LTV:CAC Ratio Calculator
Are You Buying Customers for Less Than They're Worth?
Customer Lifetime Value and Customer Acquisition Cost are each useful on their own, but neither tells the full story alone. The LTV:CAC ratio puts them side by side and answers the question that actually determines whether a growth strategy is sustainable: for every dollar spent acquiring a customer, how many dollars does that customer return?
The Formula
LTV:CAC Ratio = Customer Lifetime Value / Customer Acquisition Cost
The result is expressed as a ratio against 1 — a 3:1 ratio means every dollar spent acquiring a customer returns three dollars in lifetime value.
Interpreting the Ratio
| LTV | CAC | Ratio | Assessment |
|---|---|---|---|
| $150 | $250 | 0.6:1 | Unhealthy — losing money on every customer acquired |
| $500 | $200 | 2.5:1 | Below target — aim for 3:1 or higher |
| $800 | $200 | 4.0:1 | Healthy — a strong, sustainable ratio |
| $2,500 | $300 | 8.33:1 | Very high — consider investing more in acquisition |
A ratio that's very high isn't purely good news — it can mean a company is under-investing in growth and leaving expansion on the table.
Where This Calculation Matters
- Fundraising and board reporting — LTV:CAC is one of the standard efficiency metrics investors use to judge whether a growth model works.
- Channel-level decisions — computing the ratio separately per acquisition channel shows which ones are worth scaling and which are quietly unprofitable.
- Pricing sanity checks — a ratio under 1:1 is an immediate signal that pricing, retention, or acquisition cost needs to change before scaling spend further.
How to Use This Calculator
- Enter Customer Lifetime Value ($) — use the Customer Lifetime Value Calculator first if you don't already have this figure.
- Enter Customer Acquisition Cost ($) — total sales and marketing spend divided by the number of customers acquired.
- Select Calculate to get the ratio and a plain-language assessment of where it falls.
Related Calculations
Once you know your ratio, the Marketing ROI Calculator gives a complementary campaign-level view of the same spending.