LTV:CAC Ratio Calculator

The LTV:CAC ratio compares a customer's lifetime value against what it cost to acquire them, calculated as LTV divided by CAC and expressed as a multiplier. A ratio of 3.00x means the customer is worth three times what was spent to acquire them, based on whatever LTV and CAC figures were used. It's a single number meant to summarize whether acquisition spend is, in theory, buying something worth more than it costs, but it only answers that question as well as the LTV and CAC figures feeding it are defined. The ratio says nothing about how quickly that value is realized, which is a separate question this metric doesn't attempt to answer, and one that CAC payback period is built to cover instead.

Divide LTV by CAC: LTV:CAC = LTV ÷ CAC. An LTV of $720 divided by a CAC of $240 gives a ratio of 720 ÷ 240 = 3.00x. Both inputs need to describe the same group of customers over a comparable period: an LTV modeled from one cohort divided by a CAC measured from an entirely different one won't produce a ratio that means anything about either group specifically. The LTV figure also needs a known, consistent definition: a revenue-based LTV divided by CAC answers a different question than a margin-adjusted LTV divided by the same CAC, since only one of them subtracts the cost of serving the customer, and the two results aren't directly comparable.

There's no single required model; what matters is knowing which one is feeding the ratio and reading the result accordingly. A ratio built from the simple, revenue-based LTV model compares revenue-based customer value against CAC; a ratio built from the margin-adjusted model compares margin-adjusted customer value against CAC, since that model factors in gross margin before the division. These are two different economic comparisons, not two ways of computing the same number, and neither is wrong on its own. The mistake is mixing them, reading a revenue-based ratio as if it already accounted for cost of goods, or comparing a revenue-based ratio from one period against a margin-adjusted ratio from another. Whichever LTV model is used, stating it and keeping it consistent matters more than which one is chosen.

There's no single target that applies across businesses. The right ratio depends on how LTV and CAC are each defined, the business's margin structure, its growth strategy, and how fast it needs to recover acquisition costs in cash. A business intentionally investing ahead of growth may accept a lower ratio for a period; a business optimizing for near-term efficiency will want a higher one. Numbers commonly repeated online as a universal target don't account for any of that context, and a ratio computed with a revenue-based LTV isn't comparable to one computed with a margin-adjusted LTV in the first place. Reading the ratio alongside CAC payback period gives a fuller picture than the ratio alone.

LTV:CAC ratio asks whether a customer is worth more than they cost, over their entire relationship with the business. CAC payback period asks a narrower, faster question: how many months of gross margin it takes to recover just the acquisition cost, regardless of what happens after that point. A customer can score well on both, well on one and poorly on the other, or poorly on both. A high LTV:CAC ratio built on a long customer lifespan can still come with a payback period that strains cash flow in the near term, even though the long-run economics look strong. The two metrics answer different questions and are meant to be read together, not as substitutes for each other.