar of revenue locked in by contract, how much did you spend to acquire it? A ratio of 0.5 means you spent fifty cents to win each dollar of contracted lifetime value; a ratio above 1.0 means you spent more to acquire the customer than the contract is worth — usually unsustainable without margin expansion or renewal.

Why it matters

You calculate this ratio because it isolates acquisition efficiency from deal size and contract term in a single number. Using the contracted view protects you from churn guesswork: it assumes the customer stays for the full committed term, so the number is something you can forecast and defend to a board the moment a deal closes. Finance uses it to test whether unit economics work — can you earn back the sales and marketing investment within the term, leaving room for gross margin and overhead? Sales leaders use it to benchmark efficiency: if yours is 1.5 and a peer's is 0.8, you are either overspending to acquire, landing smaller deals, or signing shorter contracts. Operators use it to size budgets: a 0.5 target across 100 planned logos at $50K CCLTV each justifies roughly $2.5M of spend.

How to read it

Lower is better — you are spending less to win each dollar of contracted value. The cleanest sanity check is your gross margin: if margin is 80% and your ratio is 1.5, you would burn 150% of one year of gross margin to acquire a customer, so payback is impossible without multi-year terms or expansion. Read the ratio quarter-over-quarter. A rising ratio usually means either CAC per logo is climbing (market getting expensive, channel saturation) or CCLTV is shrinking (smaller deals, shorter terms). A falling ratio is good, but check the driver: better sales efficiency (lower CAC) is durable, while a drop caused purely by winning bigger deals can hide a CAC that is still creeping up underneath. Always read CAC per Logo and Contracted CLTV separately to see which lever moved.

What good looks like

Watch-outs

• Ignoring contract term. A 0.5 ratio on a 1-year deal and a 0.5 ratio on a 3-year deal are completely different payback stories — segment by term before comparing periods or teams.
• Confusing the ratio with payback period. The ratio is spend-to-revenue; payback also needs margin and term: payback ≈ ratio ÷ (gross margin % ÷ contract years). A 0.5 ratio at 60% margin is roughly 10 months on a 1-year deal but 30 months on a 3-year deal.
• Accepting a high ratio without opening the components. A 1.5 could come from high CAC (inefficient sales) or low CCLTV (too many small deals) — drill into CAC per Logo and Contracted CLTV separately, because the two have very different fixes.
• Comparing across segments without adjusting. Enterprise may run a 1.2 (bigger deals, longer terms) while mid-market runs a 0.4 (smaller, shorter), and both can be healthy at their respective margins. Compare like with like.

Worked example