Sales & Pricing
CAC & LTV Calculator
Check your unit economics: customer acquisition cost vs lifetime value
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CAC
Ads, content, agencies, marketing tools.
Sales salaries, commissions, sales tools.
LTV
Customer Acquisition Cost (CAC)
Lifetime Value (LTV)
LTV : CAC ratio
Payback period
CAC vs LTV
Annual revenue per customer
1,000 SAR
Annual gross profit per customer
600 SAR
How does it work?
CAC is what you spend to win a customer; LTV is what they're worth to you over their relationship. The ratio tells you whether your acquisition model is profitable. Below 1:1 you lose money on every new customer. The industry benchmark is 3:1 — every riyal of acquisition spend should return three riyals of gross profit.
The two formulas
Both numbers are derived from your real data:
CAC = (Marketing spend + Sales spend) ÷ New customers acquired | LTV = AOV × Purchases/year × Lifespan years × Gross margin% | Ratio = LTV ÷ CAC | Payback months = CAC ÷ Monthly gross profit per customer
Worked example
An e-commerce store spends 50,000 SAR on marketing + 0 on sales and acquires 100 customers in October.
- CAC = 50,000 ÷ 100 = 500 SAR per customer
- Average order value = 100 SAR, 10 orders per year per customer
- Customer lifespan = 2 years, 100% gross margin (digital goods)
- LTV = 100 × 10 × 2 × 100% = 2,000 SAR
- LTV:CAC ratio = 2,000 ÷ 500 = 4:1 (healthy)
- Payback = 500 ÷ (100 × 10 × 100% ÷ 12) = 500 ÷ 83.33 = 6 months
Practical tips
- Below 1:1 — you are losing money on every new customer.
- 1:1–3:1 — viable but no margin to invest in growth.
- 3:1–5:1 — the textbook healthy range; invest more in acquisition.
- Above 5:1 — you may be under-spending on growth; competitors will catch up.
- For SaaS, target payback under 12 months; retail often tolerates 18–24.
Frequently Asked Questions
What costs go into CAC?
Everything you spend to acquire a customer: ads, content, agency fees, sales salaries and commissions, sales tooling. Exclude post-sale support and product costs.
Should LTV use revenue or gross profit?
Gross profit. Revenue overstates customer value — what matters is the dollars left after the cost of goods sold.
What's a good LTV:CAC ratio?
3:1 is the textbook target. Lower means you're not earning enough per customer; much higher (10:1+) usually means you're under-investing in growth.
How do I estimate customer lifespan?
Use 1 ÷ monthly churn rate. For example, 5% monthly churn = 20-month average lifespan. For young businesses without history, use industry benchmarks.
Is payback period the same as break-even?
No. Payback is how many months it takes to recoup the CAC for one customer from that customer's gross profit. Break-even is the total volume that covers fixed costs.
How often should I recalculate?
Monthly if you are growing fast or testing new acquisition channels; quarterly for stable businesses. A 20% swing in CAC or LTV warrants a deeper look.
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