CAC to LTV Calculator
The LTV:CAC ratio is the single most important number in customer economics. A healthy business makes at least 3x back per customer over their lifetime. This shows your ratio and payback.
Formulas: CAC = total sales & marketing spend ÷ new customers. LTV = average order value × profit margin × average purchases per customer (lifetime). Ratio = LTV ÷ CAC. Healthy benchmark: 3:1 is the common floor; above 5:1 suggests you could invest more in growth; below 1.5:1 is thin and below 1:1 loses money per customer. Payback: how many purchases it takes to recoup CAC — important for cash-flow planning. Context: ratio varies by industry and stage; compare to your cohort data, not just a generic target.
FAQ
What is a good LTV:CAC ratio?
A common benchmark is 3:1 or higher — you earn $3+ for every $1 spent acquiring a customer. Above 5:1 can mean you're under-investing in growth; below 1.5:1 is cause for concern.
How do you calculate customer lifetime value?
LTV = average order value × profit margin × average number of purchases over the customer's lifetime. It's the net profit one customer generates for you, not just revenue.
What is CAC payback period?
How long it takes to earn back what you spent to acquire a customer — CAC ÷ (AOV × margin) in purchases, or in months using monthly contribution margin. Shorter payback means less cash tied up.
Figures are editable example defaults for modeling, not quotes or advice. Financial, tax, and medical outcomes vary with your situation — verify with a qualified professional (CFP, CPA, tax advisor, or veterinarian).