LTV to CAC Ratio Calculator

The Golden Metric of Unit Economics

In e-commerce and SaaS, the single most important metric for determining the long-term viability of your business is the ratio between your Customer Lifetime Value (LTV) and your Customer Acquisition Cost (CAC).

What is LTV?

Customer Lifetime Value (also known as CLV) is the total gross profit you expect to earn from a single customer over the entire duration of their relationship with your business. If a customer buys from you 3 times over 2 years, their LTV is the total profit of all 3 orders combined.

What is CAC?

Customer Acquisition Cost is how much you have to spend on sales and marketing (like Facebook Ads) to acquire a single new paying customer.

What is a "Good" LTV:CAC Ratio?

• Less than 1:1 : Your business is burning cash. You are spending more to acquire a customer than they will ever pay you back.
• 1:1 : You are breaking even, but making zero profit.
• 3:1 : The Industry Standard. This is the golden ratio most venture capitalists look for. It means for every $1 you spend on marketing, you get $3 back in lifetime profit.
• 5:1 or Higher: You have a highly profitable business, but you might actually be under-spending on marketing. You could aggressively increase your ad spend to capture more market share.