E-Commerce Finance

LTV:CAC Ratio & Payback Calculator

Calculate customer lifetime value, your LTV:CAC ratio, and CAC payback period to see whether your acquisition spend actually pays back, and how fast.

Example numbers, replace with yours

Average order value

€

Gross margin

LTV is measured in gross profit, not revenue

Orders per year

Average purchase frequency per customer

Customer lifespan

yrs

CAC

€

Customer acquisition cost

LTV

€432

Lifetime gross profit

LTV : CAC

10.8:1

At or above 1:1

CAC payback

3.3 mo

Months to recoup CAC

Each customer is worth €432 in gross profit and costs €40 to acquire, an LTV:CAC of 10.8:1. Over the lifespan you entered, each customer returns at least as much gross profit as it cost to acquire. Whether that is enough depends on your payback time and cash. You recoup acquisition cost in about 3.3 months. Compare that with how long your cash can wait for acquisition cost to come back. For reference, David Skok's SaaS Metrics 2.0 says the best SaaS businesses have an LTV to CAC ratio higher than 3. He calls it a guideline and wrote it about SaaS, not ecommerce.

Pressure test these numbers