What the result shows
How many dollars of estimated customer lifetime gross profit you receive for each dollar spent on customer acquisition, and the estimated payback time.
Ecommerce LTV:CAC Ratio Calculator
Compare customer acquisition cost (CAC) with the gross profit a customer may create over their lifetime, then see how long payback could take.
Check whether acquisition pays back
Use figures from a mature customer group where possible. Lifetime value should use gross profit, not revenue alone.
Gross-profit LTV:CAC ratio
3.67x
Each $1 of customer acquisition cost returns an estimated $3.67 in lifetime gross profit, with payback in about 6.5 months.
- Lifetime revenue per customer
- $400
- Lifetime gross profit per customer
- $220
- Estimated acquisition payback
- 6.5 months
Know how much room you have to acquire a customer.
How it is calculated
Multiply average order value by yearly orders, customer lifespan, and gross margin. Divide that lifetime gross profit by customer acquisition cost.
How to use it
Use the ratio with payback time when setting acquisition budgets. A high lifetime return can still strain cash when it takes too long to recover customer acquisition cost.
What this result leaves out
Order frequency, customer lifespan, and margin are held steady. Discounts, returns, cohort differences, changing purchase behaviour, and when cash is collected are not included.
Before you use the result
Is a 3:1 LTV:CAC ratio always good?
The cost basis and payback time matter. A ratio based on revenue is not directly comparable with one based on gross profit. Even a high ratio can strain cash if repeat purchases take a long time or future orders fall short.
What should a new store use for customer lifespan?
Start with observed repeat orders and a conservative time horizon. Run a shorter-lifespan case as well. A young customer group has not shown its full buying pattern, so treat long-term lifetime value as an assumption.
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