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CAC : LTV calculator
The short answer
This CAC to LTV calculator tells you whether your customers are worth what you pay to acquire them. Enter your marketing spend, new customers, order value, purchase frequency, gross margin and expected customer lifespan to get CAC, gross-profit LTV, the LTV:CAC ratio and your CAC payback period in months.
LTV : CAC
6.9 : 1
Healthy — room to scale acquisition.
CAC
₹750
LTV (gross profit)
₹5,184
CAC payback
3.5 months
Calculations run in your browser. Nothing you type is stored or sent anywhere. Outputs are planning estimates, not guarantees.
How it's calculated
How to read the result
- 3 : 1 or better — generally healthy; room to invest more in acquisition
- 1.5 – 3 : 1 — workable, but watch payback and cash flow
- Below 1.5 : 1 — acquisition is likely unprofitable; fix retention, margin or CAC first
- Payback over 12 months — needs strong cash reserves or retention confidence
Worked example
₹3,00,000 spent to acquire 400 customers gives a ₹750 CAC. At ₹1,800 AOV, 2.4 orders a year and 60% gross margin, annual gross profit per customer is ₹2,592. Over two years, LTV ≈ ₹5,184, an LTV:CAC of about 6.9 : 1, with payback in roughly 3.5 months.
Honest caveats
- Orders per year and lifespan are estimates — use cohort data, not hope
- Use new-customer CAC, not blended CAC including returning buyers
- Revenue-based LTV overstates value; this calculator uses gross profit
- The ratio ignores timing — always read it together with payback
LTV:CAC interpretation
| LTV:CAC | What it suggests |
|---|---|
| Below 1:1 | Each customer loses money — fix economics before scaling |
| 1:1 to 2:1 | Thin returns; improve retention or reduce CAC |
| Around 3:1 | Commonly considered healthy |
| Above 5:1 | Possibly under-investing in growth |
Payback period — how many months of gross profit it takes to recover CAC — shows the cash-flow side. See payback period.
How to improve LTV:CAC
- Raise repeat purchase with retention journeys and subscriptions
- Increase AOV with bundles and thresholds
- Lower CAC with better creative, targeting and conversion rates
- Improve margin with pricing and cost control
- Reduce churn with onboarding and service
LTV calculation methods
| Method | Use when |
|---|---|
| Historical cohort LTV | You have a year or more of data |
| Simple formula (AOV × purchase frequency × lifespan × margin) | Early-stage estimates |
| Predictive LTV | Large datasets and modelling capability |
A worked example
A subscription brand earns ₹300 contribution margin a month per customer, with an average lifespan of eight months: LTV is about ₹2,400. At a CAC of ₹800, LTV:CAC is 3:1 and payback is under three months — healthy for scaling.
Frequently asked questions
Where do I get orders per year and lifespan?
From cohort analysis of past customers: how many orders a typical customer placed in their first 12 months, and how long customers keep buying.
Why use gross profit instead of revenue?
Because revenue includes product cost you never keep. Gross-profit LTV reflects what you can actually spend to acquire a customer.
What's a good payback period?
Shorter is better for cash. Many D2C brands aim for under three to six months; subscription and B2B businesses often accept longer.
How do we calculate LTV for a new brand without history?
Start with assumptions based on purchase frequency and margins, then replace them with cohort data as it arrives.
Should CAC include agency fees and creative costs?
For a fully loaded CAC, yes. Many teams track both media-only CAC and fully loaded CAC.
What LTV:CAC ratio is healthy?
Around 3:1 is a common rule of thumb, but payback period and cash flow matter too.
Should LTV use revenue or margin?
Margin — revenue-based LTV overstates customer value.
Should LTV include future discounts?
Use expected margin after typical discounts for a realistic estimate.
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