CAC / LTV Calculator
Calculate Customer Acquisition Cost and Lifetime Value ratio.
CAC and LTV: The Two Numbers That Determine Business Viability
Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV) are the two most critical metrics for any subscription, SaaS or e-commerce business. If LTV:CAC < 1, you lose money on every customer. A ratio of 3:1 or higher is considered healthy. These metrics guide decisions on marketing budget, pricing, customer retention investment and fundraising. Our calculator lets you model different scenarios to optimise your unit economics.
Frequently Asked Questions
What is a good LTV to CAC ratio? ▼
Benchmark ratios: < 1:1 = unsustainable (losing money per customer), 1:1–2:1 = marginal (covering costs only), 3:1 = healthy (VC-fundable), 4:1–5:1 = excellent, > 5:1 = strong (consider spending more on acquisition). For SaaS: aim for 3:1 or higher. For e-commerce: 2.5:1 to 4:1 is typical.
How to calculate Customer Acquisition Cost (CAC)? ▼
CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired (in the same period). Include: ad spend, agency fees, sales team salaries, tools and software, trade show costs. Example: ₹5 lakh spend, 100 new customers → CAC = ₹5,000 per customer.
How to calculate Customer Lifetime Value (LTV)? ▼
LTV = Average Purchase Value × Purchase Frequency per Year × Customer Lifespan (years) × Gross Margin %. Example: ₹2,000 avg order × 4 orders/year × 3 years × 60% margin = ₹14,400 LTV. Higher gross margin products have better LTV.
How to improve LTV to CAC ratio? ▼
Reduce CAC: better targeting, referral programs, SEO (organic acquisition), improve conversion rate. Increase LTV: upsell/cross-sell, loyalty programs, subscription models, better customer success (reduce churn), increase average order value. Both levers move the ratio up.
What is payback period in unit economics? ▼
Payback Period = CAC ÷ (Monthly Revenue per Customer × Gross Margin). Example: CAC ₹5,000, monthly revenue ₹2,000, 60% margin → Payback = 5,000 ÷ (2,000 × 0.6) = 4.2 months. Aim for < 12 months payback for a healthy SaaS business.