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CAC & LTV

CAC & LTV calculator: is your customer growth worth what you pay?

Work out what it costs to win a customer, what they are worth over their lifetime, the ratio between the two, and how long a customer takes to pay back their cost. Compare your channels to see where to put your budget.

CAC, LTV and ratioPayback periodChannel comparison

Acquisition costs (one period)

Customer value

Result

50 JODCAC · cost per customer
108 JODLTV · lifetime profit per customer
2.16 : 1LTV to CAC ratio
11.1 moCAC payback period

To keep a 3:1 ratio your CAC should stay under about 36 JOD.

Growth is profitable but the cushion is thin (under 3x). A rise in ad costs or a drop in repeat purchases could squeeze you.

Compare your channels

Enter what you spent on each channel and the new customers it brought to find your cheapest and costliest channel.

ChannelCACVersus LTV
Meta ads 50 JOD2.16 : 1
Google Search ✓41.67 JOD2.59 : 1
Referrals 75 JOD1.44 : 1

Cheapest channel: Google Search at 41.67 JOD. Costliest: Referrals at 75 JOD (1.8x as much).

LTV here is based on gross profit, not revenue, and assumes steady buying behaviour. A new customer may differ from the average, so review the numbers every quarter.

How the tool works

Enter your marketing spend, sales costs and new customers to calculate CAC, then average order value, orders per year, margin and customer lifetime to calculate LTV. The tool shows the ratio between them and the payback period in months, and tells you whether your growth is profitable. In the table below, compare your channels to see the cheapest and costliest.

What are CAC and LTV?

CAC (customer acquisition cost) is what you spend on average to win a new customer: total marketing and sales costs in a period ÷ new customers in that period. LTV (customer lifetime value) is the profit you expect from one customer from the first purchase until they stop buying.

Together they answer the question every owner cares about: does each dollar I spend on winning customers come back as more than a dollar?

How to read the LTV to CAC ratio

The common rule of thumb is a ratio of 3 to 1 or better, meaning a customer returns three times what they cost to win. It is a guideline rather than a law, and businesses with long sales cycles or subscriptions may accept different ratios.

  • Under 1: you lose money on every new customer. Fix that before spending more.
  • 1 to 3: growth is possible but the cushion is thin and sensitive to any rise in ad costs.
  • 3 to 5: a healthy ratio and a reasonable place to raise spend.
  • Over 5: you may be under-investing and leaving growth on the table.

Payback period: when does a customer pay back?

The tool estimates how many months a customer needs to repay their acquisition cost out of gross profit. The shorter the period, the lighter the pressure on your working capital, which matters most for small businesses that fund ads from cash flow.

How to lower CAC and raise LTV

  • Improve your site's conversion rate: more conversions lower CAC without spending another cent.
  • Lean on cheaper channels: compare your channels in the table and move budget from the costliest to the cheapest.
  • Encourage repeat purchases: WhatsApp or email messages after a purchase raise orders per customer per year.
  • Raise average order value with bundles and add-on offers.
  • Build a referral channel: referred customers cost less and stay longer.

Frequently asked questions

What is a good LTV to CAC ratio?

A common rule of thumb is 3 to 1 or higher. It is a guideline that varies by business; subscriptions and long sales cycles may accept different ratios.

What do I enter as acquisition costs?

Everything you spent winning customers in the period: ads, tools and the share of sales and marketing pay tied to acquisition.

How do I estimate customer lifetime?

From your sales history: how many years does a customer keep buying before stopping? Be conservative and start with one or two years if you lack data.

Why is LTV based on profit, not revenue?

Because revenue is not profit. Calculating from gross profit gives a truer picture of what a customer actually returns to your pocket.

How do I lower CAC?

Improve your site's conversion rate, move budget to cheaper channels and build a referral channel from existing customers.

Related tools

ROAS CalculatorBreak-even CalculatorAd Budget CalculatorAll tools →

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