Finance & Business
Customer Acquisition Cost (CAC) Calculator - Calculate CAC & LTV
Calculate Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and LTV:CAC ratio. Analyze marketing efficiency and customer profitability for better business decisions.
Use Customer Acquisition Cost (CAC) Calculator - Calculate CAC & LTV to get instant results without uploads or sign-ups. Everything runs securely in your browser for fast, reliable output.
Your results will appear here.
About this tool
Our Customer Acquisition Cost Calculator is the most comprehensive free tool for analyzing marketing efficiency and customer economics. CAC (Customer Acquisition Cost) measures how much you spend to acquire each new customer - one of the most critical metrics for any business, especially subscription models, e-commerce, and SaaS companies. Understanding CAC helps you evaluate marketing channel effectiveness, set customer acquisition budgets, and determine if your business model is sustainable. Combined with Customer Lifetime Value (LTV), these metrics reveal whether you're building a profitable, scalable business or burning money acquiring unprofitable customers.
Customer Acquisition Cost is calculated by dividing total marketing and sales expenses by the number of new customers acquired. Include all costs: advertising spend (Google, Facebook, etc.), content marketing, SEO, email marketing, marketing salaries, sales team salaries, commissions, software tools, agencies, and events. If you spent $50,000 and acquired 100 customers, your CAC is $500. Track CAC by channel to identify your most efficient customer sources. Lower CAC means more efficient marketing. Rising CAC signals increasing competition, saturated channels, or declining marketing effectiveness. Benchmark your CAC against industry standards and customer value.
Customer Lifetime Value (LTV or CLV) estimates the total profit a customer generates over their entire relationship with your business. Formula: (Average Purchase Value × Purchase Frequency × Customer Lifespan) × Gross Margin. For example, if customers spend $100 monthly for 24 months with 50% margin, LTV is $100 × 12 × 2 × 0.50 = $1,200. LTV represents the maximum you can afford to pay for customer acquisition while remaining profitable. Higher LTV businesses can afford higher CAC and more aggressive growth. Improving LTV through retention, upsells, and referrals is often easier than reducing CAC.
The LTV:CAC ratio is the golden metric for business health. A 3:1 ratio (LTV is 3× CAC) is the minimum acceptable - you earn $3 for every $1 spent acquiring customers. Ratios of 4:1 to 5:1 are excellent, indicating profitable, scalable unit economics. Ratios under 3:1 mean you're spending too much on acquisition or customers aren't valuable enough. Ratios over 10:1 suggest you're under-investing in growth. CAC Payback Period shows how long to recover acquisition costs - under 12 months is excellent, under 18 months acceptable. Our calculator provides comprehensive analysis including all these metrics. It's completely free, requires no registration, perfect for marketers, founders, CFOs, and anyone responsible for customer acquisition or growth.
Usage examples
E-commerce Store
$20K marketing, 200 customers, $80 AOV, 3 orders/year, 3 years, 40% margin
CAC: $100, LTV: $288, LTV:CAC: 2.88:1, Needs improvement
SaaS Business
$50K spend, 100 customers, $50/mo, 24 months, 80% margin
CAC: $500, LTV: $960, LTV:CAC: 1.92:1, Unsustainable
Subscription Box
$30K marketing, 500 customers, $40/mo, 12 months, 50% margin
CAC: $60, LTV: $240, LTV:CAC: 4:1, Excellent unit economics
Professional Services
$15K spend, 30 clients, $5K project, 2 projects/year, 3 years, 60% margin
CAC: $500, LTV: $18K, LTV:CAC: 36:1, Very strong
How to use
- Enter total marketing and sales expenses for the period
- Input number of new customers acquired
- Add average purchase value and frequency
- Specify average customer lifespan in months
- Enter gross margin percentage
- View CAC, LTV, LTV:CAC ratio, and payback period
Benefits
- Calculate accurate Customer Acquisition Cost
- Customer Lifetime Value estimation
- LTV:CAC ratio analysis
- CAC payback period calculation
- Marketing ROI evaluation
- Channel efficiency comparison
- Break-even customer analysis
- Instant what-if scenario planning
- Industry benchmark comparisons
- Mobile-friendly for presentations
- No registration required - free
- Essential for growth and marketing
FAQs
What is Customer Acquisition Cost (CAC)?
CAC is the total cost to acquire one new customer. Formula: Total Marketing & Sales Expenses ÷ Number of New Customers Acquired. Include all acquisition costs: ads, content, SEO, salaries, tools, agencies. Example: $50,000 spent ÷ 100 customers = $500 CAC. Track monthly and by channel. Lower CAC means more efficient marketing. Compare CAC to customer value (LTV) - profitable businesses have LTV > 3× CAC. Rising CAC signals market saturation or declining marketing effectiveness.
What is a good LTV:CAC ratio?
The ideal LTV:CAC ratio is 3:1 to 5:1, meaning customers are worth 3-5 times their acquisition cost. 3:1 is minimum acceptable - provides reasonable profit margin and allows for CAC variability. 5:1 or higher is excellent - strong unit economics enabling aggressive growth. Under 3:1 means you're spending too much on acquisition or customers aren't valuable enough - unsustainable. Over 10:1 suggests you're under-investing in growth and missing market opportunity. Aim for 4:1 as optimal balance.
How do I calculate Customer Lifetime Value (LTV)?
LTV = (Average Purchase Value × Purchase Frequency per Year × Customer Lifespan in Years) × Gross Margin %. Example: customers spend $100/month ($1,200/year), stay 3 years, 50% margin = $1,200 × 3 × 0.50 = $1,800 LTV. For subscriptions: Monthly Recurring Revenue × Customer Lifespan × Margin. Use historical data for accuracy. Include all revenue: initial purchase, repeat purchases, upsells, cross-sells. Deduct variable costs but not CAC. LTV determines maximum affordable CAC.
What is CAC payback period?
CAC Payback Period is how long to recover customer acquisition costs from their revenue/profit. Formula: CAC ÷ (Monthly Revenue per Customer × Gross Margin). Example: $600 CAC ÷ ($50/month × 0.60 margin) = 20 months. Under 12 months is excellent - fast capital recovery. 12-18 months is good. Over 18 months is concerning - long time to break even on customers. Shorter payback periods improve cash flow and reduce risk. Critical for startups and funded growth companies.
How can I reduce my CAC?
Improve conversion rates: better landing pages, clearer value proposition, A/B testing, streamlined checkout. Optimize channels: focus spend on lowest-CAC channels, eliminate underperformers. Improve targeting: better audience targeting, ideal customer profiles, lookalike audiences. Increase organic: SEO, content marketing, social media (lower cost, takes time). Leverage referrals: referral programs, word-of-mouth (lowest CAC). Improve sales efficiency: better qualification, faster sales cycles, automation. Even 10-20% CAC reduction significantly impacts profitability.
How can I increase customer LTV?
Increase retention: improve product/service, better support, engagement campaigns, loyalty programs (biggest LTV impact). Increase purchase frequency: email marketing, subscriptions, consumables, habit formation. Increase purchase value: upsells, cross-sells, bundles, premium tiers. Reduce churn: onboarding, success programs, feedback loops. Maximize margin: operational efficiency, premium pricing. Increasing LTV by 20% can double profits. Focus on retention first - keeping customers is cheaper than acquiring new ones. Small improvements compound over customer lifetime.
Related tools
View all toolsBreak-Even Analysis Calculator - Calculate Break-Even Point
Calculate break-even point in units and revenue. Analyze fixed costs, variable costs, and pricing to determine when your business becomes profitable. Includes margin of safety and target profit analysis.
Finance & BusinessBusiness Valuation Calculator - Estimate Company Worth
Calculate business valuation using multiple methods: earnings multiplier, revenue multiplier, asset-based, and DCF. Get accurate company worth estimates for buying, selling, or investment decisions.
Finance & BusinessCash Flow Calculator - Calculate Operating Cash Flow
Calculate operating cash flow, free cash flow, and cash flow projections. Analyze cash inflows, outflows, and runway. Essential for business financial planning and management.
Finance & Business