LTV:CAC Ratio Calculator
Calculate your LTV:CAC ratio, understand what it means, and see whether your acquisition spend is sustainable enough to scale.
Results
Enter your values and calculate to see LTV, CAC, ratio, and a practical benchmark interpretation.
Guide rails are directional, not rigid rules. Always evaluate ratio alongside payback speed and business model constraints.
What is LTV:CAC?
LTV:CAC compares customer lifetime value to customer acquisition cost. It answers one core unit economics question: how much value does a customer generate relative to what it costs to acquire them?
If LTV:CAC is too low, growth destroys cash even while revenue rises. If it is healthy, acquisition spend has a sustainable foundation to scale from. This calculator works for both ecommerce and SaaS business models, with separate formulas for each.
LTV:CAC formula
LTV:CAC = LTV / CAC
For quick ratio mode, enter your known LTV and CAC directly.
For derived mode, the calculator builds both from your inputs:
- Ecommerce LTV:
AOV x Purchase Frequency x Customer Lifespan x Gross Margin - Ecommerce CAC:
Total Acquisition Spend / New Customers Acquired - SaaS LTV:
(ARPA x Gross Margin) / Monthly Churn Rate - SaaS CAC:
Sales and Marketing Spend / New Customers Acquired
Margin-adjusted LTV is almost always more useful than revenue-only LTV. Revenue overstates the value available to recover CAC because it does not account for the cost of delivering the product or service.
What is a good LTV:CAC ratio?
Use these as directional benchmarks, not rigid rules:
- Below 1:1: each customer costs more to acquire than they are worth — unsustainable at any scale
- 1:1 to under 3:1: weak or borderline; growth is possible but unit economics are fragile
- 3:1 to 5:1: healthy; the most common target range for scaling businesses
- Above 5:1: strong efficiency, but may indicate under-investment in growth
The right target depends on your gross margins, payback window, and how much cash the business can absorb before acquisition costs are recovered. A 3:1 ratio in a high-churn SaaS business with a 24-month payback feels very different from 3:1 in an ecommerce brand with a 6-month payback.
LTV:CAC ratio examples
Example 1: Ecommerce brand
- Average order value: $120
- Purchase frequency: 3 times per year
- Customer lifespan: 2 years
- Gross margin: 55%
- LTV: $120 x 3 x 2 x 0.55 = $396
- Total acquisition spend: $50,000
- New customers: 100
- CAC: $500
- LTV:CAC ratio: 0.79:1
Despite reasonable order value and repeat rate, this business is acquiring customers at a loss. The margin structure or acquisition cost needs to change before scaling makes sense.
Example 2: SaaS business
- ARPA: $200 per month
- Gross margin: 75%
- Monthly churn: 2%
- LTV: ($200 x 0.75) / 0.02 = $7,500
- Sales and marketing spend: $100,000
- New customers: 50
- CAC: $2,000
- LTV:CAC ratio: 3.75:1
This is inside the healthy range. CAC payback is approximately 13 months, which is acceptable for most SaaS models with strong retention.
LTV:CAC for ecommerce vs SaaS
Ecommerce and SaaS require different LTV assumptions because value accrues differently in each model.
In ecommerce, LTV is shaped by repeat purchase behavior, average order value, and how long a customer stays active. Improving any of these inputs lifts LTV directly.
In SaaS, churn dominates. Even small reductions in monthly churn have a compounding effect on LTV because customer lifetime is calculated as the inverse of churn rate. A business at 2% monthly churn has an expected customer lifetime of 50 months. At 4% churn that halves to 25 months, cutting LTV nearly in half.
That is why a single benchmark is rarely enough context. The ratio must be read alongside the payback period and the specific dynamics of your model.
LTV:CAC and CAC payback period
LTV:CAC tells you the total value of acquiring a customer relative to cost. CAC payback period tells you how long you are cash-flow negative per customer before that cost is recovered.
A business can have a strong LTV:CAC ratio and still face cash pressure if payback takes too long. For capital-constrained teams, payback period often matters more than ratio in the short term. Both should be monitored together.
CAC Payback (months) = CAC / (Monthly Revenue per Customer x Gross Margin)
Most growth-stage businesses target payback under 12 months. SaaS businesses with strong retention may accept up to 18 months. Beyond that, acquisition spend requires significant capital to sustain.
Why static LTV:CAC calculators are limited
A static calculator is useful for scenario planning and sanity checks. But LTV:CAC is not a fixed number. It shifts every time acquisition costs move, churn increases, order frequency changes, or margins compress.
A ratio that looked healthy last quarter can deteriorate quickly when a paid channel becomes more competitive, when a cohort retains worse than expected, or when a promotion pulls forward purchases without adding real repeat buyers.
By the time you have updated the spreadsheet, the picture has already changed.
Daymark connects your Shopify store and ad platforms so you can track LTV, CAC, and LTV:CAC ratio continuously from actual order and spend data, without rebuilding the model after every budget cycle.
Frequently asked questions
What is LTV:CAC?
LTV:CAC is the ratio of customer lifetime value to customer acquisition cost. It answers one core unit economics question: how much value does a customer generate relative to what it costs to acquire them? A ratio above 3:1 is generally considered healthy, though the right target depends on your business model, payback window, and margin structure.
How do you calculate LTV:CAC?
Divide customer lifetime value by customer acquisition cost. If LTV is $3,000 and CAC is $1,000, your LTV:CAC ratio is 3:1. For a more accurate result, use margin-adjusted LTV rather than revenue-only LTV, since revenue overstates the value available to recover acquisition costs.
What is a good LTV:CAC ratio?
Below 1:1 is unsustainable. Between 1:1 and 3:1 is borderline or weak. Between 3:1 and 5:1 is generally healthy and the most common target range. Above 5:1 can signal strong efficiency but may also mean the business is under-investing in growth. These are directional benchmarks, not rigid rules. Payback speed and business model constraints matter just as much as the ratio itself.
Should LTV be calculated on revenue or gross profit?
Gross profit adjusted LTV is almost always more useful. Revenue-only LTV ignores the cost to deliver the product or service, which overstates the value available to recover CAC. For ecommerce, use gross margin after COGS. For SaaS, use gross margin after hosting and support costs.
What is the difference between ecommerce and SaaS LTV:CAC?
Ecommerce LTV is modeled from average order value, purchase frequency, customer lifespan, and gross margin. SaaS LTV is typically calculated from ARPA, gross margin, and monthly churn, where churn has an outsized effect because it determines how long a customer stays. A 3:1 ratio in SaaS and a 3:1 ratio in ecommerce can reflect very different business health depending on payback period.
Why is 3:1 used as the standard benchmark?
3:1 became a common benchmark because it generally provides enough room to cover payback period, operating costs, and reinvestment while leaving margin for error. It originated in SaaS but is widely applied to ecommerce. It is a useful starting point, not a rule, and businesses with faster payback cycles or lower fixed costs may be healthy at lower ratios.
What is CAC payback period and how does it relate to LTV:CAC?
CAC payback period is the number of months it takes to recover customer acquisition cost from gross profit. LTV:CAC tells you the total value of a customer relative to what you paid. Payback period tells you how long you are cash-flow negative per customer. Both matter. A strong LTV:CAC ratio with a long payback period can still create serious cash pressure, especially for capital-constrained businesses.
Can a very high LTV:CAC ratio be a problem?
Yes. A very high ratio, say above 5:1 or 6:1, sometimes indicates strong unit economics, but it can also mean the business is being too conservative with acquisition spend and leaving growth on the table. If you can profitably acquire more customers at your current CAC, a very high ratio may reflect missed opportunity rather than exceptional performance.
How often should LTV:CAC be recalculated?
At minimum, recalculate monthly. LTV:CAC shifts whenever acquisition costs, churn, order frequency, average order value, or margins change. Teams scaling paid channels or running frequent promotions should monitor it more continuously, since a ratio that looked healthy last quarter can deteriorate quickly as channel costs rise or retention weakens.
Why does LTV:CAC change over time?
LTV:CAC is not a fixed number. It changes as CAC rises with channel saturation, as churn increases or decreases, as average order value or ARPA shifts, and as margin structure changes. A ratio calculated six months ago can be significantly off today, which is why connected live reporting is more reliable than periodic spreadsheet updates for growth decisions.
Monitor LTV:CAC with connected data in Daymark
Connect your store or product data and ad spend to track LTV, CAC, and unit economics continuously without rebuilding spreadsheets.