LTV:CAC ratio.
Enter your customer lifetime value and cost to acquire, and see whether your unit economics are healthy: the 3:1 benchmark and beyond.
LTV:CAC = lifetime value ÷ acquisition cost. Pair it with your ROAS target for the full picture.
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How to calculate LTV:CAC.
LTV:CAC = customer lifetime value ÷ customer acquisition cost. If a customer is worth £900 over their lifetime and costs £300 to acquire, your ratio is 3:1.
- LTV: ideally measured in gross profit, not revenue: average order value × purchase frequency × customer lifespan × gross margin. Using revenue flatters the ratio.
- CAC: total acquisition cost ÷ new customers acquired. Include ad spend and, for the full picture, agency fees, tools and sales costs.
What is a good LTV:CAC ratio?
3:1 is a widely used rule of thumb, especially in SaaS. Below 1:1 you lose money on every customer; far above 3:1 can mean you're under-investing in growth. The right target also depends on how quickly you recover CAC: a 3:1 ratio earned over five years is very different from one earned in six months.
Using it in paid media
LTV:CAC tells you how much you can afford to pay for a customer. Brands with strong repeat purchase can accept a first-order ROAS below break-even, see what is a good ROAS?, while subscription businesses should optimise toward the customers who stay. We apply this in our SaaS and eCommerce work.
Keep calculating.
ROAS calculator
Work out your return on ad spend and your break-even ROAS from your margin, so you know if a campaign is actually profitable.
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See your marketing efficiency ratio, profit on ad spend and break-even MER from your real revenue, and how much more the ad platforms claim than you made.
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For hotels, holiday lets and tour operators: compare the cost of a booking from ads with OTA commission, and find the most you can pay per click.
Open tool →LTV:CAC questions.
01What is the LTV:CAC ratio?
It compares the lifetime value of a customer (LTV) to what it costs to acquire them (CAC). LTV:CAC = LTV ÷ CAC. It tells you whether your acquisition is sustainable.
02What is a good LTV:CAC ratio?
A ratio of around 3:1 is the widely-cited healthy benchmark. Below ~1:1 you lose money on each customer; much above 5:1 can mean you’re under-investing in growth.
03How do I improve LTV:CAC?
Raise LTV (retention, repeat purchase, upsell, pricing) or lower CAC (better targeting, conversion rate, and channel efficiency). Feeding true LTV back into your bidding helps a lot.
Healthy LTV:CAC is where profitable growth comes from. See how our consultancy gets you there.