LTV to CAC Ratio Calculator

Calculate your Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC) to understand the efficiency of your marketing and sales efforts.

Customer Lifetime Value (LTV) Inputs

Average Purchase Value*

The average amount a customer spends per purchase.

Average Purchase Frequency Rate*

How many times a customer purchases in a given period (e.g., per year).

Average Customer Lifespan*

The average duration a customer remains active with your business (e.g., in years).

Customer Acquisition Cost (CAC) Inputs

Total Marketing and Sales Spend*

Total spend on marketing and sales activities over a period.

Number of New Customers Acquired*

The number of new customers acquired during the same period.

Results

Calculated Customer Lifetime Value (LTV):

$600

Calculated Customer Acquisition Cost (CAC):

$100

LTV to CAC Ratio:

6:1

Interpretation: A ratio of 3:1 or higher is generally considered good, indicating that your customer acquisition efforts are profitable. A lower ratio might suggest that you are spending too much to acquire customers relative to the value they bring.

Made with Minform

How to calculate LTV to CAC ratio calculator?

The LTV to CAC ratio compares the lifetime value a customer brings to the cost of acquiring them, helping you evaluate marketing efficiency.

Key formula: LTV to CAC = (Average Purchase Value × Purchase Frequency × Customer Lifespan) ÷ (Total Marketing & Sales Spend ÷ Number of New Customers)

Using the LTV to CAC ratio calculator calculator: an example

Example values used below: average purchase $100, frequency 2/year, lifespan 3 years, spend $5,000, 50 new customers.

Step-by-step calculation:

Calculate LTV: $100 (average purchase) × 2 (frequency) × 3 (lifespan) = $600.
Calculate CAC: $5,000 (marketing & sales) ÷ 50 (new customers) = $100.
Compute ratio: $600 ÷ $100 = 6:1.
Interpretation: 6:1 indicates efficient acquisition; a target of ~3:1 or higher is typically healthy.

Frequently Asked Questions

What is a good LTV to CAC ratio?

Generally, 3:1 or higher is considered healthy; it suggests customers generate substantially more value than their acquisition cost.

How often should I recalculate this ratio?

Recalculate monthly or quarterly, and after major marketing changes, to monitor trends and campaign performance.

What if CAC is higher than LTV?

If CAC exceeds LTV, acquisition is likely unprofitable; consider lowering spend, improving targeting, increasing prices, or boosting retention.

Should I include retention or support costs in LTV?

Yes. For more accurate decisions, include recurring costs, returns, and gross margin adjustments when calculating LTV.