LTV:CAC Calculator — Customer Lifetime Value
Know what a customer is worth and what you can afford to spend to win one. Calculates lifetime value, acquisition cost, the LTV:CAC ratio and how many months it takes to earn back acquisition spend.
LTV : CAC ratio
How to calculate LTV and CAC
- Choose subscription (monthly revenue and churn) or repeat purchases (order value, frequency and lifespan).
- Enter your gross margin so lifetime value reflects profit, not just revenue.
- Enter total sales and marketing spend for a period and the new customers acquired in that same period.
Reading the LTV:CAC ratio
Lifetime value is the gross profit a typical customer generates before they leave. For subscriptions it is monthly revenue × gross margin ÷ monthly churn; a 4% monthly churn means customers stay about 25 months on average. For repeat-purchase businesses it is order value × purchases per year × years × margin.
Customer acquisition cost is everything spent on sales and marketing in a period divided by the new customers won in that period: ads, salaries, tools and agency fees. A ratio of about 3:1 is a widely used benchmark for a healthy business. Below 1:1 you lose money on every customer; far above 5:1 you may be under-investing in growth.
Payback period is how many months of gross profit it takes to recover CAC. Shorter payback means growth needs less cash; many subscription businesses aim for under 12 months. These are averages, so segment by channel when you can: a channel with a great ratio deserves more budget.
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Frequently asked questions
What is a good LTV:CAC ratio?
Around 3:1 is the common benchmark. Higher is more efficient; lower than 1:1 is unsustainable.
Should LTV use revenue or profit?
Gross profit gives a truer picture of what a customer is worth, which is why the calculator applies your margin.
What goes into CAC?
All sales and marketing costs for the period, including ad spend, sales and marketing salaries, tools and agencies, divided by new customers.
How do I estimate churn?
Customers lost during a month divided by customers at the start of the month, averaged over several months.