LTV and CAC Calculator: what a customer is worth and what to spend
Customer lifetime value, the cost to win a customer, the LTV:CAC ratio and payback in months.
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Worked out from your own numbers. LTV here is gross profit: rent, salaries and other fixed costs are not taken out.
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About the LTV & CAC Calculator
Find out what a customer is worth to you over the years they keep buying, and what it costs to win one. Enter your average order value (GST is taken out if your prices include it), how often customers buy, your gross margin, how long they stay, and your marketing and sales spend. You get the customer lifetime value (LTV) as gross profit, the customer acquisition cost (CAC), the LTV:CAC ratio, the months it takes to earn back the CAC, and the most you can spend to win a customer at your own target. Add your channels to compare them. It runs in your browser.
How it works
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Step 1
Enter your average order value (tick the box if it includes GST and check the rate), how many orders a customer places in a year, and your gross margin.
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Step 2
Say how long customers stay, in years or as monthly churn, and what you spent on marketing and sales to win the new customers of one period. Or enter your CAC if you know it.
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Step 3
Read the LTV, CAC, ratio and payback, look at the what-if table, add your channels to compare them, and copy the summary or a link with your numbers.
How the numbers are worked out
Revenue per customer is the order value before GST × orders a year × the years a customer stays. LTV is that revenue × your gross margin, so it is the gross profit a customer brings. CAC is your marketing and sales spend in a period ÷ the new customers won in it. The LTV:CAC ratio is LTV ÷ CAC, and the payback period is CAC ÷ the gross profit a customer brings each month. With monthly churn, a customer stays 100 ÷ churn months on average: 4% churn means 25 months.
Using the ratio to set a spending limit
The ratio shows how much gross profit comes back for each rupee spent winning a customer. Below 1, every new customer costs more than they will ever bring in gross profit. Above 1, what is left pays for rent, salaries and profit. Choose a target from your own margins and cash, and the calculator shows the most you can spend to win a customer at that target. The starting target of 3 is only our suggestion.
What this tool cannot do
It uses averages, so it cannot tell you which customers are worth more than others. It does not take out rent, salaries or other fixed costs, and it does not discount future sales to today's value. It cannot tell whether a customer would have come to you without the marketing. How long customers stay is your own estimate: use your sales records where you can, and update the numbers as you learn more.
Frequently asked questions
What is a good LTV to CAC ratio?
There is no universal number. Below 1, you lose money on each customer you win. Between 1 and your target, each customer pays back what it cost to win them but leaves less for rent, salaries and profit. Set your own target from your margins, your fixed costs and how long you can wait for the money to come back. The calculator starts at 3 as our suggestion, and you can change it.
How do I calculate customer lifetime value?
Multiply your average order value before GST by the orders a customer places in a year and by the years they stay. That is the revenue per customer. Multiply it by your gross margin to get LTV as gross profit. A ₹1,000 order, 4 times a year for 2 years, is ₹8,000 of revenue; at a 30% margin the LTV is ₹2,400.
What should I include in CAC?
Everything you spent to win new customers in a period: ad spend, agency and freelancer fees, content, offers for first-time buyers and the cost of your sales team. Divide it by the new customers won in the same period. Include the GST on ad invoices if you cannot claim it back, and leave out spending on existing customers, such as loyalty offers.
What is the CAC payback period?
It is the number of months of a customer's gross profit it takes to earn back what you spent to win them: CAC ÷ gross profit per customer per month. If a customer brings ₹500 of gross profit a month and cost ₹2,000 to win, the payback is 4 months. Until then the money has been spent but has not come back, which matters for your cash flow.
How do I work out how long customers stay?
Look at your sales records: how long do customers who started buying a few years ago keep ordering? Or use monthly churn, the share of customers who stop buying each month. The average lifespan in months is 100 ÷ churn %, so 5% monthly churn gives 20 months. If you are not sure, enter a cautious figure and use the what-if table.
Sources and checks
Rules last checked
It works out every figure from the numbers you type, including the GST rate it takes out of your prices, and applies no outside rules.
Scores, limits and suggestions marked "our checklist", "our measure" or "our suggestion" are ours, not Google's or the platform's. How our tools work
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