Free Tool
LTV:CAC Ratio Calculator
Calculate customer lifetime value and compare it to your acquisition cost to assess business sustainability.
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What is LTV:CAC Ratio?
The LTV:CAC ratio compares the lifetime value of a customer to the cost of acquiring them. It's one of the most important metrics for understanding business sustainability and growth potential.
The Formula
LTV = Avg Order Value × Purchase Frequency × Customer LifespanLTV:CAC Ratio = LTV / CACUnderstanding the Ratio
Below 1:1
Losing money per customer
1:1 to 3:1
Need improvement
3:1 or higher
Healthy & scalable
Why It Matters
- Growth sustainability: Higher ratios mean more room to invest in growth
- Investor metric: VCs look for 3:1 or higher LTV:CAC ratios
- Pricing strategy: Helps determine if you can afford to acquire customers
- Payback period: Shows how long until you recoup acquisition costs