LTV & CAC Calculator (Free Tool)

Calculate it on margin, never on revenue

Lifetime value on revenue is the single most common way businesses talk themselves into unaffordable acquisition costs. If a customer spends thirty thousand over three years at a forty per cent margin, the money available to acquire and serve them is twelve thousand, not thirty. Every figure here is calculated on gross profit for that reason, and the margin you enter should be after the cost of delivering the work or the goods.

For a service business, include the cost of the people doing the delivery. For ecommerce, include the product cost, payment fees and shipping you absorb. What is left is what acquisition, overheads and profit come out of.

The ratio is a planning tool, not a rule

The ratio you enter as a target is yours to set, and it depends on your margins, your growth ambitions and how much cash you can tie up. A business that can wait for a return can run a lower ratio than one that needs each customer to fund the next. The calculator uses your target to work out the highest acquisition cost consistent with it, which is the number that belongs in your bidding decisions.

Read the maximum viable CAC as a ceiling rather than an objective. Paying right up to it leaves nothing for the months when conversion rates fall, and it assumes your lifespan and repeat-rate estimates are correct, which they usually are not to that precision.

Payback is the constraint before profitability is

A long payback period can sink a profitable business. If a customer takes eighteen months to repay what they cost to acquire, you are funding a year and a half of spend before any of it comes back, and growing faster makes the hole deeper rather than shallower. That is why payback is shown separately from the ratio: they answer different questions, and the cash-flow one usually binds first.

The lever that moves payback most is rarely the acquisition cost. Getting the second purchase to happen sooner, adding a higher-margin element to the first order, or moving customers onto a retainer changes payback faster than bidding cuts do. Where the money goes across channels once those numbers are known is the substance of the performance marketing service and of strategy consulting.