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CAC vs LTV Calculator
Customer acquisition cost, lifetime value, the ratio between them, and payback period.
CAC, LTV and the ratio that ties them
CAC is what you pay to acquire a customer. LTV is what that customer is worth over their entire relationship with you. The LTV:CAC ratio is the single best one-line health check of an acquisition program — a 3:1 ratio is the textbook benchmark for sustainable growth: high enough to absorb shocks, low enough to confirm you're still investing in growth. A 1:1 ratio means you break even on acquisition; a 6:1 ratio sometimes indicates that you're underinvesting and leaving market share on the table. Payback period adds the time dimension: how many months until a new customer pays back what they cost.
How to use this calculator
Fill the CAC block, the LTV block, or both. Anything you fill returns its matching numbers.
- CAC: enter total marketing spend and the number of new customers acquired in that period.
- LTV: enter average order value, orders per year, customer lifespan and gross margin.
- Optionally enter monthly revenue per customer to compute payback period.
- Aim for a 3:1 ratio and a payback under 12 months for B2B / SaaS.
Formulas
CAC is total spend divided by acquired customers. LTV multiplies order value, frequency, lifespan and margin to estimate gross profit per customer.
CAC = Total marketing spend ÷ New customers acquired
LTV = Average order value × Orders per year per customer × Customer lifespan (years) × gross margin (decimal)
LTV:CAC = LTV ÷ CAC
Payback period = CAC ÷ ( Average monthly revenue per customer (for payback) × gross margin (decimal) )
LTV:CAC tiers
Use these as orientation. Subscription products often live higher; low-margin retail lives lower.
| LTV:CAC | Tier | What it usually means |
|---|---|---|
| < 1:1 | Unprofitable | You're paying more to acquire than you'll ever earn back. |
| 1:1 — 2:1 | Tight margins | Acquisition is barely covering itself; cut weakest channels. |
| 3:1 | Healthy | Standard target — sustainable, repeatable growth. |
| 4:1+ | Excellent | Strong unit economics; consider scaling spend. |
| > 6:1 | Likely underinvesting | Probably leaving growth on the table — test increased spend. |
Tiers assume DTC / SaaS norms. Heavy-margin businesses (luxury) tolerate lower ratios; very thin-margin commodities require higher ratios.
Frequently asked questions
Should sales costs be in CAC?
Yes. CAC must include everything you spent to win the customer: paid media, content production, sales salaries, agency fees, tooling. Skipping any of those flatters the number.
How do I estimate customer lifespan?
Use 1 ÷ monthly churn rate. If 3% of customers churn each month, average lifespan is 33 months — about 2.75 years.
Why include gross margin?
Because LTV without margin is a vanity metric. A $1,000 customer at 10% margin is worth $100, not $1,000 — and that's what funds your CAC.
What's a good payback period?
Under 12 months for SaaS, under 6 months for ecommerce, under 18 months for hardware. Longer paybacks require deeper pockets and higher confidence in retention.
Is a 6:1 ratio always good?
Not always. A very high ratio can mean you're underspending on growth — your competitors will close the gap. Look at the absolute volume too: if you only acquired 50 customers last month at 6:1, you're starving the engine.
Should I use revenue or contribution margin in LTV?
Contribution margin is the honest version. Some teams report 'revenue LTV' for simplicity — fine internally, but make sure ratios use the gross-profit version when you're tying spend to it.