What is the LTV:CAC ratio?

The LTV:CAC ratio sets customer lifetime value against customer acquisition cost. It answers whether a business model pays for itself over the long run: at 3:1, every dollar spent winning a customer comes back three times over the relationship.

How do you calculate the LTV:CAC ratio?

LTV:CAC = gross-profit lifetime value ÷ customer acquisition cost. Example: an LTV of $150 against a CAC of $50 gives 3.0 : 1. Use the profit figure, not revenue — revenue lifetime value makes every ratio look better than it is.

What is a good LTV:CAC ratio?

Three to one or better counts as healthy and fundable. Between 1:1 and 2:1 you are often still profitable but spending too much per customer. Below 1:1 you lose money on every acquisition. Above 5:1 is not simply better: it usually means you are under-investing in growth and could afford to buy more of it.

How do the ratio and CAC payback relate?

Both measure acquisition efficiency from different angles. The ratio says whether a customer is worth winning; payback says when — after how many months they have repaid what they cost. A quick estimate is CAC ÷ monthly contribution per customer: $50 of CAC against $25 a month is 2.0 months. A healthy model pairs a ratio of 3:1 or better with a short payback.

LTV:CAC Ratio Calculator

What a customer is worth set against what they cost — the one figure that says whether growth is worth funding.

LTV – gross profit ($)

The gross profit a customer brings across the whole relationship. The calculator divides it by your acquisition cost to give the ratio.

→ Calculate it

CAC ($)

What it costs you to win one customer (ad spend ÷ new customers). The calculator sets lifetime value against it.

→ Calculate it

LTV:CAC ratio

3.0 : 1

LTV ÷ CAC

LTV:CAC verdict

0:1 1:1 3:1 ≥ 5:1

< 1:1 (Unprofitable) 3:1 (Healthy growth) > 4:1 (Excellent)

LTV:CAC across CAC

Ratio Your CAC

The ratio falls hyperbolically as acquisition gets more expensive. The 3:1 line sits at CAC = LTV ÷ 3, which is how much room you have left before acquisition drops below the healthy threshold.

Monthly contribution per customer ($) (optional)

The monthly gross profit one customer contributes. Enter it and the calculator adds the payback time in months.

→ Work out the margin

What the LTV to CAC ratio is actually asking

The LTV:CAC ratio divides gross-profit lifetime value by acquisition cost, and it asks one question: does a customer return more than they cost to win, by enough of a margin to be worth funding? The profit basis is not optional — it is what investors expect, and revenue lifetime value inflates every ratio built on it. Same definition as the customer lifetime value calculator and the Marketing Cockpit.

Do not know your lifetime value or acquisition cost yet? Work them out here: Customer Lifetime Value Calculator ·Customer Acquisition Cost Calculator ·Break-Even ROAS Calculator ·Profit Margin Calculator

Gross profit per purchase = AOV × (margin ÷ 100)
LTV = gross profit per purchase × purchases per customer
LTV:CAC = LTV ÷ CAC

Four inputs, one verdict: a worked ratio

An $120 average order value at a 50 % margin, three purchases per customer, and $60 to win each one:

Average order value (AOV)$120

Gross margin50 %

Purchases per customer3×

CAC (acquisition cost)$60

Gross profit per purchase = 120 × 0.50 = $60

Profit LTV = 60 × 3 = $180

LTV:CAC = 180 ÷ 60 = 3.0 : 1

Reading the result: four zones, not three

The lower thresholds are the obvious ones. The fourth is the one that surprises people: a very high ratio is also a finding, because it says you could be buying more growth than you are.

Losing money on every customer won < 1:1

Profitable but inefficient — too much budget per customer 1:1 – 3:1

Healthy: sustainable, fundable growth 3:1 – 5:1

Over-investing in profit, under-investing in growth > 5:1

The ratio says whether, not when

A ratio of 3:1 reached over four years is a different business from the same 3:1 reached in four months, and this figure cannot tell them apart. Enter your monthly contribution per customer below and the calculator adds the payback time = CAC ÷ monthly contribution. It is a quick estimate from direct contribution; the margin-adjusted version built from recurring revenue lives in the CAC payback calculator.

Moving the ratio is a question of capital efficiency

Raise lifetime value: retention is the lever with the least resistance — every additional purchase cycle lands almost entirely in profit, because no new acquisition cost attaches to it.
Lower acquisition cost: shift budget towards channels that compound rather than rent attention, and convert more of the traffic you already pay for. Both move the same numerator-free half of the fraction.

Frequently asked questions

What is the LTV:CAC ratio?: The LTV:CAC ratio sets customer lifetime value against customer acquisition cost. It answers whether a business model pays for itself over the long run: at 3:1, every dollar spent winning a customer comes back three times over the relationship.
How do you calculate the LTV:CAC ratio?: LTV:CAC = gross-profit lifetime value ÷ customer acquisition cost. Example: an LTV of $150 against a CAC of $50 gives 3.0 : 1. Use the profit figure, not revenue — revenue lifetime value makes every ratio look better than it is.
What is a good LTV:CAC ratio?: Three to one or better counts as healthy and fundable. Between 1:1 and 2:1 you are often still profitable but spending too much per customer. Below 1:1 you lose money on every acquisition. Above 5:1 is not simply better: it usually means you are under-investing in growth and could afford to buy more of it.
How do the ratio and CAC payback relate?: Both measure acquisition efficiency from different angles. The ratio says whether a customer is worth winning; payback says when — after how many months they have repaid what they cost. A quick estimate is CAC ÷ monthly contribution per customer: $50 of CAC against $25 a month is 2.0 months. A healthy model pairs a ratio of 3:1 or better with a short payback.