CAC Payback Calculator
If you spend money to get customers, two numbers decide whether the business works: what one costs, and how many orders it takes before you have your money back.
Result
$0.00
Where the money goes
Saving keeps your figures on this device only — nothing is sent anywhere.
The two numbers and the ratio between them
CAC = Marketing spend ÷ New customers acquired. With the defaults, $2,400 across 80 customers is $30 each.
LTV = AOV × Gross margin × Orders per year × Years. That is margin-based on purpose: revenue-based lifetime value flatters every business and has bankrupted several. A customer generating $181 of revenue at 55% margin is worth about $100 to you, not $181.
The ratio is the health check. Around 3:1 is a widely used rule of thumb for a sustainable acquisition-led business — enough margin left over after acquisition to cover overhead and profit. Below roughly 1:1 you are buying customers for more than they will ever return, which scales into a larger loss rather than a larger business.
Payback is where cash flow lives
The ratio tells you whether the business model works. Payback tells you whether you survive to see it. If a customer's first order returns $23 of margin against a $30 CAC, you are $7 down on order one and only whole partway through order two.
That gap is funded from your own cash, and the faster you grow the larger it gets — which is the mechanism by which profitable-on-paper businesses run out of money. A business paying back within the first order can reinvest immediately and grow as fast as demand allows. A business paying back on order three needs the cash to bridge months of it, and the arithmetic of growth works against it.
Improving the ratio without spending less
Cutting marketing spend improves the ratio and shrinks the business. The levers that actually help:
- Raise average order value. A bundle or a free-shipping threshold lifts LTV across every customer immediately, with no change to acquisition. This is usually the fastest available move.
- Raise gross margin. LTV is margin-based, so a few points of margin flow straight through — and the fee-level detail the other calculators here expose is where those points usually hide.
- Raise repeat rate. The single largest multiplier, since it compounds through both orders per year and years retained. It is also the slowest to move and the hardest to fake.
- Lower CAC. Real, but the least controllable — ad auctions are not yours to set.
Be suspicious of your own repeat rate
LTV is the most over-estimated number in ecommerce, because two of its four inputs are forecasts. A business twelve months old does not know its retention over 1.8 years; it is extrapolating. The safe practice is to justify acquisition spend on a horizon you have actually measured — if you have twelve months of data, set years to 1 and see whether the ratio still works. If it only works on years you have not lived through yet, you are funding a hypothesis.
Questions
How do I calculate customer acquisition cost?
Divide total marketing and sales spend by the number of new customers acquired in the same period. Include everything you spend to acquire: ad spend, agency or freelancer fees, discounts given specifically to acquire first-time buyers, and any tooling dedicated to acquisition. Ad spend alone understates CAC for most businesses.
What is a good LTV to CAC ratio?
Around 3:1 is the commonly cited benchmark for a sustainable acquisition-led business, but treat it as a heuristic rather than a constant — the right number depends on your overhead and how reliable your retention data is. Note that a very high ratio is not automatically good news: it often means you could profitably spend more on acquisition than you currently do.
Should I use revenue or margin to calculate LTV?
Margin, always. Revenue-based LTV overstates what a customer is worth by exactly your cost of goods, and businesses that budget acquisition against revenue LTV routinely spend more to acquire a customer than the customer will ever contribute. Use gross margin after product, shipping and fees — before marketing, since marketing is the thing you are evaluating.