LTV:CAC Calculator
Calculate customer lifetime value (LTV), customer acquisition cost (CAC), and the LTV:CAC ratio — the core unit-economics check for any subscription or repeat-purchase business, showing whether customers are worth more than it costs to acquire them.
Fees last verified: 2026-08-02
Your numbers
Results update instantly as you type.
Average revenue per order or transaction.
Average number of times a customer purchases per year.
Average number of years a customer keeps buying before churning.
Average cost to acquire one new customer, including ad spend and any other acquisition costs.
Customer lifetime value (LTV)
$300
LTV:CAC ratio
3
3:1 or higher is generally considered healthy.
How the LTV:CAC Calculator works
Enter your average order value, how often a customer purchases per year, and how many years they typically stick around, to calculate lifetime value (LTV). Then enter your customer acquisition cost (CAC) to see the LTV:CAC ratio. Three mistakes are common here: treating raw revenue-based LTV (what this calculator computes) as pure profit, when it hasn't been adjusted for gross margin or servicing cost; entering only media spend as CAC while leaving out sales salaries, tools, and content, which understates CAC and flatters the ratio; and plugging in an optimistic lifespan assumption not backed by real retention data, which inflates LTV on paper only.
Who this is for
For SaaS founders checking their unit economics hold up before raising a round, since investors expect a defensible LTV:CAC story, not just a growth chart. Subscription and repeat-purchase ecommerce brands use it to decide how much they can actually afford to spend acquiring a customer, rather than picking an acquisition budget arbitrarily. Investors and operators use it to sanity-check whether reported growth is being bought profitably or subsidized by spend that doesn't pencil out once the full cost of acquisition is counted.
Worked example
Your average order value is $50, customers purchase 3 times per year, and stick around for 2 years on average — LTV = $50 × 3 × 2 = $300. If it costs $100 to acquire each customer, your LTV:CAC ratio is $300 / $100 = 3.0 — right at the widely-cited 3:1 threshold, meaning acquisition spend is roughly sustainable but without much room to spare. Now check whether that $100 CAC is fully loaded. If it only reflects ad spend, and the business also runs a sales team qualifying leads, pays for CRM tools, and produces content to support acquisition, the real CAC once those costs are allocated per customer could easily be $150 or more. At that real CAC, the ratio drops to $300 / $150 = 2.0 — below the healthy threshold, a materially different diagnosis than the 3.0 an ad-spend-only CAC implied. In that scenario, the highest-leverage fix often isn't cutting CAC further — it's retention: extending customer lifespan from 2 to 3 years lifts LTV to $50 × 3 × 3 = $450, bringing the ratio back to $450 / $150 = 3.0 without touching CAC at all. A 1:1 ratio between a metric error (undercounted CAC) and a real fix (retention) is exactly why both inputs deserve scrutiny before trusting the headline number.
What the 3:1 benchmark means, and where it can mislead
The 3:1 LTV:CAC ratio is a widely cited rule of thumb, popularized in SaaS and subscription businesses, standing for 'a customer is worth roughly three times what it cost to acquire them' — enough margin to cover acquisition cost, operating costs, and still leave room for profit. It's a useful default, not a law: the right target genuinely varies by business model, margin structure, and how quickly cash is recovered. That last point is why payback period is worth tracking alongside the ratio. LTV:CAC measures total return over a customer's entire lifespan; payback period measures how long it takes to simply recover the acquisition cost. A business can carry a strong long-run ratio while facing real cash-flow strain if most of that value arrives late — and a shorter payback period can justify running with a thinner ratio in the near term, since capital is freed up fast enough to reinvest in more acquisition. Two pitfalls cut in opposite directions. A high ratio isn't automatically a win: if the underlying economics could support profitably acquiring customers at a meaningfully higher CAC, a very high ratio (10:1 or more) can mean under-investment in growth rather than efficiency. And a low ratio isn't automatically a red flag for an early-stage business with a short payback and a credible plan to improve retention or CAC over time. The input most likely to distort the whole calculation is CAC scope — counting only ad spend and leaving out sales salaries, tools, and content production is one of the most common mistakes here, and it systematically understates real CAC.
Frequently asked questions
What is LTV:CAC?
LTV:CAC compares customer lifetime value (LTV) — the total revenue a customer generates over their relationship with your business — to customer acquisition cost (CAC), what it cost to acquire them. The ratio shows whether the revenue a customer brings in justifies what you spent to get them.
What's the formula used here?
LTV = Average order value × Purchases per year × Customer lifespan (years). LTV:CAC ratio = LTV ÷ CAC. This is a common, simplified LTV model — it doesn't subtract cost of goods or servicing costs, so treat the LTV shown here as revenue-based, not pure profit.
Why is 3:1 considered the healthy benchmark?
A 3:1 ratio is a widely cited rule of thumb, popularized in SaaS and subscription businesses, meaning a customer generates roughly three times what it cost to acquire them — enough to cover acquisition cost, operating costs, and still leave a profit margin. Below 1:1 you lose money on every customer; between 1:1 and 3:1, margins are thin.
What actually counts as CAC — just ad spend, or more?
A fully-loaded CAC includes every real cost of acquiring a customer: ad spend, but also sales salaries, CRM and marketing tools, events, and content production, divided across the customers acquired. Counting only ad spend systematically understates CAC and makes the ratio look artificially healthy — enter the fullest figure you can reasonably attribute, not just the media-spend line from a dashboard.
Should LTV be based on revenue or gross margin?
This calculator's formula produces a revenue-based LTV, which is simpler to calculate but overstates the number compared to what a customer actually contributes after cost of goods and servicing costs. For a more conservative, decision-grade ratio, multiply the LTV shown here by your gross margin percentage before comparing it to CAC — a $300 revenue-based LTV at a 40% gross margin is really closer to $120 of contribution against acquisition cost.
Can a ratio be too high?
Yes — a very high LTV:CAC (10:1 or more) can signal under-investment in growth rather than excellence. If your economics support acquiring customers profitably at a much higher CAC, spending too conservatively on acquisition may be leaving real growth on the table.
How does payback period relate to LTV:CAC?
LTV:CAC measures total return over a customer's full lifespan; payback period measures how long it takes to recover the acquisition cost in the first place — a business can have a strong long-run ratio but a slow payback if most of the value arrives late, which is a real cash-flow risk even when the ratio looks healthy. A short payback period can also justify accepting a lower LTV:CAC in the near term, since cash is recovered quickly enough to reinvest in more acquisition.
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