LTV:CAC ratio calculator
LTV:CAC compares the lifetime gross profit of a customer to what you paid to acquire them. It is the headline efficiency metric, though payback period is the one operators steer by day to day. Solve it any way and read the verdict.
Using typical funnel assumptions, to show that the metric above can’t tell you if you’re winning. Your real numbers live in the full calculator.
Drop in one product and the Target ROAS calculator works your whole P&L backwards to the number that actually decides it, free, no signup.
What is the LTV:CAC ratio?
LTV:CAC compares the lifetime gross profit of a customer to what you paid to acquire them. It is the headline efficiency metric for a subscription or repeat-purchase business: are your customers worth meaningfully more than they cost to win?
How to calculate LTV:CAC
What is a good LTV:CAC ratio?
Around 3:1 to 5:1 is the zone most brands aim for. The 3:1 rule of thumb leaves room for overhead and profit on top of acquisition. But the bands tell the fuller story:
| Ratio | Read |
|---|---|
| Below 1:1 | Burning cash, you lose money even over a lifetime |
| 1:1 to 3:1 | Fragile, works but thin, lean on retention |
| 3:1 to 5:1 | Healthy, the target zone |
| Above 5:1 | Likely underspending, you could buy more growth and still profit |
A 5:1 ratio with an 18-month payback can starve a business of cash, while a 3:1 with a 2-month payback compounds fast. Watch how quickly the lifetime value arrives, not only how big it is. See the payback period calculator.
How to improve the LTV:CAC ratio
- Raise LTV: cut churn, lift purchase frequency and AOV, protect margin (see the LTV calculator).
- Lower CAC: improve conversion rate and targeting so each customer costs less to win (see the CAC calculator).
- Do not chase a high ratio for its own sake. Above 5:1 usually means you are underinvesting and leaving growth on the table.
The operator’s playbook
How a paid-media operator reads this number, not a glossary definition.
3:1 is a guideline, not a law+
The 3:1 rule of thumb bakes in room for overhead and profit on top of acquisition. Below 1:1 you lose money even over a lifetime. Above 5:1 you are usually underspending: you could buy more growth and still profit.
Payback beats the ratio+
A 5:1 ratio with an 18-month payback can starve a business of cash, while a 3:1 with a 2-month payback compounds fast. Watch how quickly the LTV arrives, not just how big it is.
Frequently asked questions
How do you calculate LTV:CAC?
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Lifetime gross profit divided by customer acquisition cost. $240 LTV and $80 CAC is 3:1. This tool also solves for the LTV or CAC that hits a target ratio.
What is a good LTV:CAC ratio?
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Roughly 3:1 to 5:1 for most brands. Under 1:1 is unprofitable; well above 5:1 usually signals underinvestment in growth. Use profit-based LTV, not revenue.
What does a 3:1 LTV:CAC ratio mean?
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A customer is worth three times what they cost to acquire over their lifetime, in gross profit. It leaves room for overhead and profit on top of acquisition and is the common health target.
Why is my LTV:CAC ratio low?
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Either CAC is too high (weak conversion or targeting) or LTV is too low (high churn, low repeat or thin margin). Fix whichever side is further from benchmark first.
Is a higher LTV:CAC always better?
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No. Above about 5:1 usually means you are underinvesting in growth: you could spend more to acquire and still profit. Very high ratios often signal missed scale.
Built by Yehonatan Tav, paid media for ecommerce brands spending $50k to $500k a month. Figures are illustrative; run the logic on your own numbers.