Compare your customer lifetime value (LTV) with your acquisition cost (CAC). See in seconds whether your growth is sustainable.
Rule of thumb: LTV/CAC ≥ 3 is healthy, below 1 is unsustainable.
Let's talk about your growth strategy →LTV (Customer Lifetime Value) is the profit a customer brings over their lifetime; CAC is the cost to acquire them. The LTV/CAC ratio is the most critical metric for the sustainability of your ad and growth spend.
LTV = Average Order Value × Gross Margin × Orders per Year × Lifespan (years). This calculator uses profit-based LTV, based on gross profit per customer rather than revenue.
The common rule: LTV/CAC ≥ 3 means healthy growth. 1–3 is acceptable but should be optimized; below 1 is unsustainable because each new customer loses money.
The fewer orders needed to recover CAC (payback), the healthier your cash flow. Long payback periods cause cash crunches during fast scaling.
LTV (Lifetime Value) is the total profit a customer brings to your business over the relationship.
CAC (Customer Acquisition Cost) is the average marketing/sales cost to acquire one customer.
The general target is ≥ 3. Below 1 is unsustainable; above 3 indicates healthy, scalable growth.
Increase repeat purchase frequency, average order value and gross margin, and extend customer lifespan (retention).