LTV and CAC Calculator
The two numbers that decide whether your marketing is sustainable are customer lifetime value (how much a customer is worth over time) and customer acquisition cost (how much you spend to win one). On their own they mean little; together, as a ratio, they tell you whether growth is profitable. This calculator works out both, the LTV to CAC ratio, and how many months it takes to earn back what you spend acquiring a customer - with a plain read on whether the numbers are healthy.
How to use this tool
- 1Enter your average order value, how many times a customer buys per year, and how many years they stay.
- 2Add your gross margin if you want profit-based LTV; leave it at 100 to use revenue.
- 3Enter your total marketing and sales spend for a period and the number of new customers it won.
- 4Read the LTV:CAC ratio, with lifetime value, acquisition cost, and payback period below.
- 5Use the verdict to judge whether to scale spend, cut acquisition cost, or raise lifetime value.
Formula used
Example
Average order 40, bought 12 times a year, customers stay 2 years, 60% margin. LTV = 40 x 12 x 2 x 0.6 = 576. Spend 8,000 to win 200 customers, so CAC = 40. Ratio = 14.4:1 - very healthy, with room to spend more on acquisition.
Average order 25, bought 3 times a year, 1 year lifespan, 100% (revenue). LTV = 75. Spend 5,000 for 100 customers, CAC = 50. Ratio = 1.5:1 - profitable but tight; the payback period shows it takes most of the customer's life to recoup the cost.
Common use cases
- Deciding whether you can afford to spend more on ads
- Comparing acquisition channels by their cost per customer
- Checking that a subscription or repeat-purchase model is sustainable
- Setting a target CAC before launching a campaign
- Explaining unit economics to a partner or investor
Common mistakes
- Using revenue instead of profit for LTV - include gross margin so the ratio reflects money you keep, not money you take.
- Counting only the first purchase - lifetime value depends on repeat purchases across the customer's lifespan, not a single order.
- Leaving out sales costs from CAC - include all spend that wins customers, not just ad cost.
- Chasing a high ratio by underspending - a very high ratio can mean you are under-investing in growth, not just being efficient.
Frequently asked questions
What is a good LTV to CAC ratio?
A ratio of about 3:1 is widely considered healthy: each customer returns roughly three times what they cost to acquire, leaving margin for overheads and profit. Below 1:1 you lose money on each customer; far above 3:1 can mean you are under-investing in growth.
Should LTV use revenue or profit?
Profit is more honest. Multiply by your gross margin so LTV reflects the money you actually keep after the cost of goods. Using revenue overstates lifetime value and flatters the ratio.
What is CAC payback period?
It is how many months of a customer's gross profit it takes to earn back what you spent to acquire them. A shorter payback frees up cash to reinvest sooner; many businesses aim to recover CAC within 12 months.
What counts as acquisition cost?
All the spend that goes into winning new customers over a period: advertising, marketing tools, agency or freelancer fees, and the portion of sales costs tied to acquisition. Divide that total by the number of new customers it produced.
How do I improve a weak ratio?
Either raise LTV (increase order value, repeat purchase rate, retention, or margin) or lower CAC (cheaper channels, better conversion, referrals). Small gains on both sides compound, because the ratio multiplies them.
Is my data uploaded?
No. The calculation runs entirely in your browser. The figures you enter are never sent to a server, stored, or shared.
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