LTV CAC Ratio Formula
The LTV CAC Ratio is a fundamental unit-economics metric that evaluates the profitability of a business by comparing the revenue a customer generates over their lifetime against the cost to acquire them. A healthy ratio indicates sustainable growth and efficient marketing spend.
Bottom Line
The LTV CAC Ratio is a fundamental unit-economics metric that evaluates the profitability of a business by comparing the revenue a customer generates over their lifetime against the cost to acquire them. A healthy ratio indicates sustainable growth and efficient marketing spend.
Customer Lifetime Value Calculator
Calculate CLV, CLV:CAC ratio, and acquisition payback from purchase patterns.
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Formula
Copy the exact expression or work through it step by step below.
LTV CAC Ratio = Customer Lifetime Value / Customer Acquisition Cost Variables
LCR
LTV CAC Ratio
The ratio of lifetime value to acquisition cost. A ratio of 3 or higher is the common health benchmark; below 1 means you lose money on every customer.
CLV
Customer Lifetime Value
Customer Lifetime Value in currency units: total revenue or gross profit expected from a customer over the relationship. The numerator. Use gross profit for a stricter read.
CAC
Customer Acquisition Cost
Customer Acquisition Cost in currency units: the fully loaded spend to win one customer. The denominator.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Avg Purchase Value = $50.00, Purchase Frequency Per Year = 4, Customer Lifespan Years = 3, Acquisition Cost = $100
- 2
Put LTV and CAC on the same basis: either both on revenue or both on gross profit, and both as lifetime totals per customer.
An LTV of 2,400 against a CAC of 800 keeps both as per-customer lifetime figures.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
At a 60% gross margin, the calculator lands with clv at 600, margin-adjusted clv at 360, and an LTV:CAC ratio of 3.6.
- 4
Re-run using a gross-profit LTV instead of revenue, since a revenue-based ratio of 3 can fall below the healthy line once costs are removed.
A 3:1 revenue ratio at 60% gross margin becomes a 1.8:1 profit ratio.
Worked Example
LTV CAC Ratio sample case
Avg Purchase Value
$50.00
Purchase Frequency Per Year
4
Customer Lifespan Years
3
Acquisition Cost
$100
Gross Margin
60%
CLV = $50 times 4 times 3 = $600. Margin-adjusted CLV = $600 times 60% = $360. LTV:CAC = $360 / $100 = 3.6.
The calculator lands with clv at 600, margin-adjusted clv at 360, and an LTV:CAC ratio of 3.6 against the $100 acquisition cost.
Common Variations
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Sources & References
- What is LTV:CAC Ratio? | Formula & Calculation — Shopify
- LTV to CAC Ratio: What It Is and How to Calculate It — Investopedia
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