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LTV to CAC ratio calculator

The LTV to CAC ratio compares the contribution margin a customer brings over a fixed window, such as 12 months, with what it cost to win them. A ratio of 1 means you only got your money back. Work it out on contribution, not revenue, which can make it look three times better than it is.

After sales tax is taken out.

After product cost, shipping, fees and returns.

Per new customer, averaged (0.8 is fine).

Average repeat order, after tax.

Often higher: no ad cost to win it.

Ad spend ÷ new customers who kept their order.

LTV:CAC
1.29
12-month contribution per customer
$49.60
The same on revenue (flattering)
3.07
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The formula

  • 12-month contribution = first order value × its margin + repeat orders × repeat order value × repeat margin
  • LTV:CAC = 12-month contribution ÷ CAC
  • Revenue version = (first order value + repeat orders × repeat order value) ÷ CAC

Rates are shares between 0 and 1: 30% is 0.3.

Worked example

A first order averages $70 at a 40% contribution margin: $28.

Customers place 0.8 repeat orders in 12 months, averaging $60 at 45%: $21.60.

Winning a customer costs $38.45.

Twelve-month contribution is $49.60, so LTV:CAC is 1.29: customers barely pay back within a year. On revenue, the same customers look like 3.07.

Questions

What is a good LTV to CAC ratio?

Above about 3 is often quoted, but that rule of thumb comes from subscription software. For a product brand on 12-month contribution, a lower ratio with a short payback can be healthier than a high one that takes years.

Why 12 months, not lifetime?

Lifetime value needs guesses about customers you haven't seen yet. A fixed window uses only what customers really did, so one month's new customers can be compared with another's.

What should CAC include?

All marketing spend in the period divided by the new customers it won, leaving out first orders that were cancelled or came back. Blended CAC across every channel is harder to flatter than one platform's number.

The full guide

LTV to CAC Ratio for D2C Brands: How to Calculate It HonestlyLTV:CAC compares what a customer is worth with what it cost to win them. How to calculate it on contribution margin, over a fixed window, and what's healthy.

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