LTV & CAC Calculator
Calculate customer lifetime value on gross margin, what it costs to acquire a customer, the LTV:CAC ratio, and how many months it takes to earn the acquisition cost back. Works for subscriptions and for stores.
The formulas this calculator uses
- Subscription LTV = monthly revenue per customer × gross margin ÷ monthly churn. $49 a month at 75% margin and 4% churn is $36.75 ÷ 0.04 = $918.75.
- Ecommerce LTV = average order value × orders per year × years retained × gross margin. $65 × 2.5 × 2 × 40% = $130.
- CAC = acquisition spend ÷ new customers won with it. Include what it really took: ad spend, and if you are honest, agency fees and the tools that run the campaigns.
- LTV:CAC = LTV ÷ CAC. CAC payback = CAC ÷ monthly gross profit per customer.
What a healthy LTV:CAC looks like
The most widely used rule of thumb, popularised by David Skok's SaaS metrics writing, is an LTV:CAC of at least 3:1 with CAC paid back within about 12 months. Below 1:1 you lose money on every customer. Between 1 and 3, you are profitable on paper, but the costs that gross margin leaves out (support, refunds, overheads) usually eat the difference. Well above 5, you are probably leaving growth on the table by spending too little.
Treat 3:1 as a sanity check, not a law. A business with fast payback can grow profitably at a lower ratio; one that waits 30 months to recover CAC needs a higher one, because it is financing every customer for over two years.
Four ways LTV gets overstated
- Using revenue instead of gross margin. A $100 order with a 30% margin is worth $30 to you, not $100. Revenue LTV makes a CAC look affordable when it is not.
- Blended CAC. Dividing paid spend by all new customers, including the ones who found you through search or referral, makes paid acquisition look cheap. Divide paid spend by the customers paid acquisition actually brought in.
- Churn from your best cohort. Early customers often churn less than later ones reached through broader targeting. Use recent cohorts.
- Lifetimes you have not observed. Low churn implies customers stay for years. If your business is 18 months old, you have not seen a 5-year customer yet; cap the lifetime at what the data supports.
Get CAC by channel from the ad accounts themselves
With Google Ads, Meta Ads and GA4 connected to MCP Ads, you can ask Claude: "For last quarter, show spend and new customers by channel, and CAC per channel using only the conversions each platform can prove." That is the paid CAC figure the second pitfall above asks for, without exporting three reports.
Related tools
What each conversion costs today, and the break-even CPA on the first sale.
The return on ad spend your margin requires before a campaign makes money.
Work back from a customer goal to the budget it takes at your CAC.
See CAC by channel without building the spreadsheet
Connect Google Ads, Meta Ads and GA4 to MCP Ads and ask Claude what each new customer really cost, channel by channel.