Customer Acquisition Cost (CAC) Calculator

A 3:1 LTV:CAC ratio is generally considered healthy for most businesses. This means you earn $3 in lifetime value for every $1 spent acquiring a customer. Ratios below 3:1 may indicate unsustainable unit economics, while ratios above 5:1 might mean you're underinvesting in growth.

Yes, include all costs directly related to customer acquisition: ad spend, marketing team salaries, tools, agency fees, and content production costs. Some companies also include a portion of sales costs. The key is consistency—use the same methodology over time to track trends.

The simplest formula is: LTV = Average Order Value × Purchase Frequency × Customer Lifespan. For subscription businesses, use: Monthly Revenue per Customer × Average Customer Lifespan in Months. Include gross margin if you want to calculate contribution-based LTV.

Each channel has different audience quality, competition levels, and conversion efficiency. Paid search often has higher intent but more competition. Referral programs typically have the lowest CAC because customers are pre-qualified. Content marketing has high upfront costs but compounds over time.

Focus on improving conversion rates at each funnel stage, invest in channels with proven unit economics, build referral programs, improve ad targeting, create content that compounds, and reduce churn (higher LTV means you can afford higher CAC). Test aggressively and cut underperforming channels.