Why is LTV:CAC misleading?

Three reasons LTV:CAC overstates the health of DTC brands: time horizon games, blended vs paid CAC confusion, and gross profit vs revenue conflation. Most reported LTV:CAC ratios are aspirational.

Time horizon distortion

'LTV is $400!' Over what period? 12 months? 36? Lifetime? Each gives wildly different numbers. Most healthy DTC brands have a 12-month LTV that's 40-60% of their reported 'lifetime' LTV. Always ask which horizon.

Blended vs paid CAC

Reporting paid CAC (the cheap one) against blended LTV (the big one) inflates the ratio. Apples-to-apples: paid CAC vs paid-channel LTV, or blended CAC vs blended LTV. Mixing them is misleading.

Gross profit vs revenue

LTV should be calculated on gross profit, not revenue. A brand reporting '$200 LTV' on $200 of revenue with 40% margin actually has $80 LTV. If CAC is $40, real ratio is 2:1, not 5:1.

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