CAC and LTV Calculator

Calculate CAC (what it costs you to acquire a new customer) and LTV (the profit that customer generates over the whole time they stay with you), and the ratio between the two — the go-to metric for knowing whether your business is sustainable long-term, not just profitable sale by sale.

How is it calculated?

CAC = marketing and sales spend for a period ÷ new customers acquired in that period. LTV = average purchase value × purchases per year × average retention years × your gross margin (as a fraction) — that is, the total gross profit an average customer generates over the whole time they stay with you. The LTV/CAC ratio shows how many times over you recover, in profit, what it cost you to acquire that customer.

Examples

  • 10,000 spent for 50 new customers, average purchase 40, 12 purchases/year, 60% margin, 3-year retention

    CAC: 200. LTV: 864. LTV/CAC ratio: 4.32x.

  • 6,000 spent for 30 new customers, average purchase 25, 24 purchases/year, 50% margin, 2-year retention

    CAC: 200. LTV: 600. LTV/CAC ratio: 3x.

How to read the LTV/CAC ratio

These are general references, not rules: they depend on your industry and payback period. For the maximum cost per sale in an ecommerce business, use max CPA, and to measure a campaign, marketing ROI.

LTV/CACTypical reading
Less than 1You lose money on every new customer
Between 1 and 3Profitable but tight; review retention or costs
3 or moreCommon reference for a healthy business

Frequently asked questions

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