Why is LTV:CAC ratio important?
An LTV:CAC ratio below 1 means you lose money on every customer acquired, while 3:1 or higher indicates a scalable and sustainable unit economic model.
How to Use LTV (Customer Lifetime Value) Calculator
Step 1: Average Purchase Value
Enter average order amount or monthly subscription fee.
Step 2: Purchase Frequency & Retention
Enter how many times a customer buys per year and average customer lifespan in years.
Step 3: Gross Margin
Enter your business gross margin percentage.
Key Features & Capabilities
- Computes LTV = (Avg Value * Frequency * Lifespan) * Margin %
- Interactive LTV:CAC health ratio gauge
Frequently Asked Questions
How do you calculate customer lifespan?
For subscription models, customer lifespan equals 1 / Churn Rate. If monthly churn is 5%, average customer lifespan is 20 months.
Related Tools
- CAC (Customer Acquisition Cost) Calculator — Calculate the average marketing and sales cost spent to acquire one new customer.
- ROI (Return on Investment) Calculator — Calculate Return on Investment percentage and annualized ROI for business investments.
- Profit Margin Calculator — Calculate Gross Profit Margin, Net Margin, and Profit Markup from cost and revenue.