The CAC & LTV Calculator

Tool 1 of 4

Customer Acquisition Cost (CAC)

What it actually costs you, in money, to win one new paying customer.

Why this matters Fab.com raised over $300 million and still went bankrupt. Its CAC was higher than what most customers ever spent with the company — every new customer it "won" was actually a loss, and growth just meant losing money faster. Nobody at the company was lying about their growth numbers. They simply weren't looking at this one number closely enough.

One term, unpacked

CACTotal spend on marketing and sales in a period, divided by the number of new customers that spend actually produced.

Total marketing + sales spend this month

Ad spend, salaries of anyone in sales/marketing, tools — everything spent to acquire customers.

New customers won this month

How many new paying customers that spend actually produced.

Worked example A small D2C skincare brand spends $6,000/month across ads and a part-time marketer's salary, and that spend brings in 40 new paying customers that month.
CAC = $6,000 ÷ 40 = $150 per customer. Every single new customer costs $150 to acquire, before they've paid a single rupee back.

Your CAC (feeds into the ratio below) $0

Tool 2 of 4

Lifetime Value (LTV)

The total profit an average customer brings you over the whole time they keep buying from you.

Two terms, unpacked

Gross marginWhat you keep from a sale after subtracting only the direct cost of delivering it — not rent or salaries, just that one sale's cost.

Churn rateThe share of customers who stop buying from you in a given period. Lower churn means a longer average customer lifetime.

Average order value

What a customer typically pays per purchase, or per month if subscription.

Gross margin (%)

What share of that order is actual profit, before overhead.

Purchases per year

How many times an average customer buys per year.

Average years a customer keeps buying

If you know your churn rate instead, average lifetime (years) ≈ 1 ÷ annual churn rate. Not sure? A reasonable starting guess for most small businesses is 2 years.

Worked example, continued That same skincare brand has a $45 average order, a 55% gross margin, and customers buy 4 times a year for an average of 2 years.
Profit per order = $45 × 55% = $24.75. LTV = $24.75 × 4 × 2 = $198. That's what one average customer is actually worth over their whole relationship with the brand.

Your LTV (feeds into the ratio below) $0

Tool 3 of 4

The LTV : CAC ratio

The single number that tells you whether growing your business makes you richer or poorer.

Carried automatically from Tools 1 and 2 above.

LTV

$0

÷

CAC

$0

=

Ratio

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Industry benchmark for a healthy business: 3 : 1 or higher

What the ratio means

Below 1:1You lose money on every customer. Stop scaling immediately — growth makes this worse, not better.

1:1 to 2:1Breaking even at best. Fix retention or reduce CAC before growing further.

3:1Healthy. The standard benchmark for a business that can scale profitably.

5:1+Excellent — you may even be under-investing in growth.

Tool 4 of 4

Payback period & final verdict

A good ratio doesn't help if it takes two years to get your money back. This is the number investors actually ask for.

One more term, unpacked

Payback periodHow many months it takes for one customer's profit to add up to what you spent acquiring them. Short payback means you can reinvest and grow faster.

Worked example, continued CAC was $150. Profit per order was $24.75, earned 4 times a year — about $2.06 profit per customer per month.
Payback period = $150 ÷ $2.06 ≈ 73 months. Even with a decent LTV:CAC ratio, this brand would wait over 6 years to earn back what it spent on each customer — a real cash problem hiding behind a healthy-looking ratio.

Your estimated payback period — months

The CAC & LTV Calculator

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Customer Acquisition Cost (CAC)

Lifetime Value (LTV)

The LTV : CAC ratio

Payback period & final verdict

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