Question 1

How do you calculate CAC?

Accepted Answer

CAC (Customer Acquisition Cost) is the total spend on acquisition divided by the number of new customers acquired in the same period. For example, $10,000 spent that brought in 50 new customers gives a CAC of $200.

Question 2

How do you calculate LTV?

Accepted Answer

LTV (Lifetime Value) is the value a customer generates over their relationship with the business, calculated as average order value × purchase frequency × average retention time. A customer who spends $100 a month and stays for 12 months has an LTV of $1,200.

Question 3

What LTV:CAC ratio is considered healthy?

Accepted Answer

The most common industry benchmark is 3:1 — each customer should generate at least 3 times what it cost to acquire them. A ratio below 1:1 means you're losing money on every new customer; above 5:1 might mean you could be investing more in acquisition.

Question 4

What is CAC payback?

Accepted Answer

It's the time (in months) it takes for the business to recover what it spent acquiring a customer, calculated as CAC divided by the revenue (or profit, if you factor in margin) that customer generates per month. A short payback means cash is freed up faster to reinvest in acquisition.

CAC & LTV Calculator

How the calculator works, in practice

What each metric means

CAC (Acquisition Cost)

LTV (Customer Value)

LTV:CAC ratio

Payback

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