This calculator estimates customer lifetime value using contribution margin rather than revenue alone, then compares that value with customer acquisition cost.
How it works
It multiplies average order value by contribution margin to estimate contribution per order, then applies purchase frequency and expected customer lifespan. CAC payback uses the average monthly contribution generated by one customer.
The formula
The LTV:CAC ratio compares estimated contribution LTV with acquisition cost. The maximum CAC at the target ratio equals estimated LTV divided by the target ratio.
Worked example
With an average order value of 180, a 45% contribution margin, four orders per year, a three-year customer lifespan and CAC of 120, estimated contribution LTV is 972, LTV:CAC is 8.1x and CAC payback is about 4.44 months.
This is a planning model, not a cohort forecast. Real LTV can change with churn, discounting, refunds, retention curves, customer segments, taxes, overhead and future changes in margins.
Frequently asked questions
Should LTV use revenue or profit?
For acquisition decisions, a contribution-based LTV is often more informative because it reflects the portion of revenue remaining after variable costs.
What does CAC payback period mean?
It estimates how many months of average customer contribution are required to recover the initial acquisition cost.