LTV CAC Ratio Formula
The LTV CAC Ratio is a fundamental unit-economics metric that evaluates the profitability of a business by comparing the revenue a customer generates over their lifetime against the cost to acquire them. A healthy ratio indicates sustainable growth and efficient marketing spend.
Formula
Copy the exact expression or work through it step by step below.
LTV CAC Ratio = Customer Lifetime Value / Customer Acquisition Cost Variables
LCR
LTV CAC Ratio
The ltv cac ratio value plugged into the ltv cac ratio calculation.
CLV
Customer Lifetime Value
The time horizon applied to the ltv cac ratio formula.
CAC
Customer Acquisition Cost
The cost-side input that anchors the ltv cac ratio math.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Avg Purchase Value = $50.00, Purchase Frequency Per Year = 4, Customer Lifespan Years = 3, Acquisition Cost = $100
- 2
Translate rates, periods, and cash values onto the same footing before combining them.
Keep the ltv cac ratio assumptions consistent instead of mixing monthly and annual views.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with clv at 600 and annual value at $200.
- 4
Run one changed scenario so the formula is stress-tested before it is trusted.
The customer lifetime value calculator page is the fastest way to compare that second case.
Worked Example
LTV CAC Ratio sample case
Avg Purchase Value
$50.00
Purchase Frequency Per Year
4
Customer Lifespan Years
3
Acquisition Cost
$100
LTV CAC Ratio = Customer Lifetime Value / Customer Acquisition Cost using avg purchase value $50.00, purchase frequency per year 4, customer lifespan years 3, acquisition cost $100.
The calculator lands with clv at 600 and annual value at $200.
Common Variations
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Sources & References
- What is LTV:CAC Ratio? | Formula & Calculation — Shopify
- LTV to CAC Ratio: What It Is and How to Calculate It — Investopedia
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