CAC & LTV Calculator
What a customer costs to acquire, what they are worth over time, and how long until you break even.
What counts in CAC
Customer acquisition cost is all the money spent to win a customer, divided by the customers actually won: ad spend, agency fees, content production, sales salaries and commission, plus the tools used to run it all. Counting only media spend is the most common way companies convince themselves growth is cheaper than it is.
Blended versus paid CAC
Blended CAC divides total spend by all new customers, including those from organic search and referrals. Paid CAC looks only at paid channels. Blended is the honest number for board reporting; paid CAC tells you whether a specific channel is worth scaling.
The LTV:CAC benchmark
- 1:1 — you are destroying value; every customer costs what they return.
- 3:1 — the widely cited healthy target for sustainable growth.
- Above 5:1 — suspiciously good, and usually a sign you are underinvesting in growth rather than being brilliant at it.
Payback period matters more than the ratio
A 5:1 LTV:CAC looks great, but if that lifetime value takes four years to arrive and you have six months of cash, the business can still fail. Most healthy subscription businesses recover CAC within 12 months; ecommerce brands often need payback on the first or second order. Always check both numbers together.
Estimating LTV without fooling yourself
The simple method multiplies average order value by purchase frequency by lifespan by gross margin. For subscriptions, the cleaner formula is ARPU × gross margin ÷ monthly churn. Whichever you use, base churn and lifespan on real cohort data — a lifespan assumption pulled from thin air makes every downstream number meaningless.