CAC & LTV Calculator

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.

1. CAC = 50,000 ÷ 100 = 500 SAR per customer
2. Average order value = 100 SAR, 10 orders per year per customer
3. Customer lifespan = 2 years, 100% gross margin (digital goods)
4. LTV = 100 × 10 × 2 × 100% = 2,000 SAR
5. LTV:CAC ratio = 2,000 ÷ 500 = 4:1 (healthy)
6. 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.