Customer acquisition cost and lifetime value calculator
A business works when a customer is worth more than it cost to get them, and works well when the payback is fast enough to fund the next one.
%
%
LTV to CAC ratio
10.000
- Customer acquisition cost
- 200.00
- Lifetime value
- 2000.00
- CAC payback
- 3.33 months
- Average customer lifetime
- 33.3 months
- Gross profit per customer
- 1800.00
- Gross profit per customer per year
- 720.00
Show the working
- Sales and marketing spend = 50 000
- New customers won = 250
- Revenue per customer per month = 80
- Gross margin = 75
- Monthly churn = 3
- Customer acquisition cost = 50 000 / 250 = 200
- Average customer lifetime = 100 / 3 = 33.3333
- gross_per_month = 80 * 75 / 100 = 60
- Lifetime value = 60 * 33.3333 = 2000
- LTV to CAC ratio = 200 > 0 ? 2000 / 200 : 0 = 10
- CAC payback = 60 > 0 ? 200 / 60 : 0 = 3.333 33
- Gross profit per customer per year = 60 * 12 = 720
- Gross profit per customer = 2000 - 200 = 1800
Values are shown to six significant figures here; the arithmetic itself runs on exact fractions and is only rounded where a number is printed.
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The formula
- CAC = spend / new customers
- average lifetime = 1 / monthly churn
- LTV = monthly revenue x gross margin / churn
A ratio of 3 is the usual rule of thumb for a subscription business, with payback under twelve months.
The 1/churn lifetime assumes churn is constant. In practice it falls with tenure, so this understates LTV for mature cohorts.