LTV / CAC Ratio Calculator
Model lifetime value against acquisition cost for repeat purchase or subscription businesses, with payback months, health bands, and a one-step sensitivity lever.
100% client-side. Your revenue and spend numbers never leave this browser.
Toggle between e-commerce repeat purchase and subscription churn math , shared CAC and margin inputs apply to both.
Saved with your inputs. Math is currency-agnostic; region helps us prioritize localized versions later.
LTV : CAC
2.0x
LTV (gross margin)
$405
CAC
$200
CAC payback
17.8 mo
Gross margin
60%
LTV component breakdown
Increasing purchase frequency by 0.5/year (3 → 3.5) raises your LTV to $472.50 and ratio to 2.4x.
Industry benchmark: above 3x is generally considered healthy for paid growth; above 5x is excellent headroom.
How this calculator works
The calculator asks one question first: are you an e-commerce business or a subscription business? Your answer changes the LTV formula. For e-commerce, LTV depends on how much a customer spends per order (AOV), how often they buy each year, and how many years they stay a customer, multiplied by your gross margin. For subscriptions, LTV depends on monthly revenue per user (ARPU) divided by your monthly churn rate, then multiplied by gross margin. CAC is the same for both models: divide your total monthly sales and marketing spend by the number of new customers you acquired that month. The ratio is LTV divided by CAC. The payback period tells you how many months of gross margin contribution it takes to recover the cost of acquiring that customer. A color-coded health badge shows where you stand: red below 1x, yellow from 1x to 3x, green from 3x to 5x, and gold above 5x.
Worked lens
E-commerce: $75 AOV, 3 orders/year, 3-year lifespan, 60% gross margin. LTV = $75 x 3 x 3 x 0.60 = $405. CAC = $10,000 / 50 = $200. Ratio: 2.0x (yellow). Payback: 17.8 months. Subscription: $49 ARPU, 3% monthly churn, 60% gross margin, same CAC. LTV = ($49 / 0.03) x 0.60 = $980. Ratio: 4.9x (green). Payback: 6.8 months. Reducing subscription churn from 3% to 2% raises LTV to $1,470 and the ratio to 7.4x.
Frequently asked questions
What is a good LTV:CAC ratio?
Above 3x is the standard benchmark. It means each customer generates at least three times the cost of acquiring them. Below 1x means you lose money on every customer. Between 1x and 3x, the business may survive but lacks the margin to absorb cost spikes or fund growth.
How do I improve my LTV:CAC ratio?
For subscriptions, reducing churn has the largest impact because it extends customer lifespan exponentially. For e-commerce, increasing purchase frequency or AOV is the primary lever. Both models benefit from reducing CAC through organic channels, referral programs, or better ad targeting.
What is CAC payback period?
The number of months needed to recover your customer acquisition cost from the gross margin that customer generates each month. Under 12 months is the standard benchmark for SaaS. Under 6 months is excellent and typically signals strong product-market fit.
What counts as sales and marketing spend for CAC?
All costs directly tied to acquiring customers: ad spend across all channels, sales team salaries and commissions, agency fees, referral bonuses, and sponsorship costs. Do not include product development, general overhead, or customer success costs.
Why is my ratio high but I am still losing money?
A high LTV:CAC ratio means unit economics are sound, but it does not account for fixed costs. If your monthly operating expenses exceed total gross margin, the business loses money even with strong per-customer metrics. Use a burn rate calculator to model your full cash position.
What is the difference between LTV:CAC and CAC payback?
LTV:CAC measures total return on acquisition investment over a customer's full lifetime. CAC payback measures speed: how quickly you get your money back. A company can have a 5x ratio but an 18-month payback, meaning unit economics are strong but cash is tied up for a long time.