LTV:CAC Ratio Calculator

What the LTV:CAC ratio measures

The LTV:CAC ratio compares what a customer is worth (customer lifetime value) against what it costs to win that customer (customer acquisition cost). It is a single planning number meant to answer one question: for every unit of currency spent acquiring a customer, how many units does that customer return over their lifetime? This calculator compares your current ratio against a target ratio that you choose — it never labels any ratio as universally “good,” “healthy,” or “bad.”

The formula

LTV:CAC ratio = Customer lifetime value ÷ Customer acquisition cost

From there, this calculator also derives:

• Target CAC at current LTV = Current LTV ÷ Target ratio
• Required LTV at current CAC = Current CAC × Target ratio
• CAC gap to target = Target CAC at current LTV − Current CAC
• LTV gap to target = Current LTV − Required LTV at current CAC

Why LTV basis matters

The LTV figure you enter should be built the same way every time you use this calculator. Switching between a revenue-based LTV and a gross-profit-based LTV from one calculation to the next will make the ratio meaningless for comparison over time, even though the arithmetic itself does not change based on which basis you select — the basis selector here only changes labels, not the formula.

Revenue LTV vs gross-profit LTV

Revenue LTV is the total revenue a customer is expected to generate. Gross-profit LTV nets out the cost of delivering the product or service, so it reflects what the business actually keeps before overhead, acquisition cost, and taxes. Comparing gross-profit LTV against CAC is usually the more decision-useful ratio, since revenue LTV can overstate how much a customer is really worth once delivery costs are considered. See the Customer Lifetime Value calculator for how to derive either figure.

Why LTV and CAC need consistent definitions and cohorts

LTV and CAC should describe the same group of customers, measured over comparable time windows and with consistent cost/revenue definitions. Mixing an LTV estimate from one cohort or time period with a CAC figure from a different one produces a ratio that looks precise but does not correspond to any real group of customers.

How to use a user-selected target

The target ratio in this calculator defaults to 3:1 purely as an editable starting point — it is not a universal benchmark. A suitable target for your business depends on your margin structure, cash flow position, CAC payback period, growth stage, retention quality, capital availability, and how rigorously LTV and CAC are measured. Replace the default with a target that reflects your own situation.

Reaching a target by reducing CAC

Path A holds LTV fixed and asks what CAC would need to be to hit the selected target: Target CAC = Current LTV ÷ Target ratio. If your current CAC is below that target, you have headroom to spend more per customer and still hit the target; if it is above, you would need to reduce acquisition cost (for example through channel mix, conversion rate, or sales efficiency) to close the gap.

Reaching a target by increasing LTV

Path B holds CAC fixed and asks what LTV would need to be to hit the selected target: Required LTV = Current CAC × Target ratio. If your current LTV already exceeds that requirement, you have surplus relative to the target; if not, you would need to increase LTV (for example through retention, margin, or expansion revenue) to close the gap.

Why the ratio does not replace CAC payback analysis

LTV:CAC tells you whether a customer relationship is worth more than it costs to acquire, in total, over its entire lifetime. It says nothing about when that value is recovered. A business can have a strong LTV:CAC ratio and still run into a cash-flow problem if CAC is paid up front and the offsetting value arrives slowly over years. CAC payback period is a separate analysis, focused on timing rather than total value, and is not calculated on this page.

What this ratio excludes

• Timing of cash flows, discounting, or net present value.
• CAC payback period (a distinct, timing-focused analysis).
• Changes in retention, expansion revenue, or cohort behavior over time.
• Fixed overhead, taxes, and company-wide operating costs beyond what is already in your LTV/CAC inputs.
• Cash-flow constraints and capital availability.

Worked example: above target

Consider a business with:

• Customer lifetime value (LTV, gross-profit basis) = $5,000
• Customer acquisition cost (CAC) = $1,600
• Target ratio = 3:1
• New customers acquired = 100

Current ratio = $5,000 ÷ $1,600 = 3.125:1
CAC as % of LTV = ($1,600 ÷ $5,000) × 100 = 32%
LTV less CAC = $5,000 − $1,600 = $3,400
Target CAC = $5,000 ÷ 3 = $1,666.67 (CAC headroom = $66.67)
Required LTV = $1,600 × 3 = $4,800 (LTV above target requirement = $200)

With 100 new customers: cohort gross-profit LTV = $5,000 × 100 = $500,000, total acquisition cost = $1,600 × 100 = $160,000, and cohort LTV less acquisition cost = $3,400 × 100 = $340,000.

Worked example: below target

Consider a business with:

• Customer lifetime value (LTV) = $3,000
• Customer acquisition cost (CAC) = $1,500
• Target ratio = 3:1

Current ratio = $3,000 ÷ $1,500 = 2:1
Target CAC = $3,000 ÷ 3 = $1,000 (CAC reduction needed = $500)
Required LTV = $1,500 × 3 = $4,500 (Additional LTV needed = $1,500)

This business would need to reduce CAC to $1,000, or increase LTV to $4,500, or some combination of the two, to reach the selected 3:1 target.

Common mistakes

• Treating 3:1 as a universal rule: a suitable target varies by margin structure, cash flow, payback period, growth stage, retention quality, and measurement methodology.
• Mixing revenue LTV and gross-profit LTV across calculations: pick one basis and use it consistently.
• Comparing LTV and CAC from different cohorts or time windows: both figures should describe the same group of customers.
• Treating LTV minus CAC as net profit: it excludes fixed overhead, taxes, timing, discounting, refunds, and working capital.
• Ignoring CAC payback: a healthy ratio does not guarantee the cash to fund acquisition arrives soon enough.

When cohort analysis is more appropriate

This calculator uses simplified, stable-assumption inputs and, optionally, a single cohort size to estimate cohort-level totals. Businesses with materially changing retention curves, seasonal acquisition patterns, or expansion revenue that varies by cohort are usually better served by a full cohort-based analysis that tracks each acquisition cohort's LTV and CAC separately over time, rather than a single blended ratio.

For a full walkthrough of this formula, a worked example, and how to read the result, see the LTV:CAC Ratio Explained guide.