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CAC, LTV & payback calculator
CAC is marketing and sales spend ÷ new customers. LTV is the gross profit a customer brings over their lifetime. A AED 200 CAC against a AED 675 LTV is a 3.4:1 ratio.
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LTV:CAC ratio
3.4:1
AED 675 lifetime gross profit vs AED 200 to acquire
Healthy ratio. At 3.4:1 you’re around or above the 3:1 rule of thumb. There’s room to keep scaling while CAC holds.
- CAC
- AED 200
- Cost to win one customer
- LTV (gross profit)
- AED 675
- Revenue LTV AED 1,500
- CAC payback
- 7.1 months
- AED 28.13 gross profit a month
- Max affordable CAC
- AED 225
- AED 25 headroom at 3.0:1
How this is calculated
- CAC
(Marketing + sales spend) ÷ New customersWith your numbers: AED 80,000 ÷ 400 = AED 200- Monthly gross profit per customer
AOV × Orders per year × Gross margin ÷ 12 (or Monthly revenue × Gross margin)With your numbers: AED 300 × 2.5 × 45% ÷ 12 = AED 28.13- Customer lifetime
Years you enter (or 1 ÷ Monthly churn, in months)With your numbers: 24 months- LTV (gross profit)
Monthly gross profit per customer × Lifetime in monthsWith your numbers: AED 28.13 × 24 months = AED 675- LTV:CAC
LTV ÷ CACWith your numbers: AED 675 ÷ AED 200 = 3.4:1- CAC payback
CAC ÷ Monthly gross profit per customerWith your numbers: AED 200 ÷ AED 28.13 = 7.1 months- Max affordable CAC
LTV ÷ Target LTV:CAC ratioWith your numbers: AED 675 ÷ 3 = AED 225
LTV here is gross profit, not revenue, and excludes VAT. Payback assumes gross profit arrives evenly each month; repeat-purchase brands often recover part of CAC on the first order. Lifetime from churn assumes a steady churn rate.
Which LTV formula fits your business?
Repeat-purchase brands multiply out orders over a set lifetime; subscriptions divide by churn. See the glossary for CAC and LTV.
LTV, repeat purchase = AOV × orders per year × gross margin % × years as a customerLTV, subscription = monthly revenue per customer × gross margin % ÷ monthly churn %| Input or step | Value |
|---|---|
| Marketing + sales spend | AED 80,000 for the quarter |
| New customers | 400 |
| CAC | 80,000 ÷ 400 = AED 200 |
| AOV × orders per year × margin | AED 300 × 2.5 × 45% = AED 337.50 gross profit a year |
| LTV over 2 years | AED 337.50 × 2 = AED 675 |
| LTV:CAC | 675 ÷ 200 = 3.4:1 |
| CAC payback | AED 200 ÷ AED 28.13 a month = 7.1 months |
| Max CAC at a 3:1 target | AED 675 ÷ 3 = AED 225 |
Why should LTV use gross margin, not revenue?
Revenue LTV counts money you never keep. At a 40% margin, a revenue-based 3:1 is really about 1.2:1, which barely covers acquisition.
- Gross margin should be after cost of goods, shipping, payment fees and returns where you can measure them.
- Lifetime should come from cohort retention: how long customers actually keep buying, not how long you hope they will.
What is a good LTV:CAC ratio?
The common rule of thumb is about 3:1, a heuristic from venture-backed software rather than a law. It leaves room for overheads that LTV and CAC both ignore.
| LTV:CAC | What it usually means |
|---|---|
| Below 1:1 | Each new customer loses money, even over their lifetime. |
| 1:1 to 3:1 | Gross profit covers acquisition, but there's thin room for overheads. |
| Around 3:1 to 5:1 | Healthy for most businesses, if payback is quick enough for your cash. |
| Well above 5:1 | Profitable, but you may be under-investing and leaving growth on the table. |
Payback matters as much as the ratio
A 4:1 ratio paid back over 30 months can still run a small business out of cash. Many self-funded brands aim to recover CAC within the first order or first few months; subscription businesses often accept 12 months or more.
Should you use blended CAC or paid CAC?
Track both. If paid CAC looks fine but blended CAC keeps climbing, ads may be taking credit for customers who would have come anyway.
- Blended CAC divides all marketing and sales spend by all new customers, including organic and referral. It is hard to game.
- Paid CAC divides ad spend by customers from paid channels. Use it for bids and budgets, knowing ad platforms tend to overstate attribution.
Want this built from your Shopify, CRM and finance data rather than estimates? It’s part of our Growth & Tracking Audit.
FAQ
CAC and LTV questions, answered
Everything it takes to win a customer: ad spend, agency fees, tools, content and sales salaries or time. Ad spend alone gives you paid media cost per customer, which makes CAC look better than it is.
The months of gross profit it takes to earn back what you paid for a customer: CAC ÷ monthly gross profit per customer. A AED 200 CAC with AED 28 of monthly gross profit pays back in about seven months.
For subscriptions, average lifetime is 1 ÷ monthly churn, so 5% churn means about 20 months. Small changes in churn swing LTV a lot, so test a pessimistic figure too.
Use the repeat-purchase data you do have and cap lifetime at one to two years. Replace the estimate with cohort retention once you have enough history to measure it.
Break-even ROAS asks whether the first order covers its ad cost; LTV:CAC asks whether the whole relationship does. Repeat-purchase categories such as beauty, supplements, coffee and pet food can accept first-order ROAS below break-even, while high-AOV categories like furniture and clinics usually need first-order profit.
Next step
Not sure what a customer is really worth?
Book a free 30-minute intro call to talk through your CAC, retention and margins, or see our Growth & Tracking Audit for the full picture from your own data.