Tool
LTV:CAC Calculator
Plug in your unit economics and see your customer lifetime value, CAC ratio, and payback period in real time.
Your numbers
Benchmark ratios:
- < 1:1, losing money on every customer
- 1:1 to 3:1, surviving, underinvesting in growth
- 3:1, healthy baseline
- 5:1+, under-spending on acquisition
How to Calculate LTV:CAC
Customer Lifetime Value (LTV) is the gross-margin profit a customer generates across their entire relationship with your brand. Customer Acquisition Cost (CAC) is what you spent to win them. Dividing the two gives you the single most important number in subscription and ecommerce growth.
LTV = AOV × Gross Margin × Purchases/Year × Lifespan CAC = Paid Spend ÷ New Customers Acquired LTV:CAC = LTV ÷ CAC Example: AOV = $75, Margin = 60%, Purchases/yr = 3, Lifespan = 2 LTV = 75 × 0.60 × 3 × 2 = $270 CAC = $45 → LTV:CAC = 6 : 1
What is a Good LTV:CAC Ratio?
- < 1:1Losing money on every customer you acquire.
- 1:1 to 3:1Danger zone / low margin. Surviving, not scaling.
- 3:1The B2B standard. Healthy and sustainable.
- 4:1+Highly profitable. May be under-investing in acquisition.
What is a good LTV:CAC ratio?
The widely accepted benchmark is 3:1, every $1 spent acquiring a customer should return $3 in gross-margin lifetime value. Below 1:1 you lose money on every customer. Between 1:1 and 3:1 you are surviving but underinvesting in growth. Above 5:1 you are likely under-spending on acquisition and leaving growth on the table.
How do you calculate LTV:CAC?
LTV = Average Order Value × Gross Margin × Purchases per Year × Customer Lifespan (years). CAC = Total Acquisition Spend ÷ New Customers Acquired. The ratio is LTV ÷ CAC.
Should CAC include organic and referral customers?
For paid-channel decisions, calculate paid CAC (paid spend ÷ paid customers only). For company-level board reporting, blended CAC (all spend ÷ all new customers) is more honest. Track both and never mix them in the same comparison.
What is CAC payback period?
CAC payback is the number of months it takes for a customer's gross-margin contribution to repay their acquisition cost. Under 12 months is strong for DTC; under 18 months is acceptable for B2B SaaS.
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