LTV and allowable CAC calculator
How much profit a customer leaves you over their time with you, and how much you can pay to win one without losing.
Change the numbers and the result updates at once.
What does the result mean?
LTV is the profit a customer leaves, not the sales. 3:1 is a common rule of thumb that leaves room for fixed costs and growth.
If the allowable CAC is above what you pay today
You have room to spend more on acquisition, especially in campaigns that bring customers who buy again.
If it is below what you pay today
Focus on repeat purchases: email, loyalty and bundles. One more order a year moves the number a lot.
How is it calculated?
LTV = average order × margin × orders per year × years. Allowable CAC = LTV ÷ 3.
An average order of 400, a 30% margin, 3 orders a year, for two years:
400 × 0.30 × 3 × 2 = 720 ÷ 3 = 240
You can pay up to 240 to win a new customer.
Questions
Why a 3:1 ratio?
It is a common rule of thumb, not a law: it leaves two thirds of the profit for fixed costs and growth. A young store may accept less to grow faster.
How do I find orders per customer per year?
Divide a year's orders by the number of distinct customers in the same year. Most store platforms give you both numbers.
Should LTV be in sales or in profit?
In profit. LTV in sales makes a customer look worth more than they are, so you pay more to win them than they bring back.
Related tools
Ad profit calculator
The lowest ad return that keeps you from losing, and the most an order may cost.
Ad budget planner
The budget and the orders your sales target needs.
Profit margin and pricing calculator
The price that gives the margin you want after shipping and payment fees.
The next step.
The result is a starting point. In the Growth Audit we compare it with your store's and campaigns' real numbers.