LTV:CAC Ratio Calculator
Example: Customer lifetime value (LTV): 800 $ · Customer acquisition cost (CAC): 200 $
| LTV : CAC ratio | 4 |
| CAC as fraction of LTV | 0.25 |
Worked example
With an $800 lifetime value and a $200 acquisition cost, the LTV:CAC ratio is 800 divided by 200, or 4.0. That means every dollar spent acquiring a customer returns four dollars of lifetime value, comfortably above the 3.0 benchmark. The CAC also equals just 25% of LTV, leaving healthy room for the rest of your costs and profit.
Frequently asked questions
What is a good LTV:CAC ratio?
The common benchmark is 3:1. Around 1:1 you barely cover acquisition; below 1 you lose money on each customer. Much above 3:1, say 5:1 or more, can signal you are underspending on growth and leaving market share on the table.
Should LTV be based on revenue or profit?
On gross profit. Using revenue overstates the ratio because it ignores the cost of delivering the product. A margin-based LTV keeps the comparison honest against your acquisition spend.
Does a high ratio mean I should spend more?
Often, yes. A very high ratio suggests you could profitably acquire more customers by increasing marketing, as long as the extra spend keeps LTV comfortably above CAC and you can fund the growth.
What else matters besides the ratio?
CAC payback period, how many months it takes to earn back acquisition cost, matters just as much. A great ratio with a two-year payback can still strain cash flow. Watch both together.