We've all been there—searching for a simple, free tool to help with a business problem, only to be met with complex dashboards, paywalls, or overly simplified calculators that don't tell the whole story. That's why I've built this calculator for you.
Customer Lifetime Value (LTV) and the LTV to Customer Acquisition Cost (LTV:CAC) ratio are two of the most powerful metrics you can use to understand the health and long-term viability of your business. While LTV on its own tells you the total revenue you can expect from a single customer over their lifetime, the LTV:CAC ratio is what really puts that number into perspective.
Here’s why these metrics are so useful:
- LTV: It Helps You Value Your Customers: By calculating the LTV, you can move beyond a single transaction and see the true value of your customer base. It helps you identify which marketing channels are bringing in the most profitable customers and allows you to make better decisions about how much to invest in acquiring new ones.
- LTV:CAC Ratio: It Measures Your ROI: The ratio tells you exactly how much value you get back for every dollar you spend on acquiring a new customer. A healthy ratio, generally considered to be 3:1 or higher, means that for every dollar spent on sales and marketing, you're earning three dollars in lifetime value from that customer.
- Strategic Decision-Making: This ratio is not just a number—it’s a guide for your business strategy. A low ratio might signal that you're spending too much on customer acquisition or that your customer retention needs work. A very high ratio, on the other hand, could mean you're being too conservative with your marketing budget and missing out on opportunities for growth.
By providing this calculator, we hope to give you a quick, free, and accessible way to start measuring these vital metrics so you can make more confident, data-driven decisions for your business.