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/CAC | Typical reading |
|---|---|
| Less than 1 | You lose money on every new customer |
| Between 1 and 3 | Profitable but tight; review retention or costs |
| 3 or more | Common reference for a healthy business |