What is a good LTV:CAC ratio?

3:1 or higher is the widely cited benchmark for healthy ecommerce unit economics. 1:1 means you break even per customer. Below 1:1 you lose money on every acquisition. Above 5:1 you may be under-spending on ads and leaving growth on the table.

How do I calculate LTV for ecommerce?

Multiply average order value × gross margin % × orders per year × years a customer typically stays active. That's the gross profit a customer brings back over their lifetime. For more precision, subtract retention costs (email tools, loyalty program) from the result.

What is a good CAC for an online store?

There's no universal number — what matters is CAC relative to LTV. A $50 CAC is great if LTV is $200 and terrible if LTV is $40. As a rule of thumb, CAC should be at or below one-third of LTV, and ideally pay back within 3–6 months.

Does CAC include organic customers?

Strictly defined, CAC is paid acquisition cost ÷ paid-acquired customers. Many founders compute a blended CAC (total spend ÷ total new customers including organic) to see overall efficiency. Track both — paid CAC tells you if ads work; blended CAC tells you if the business works.

How is payback period different from LTV:CAC?

LTV:CAC measures total return per customer; payback measures how fast you get the cash back. A 5:1 ratio with a 24-month payback is risky for a small business because your cash is locked up. Aim for a healthy ratio AND a payback inside 3–6 months.

CAC vs LTV Calculator

CAC (Customer Acquisition Cost) and LTV (Customer Lifetime Value) are the two numbers that decide whether an ecommerce store is actually a business or an expensive hobby. CAC is what you pay in ads to get one new buyer. LTV is the gross profit that buyer brings back over time. Compare them and you get the LTV:CAC ratio — the single most useful health check for any store running paid traffic on Etsy, Shopify, Amazon, TikTok Shop, or Pinterest. This calculator gives you all four numbers — CAC, LTV, ratio, and payback period — plus the max you could afford to spend acquiring a customer before the math breaks.

Last Updated: June 2026

New calculator — CAC, LTV, ratio, and payback for ecommerce stores.

Free calculator
Instant estimate
No signup needed
Beginner friendly

Who this calculator helps

DTC and Shopify brands running Meta, TikTok, Google, or Pinterest ads.
Subscription-box and replenishment-product stores where most profit comes from repeat purchase.
Etsy or Amazon sellers running off-platform ads and wanting unit-economic clarity.
Marketing agencies setting CAC targets per client before scaling campaigns.
Founders deciding whether to scale ad spend or pause and improve retention first.

Average order value ($)

Mean revenue per order over the last 30–90 days.

Gross margin (%)

What's left after product cost, platform fees, and shipping — before ads.

Orders per customer per year

If a typical buyer orders once a quarter, that's 4.

Customer lifespan (years)

Rough estimate. 1 / (1 − retention rate) if you know retention.

Monthly ad spend ($)

All paid acquisition channels combined.

New customers per month

First-time buyers — not total orders.

CAC

$20.00

Cost to acquire one new customer

LTV

$144.00

Lifetime gross profit per customer

LTV : CAC

7.2 : 1

Healthy

Payback period

3.3 mo

Months to earn back CAC

Unit economics: Healthy

Breakdown

Profit per order: $24.00
Orders per customer (lifetime): 6
Max profitable CAC (break-even): $144.00
Healthy CAC target (LTV ÷ 3): $48.00

Each customer is worth at least 3× what they cost to acquire. You can usually grow faster by spending more on ads — as long as CAC doesn't creep up while you scale.

All calculations are estimates based on average platform fees. Real profits may vary depending on category, ads, and shipping.

Free worksheet for your next step

Use this worksheet to plan FBA fees, ads, and product profitability.

TrackerMarketing
Marketing KPI Tracker
Track the marketing KPIs that matter — traffic, CTR, conversion rate, CAC, ROAS, and email performance — in one monthly dashboard.
Open the tracker →
PlannerBusiness Planning
Revenue Forecast Planner
Forecast monthly revenue using traffic, conversion rate, and average order value to set realistic income targets for your online store.
Open the planner →

How to use this calculator

Enter your numbers in each field above — the calculator updates instantly as you type, so there's nothing to submit.
Use your real figures when you have them, or sensible estimates while you're planning. If a field doesn't apply, leave it at zero.
Compare the results, then change one input at a time to see how each lever (price, cost, fees, volume) moves the outcome.

When to use this calculator

Before scaling ad spend — confirm LTV:CAC supports more aggressive bids.
When choosing between two channels (Meta vs Google) with different CACs.
After a price increase or AOV bump, to see how unit economics changed.
When evaluating a new retention investment (email, loyalty, SMS) — what LTV lift does it need to be worth the cost?
Quarterly, as part of a unit-economics review with cofounders or investors.

Formula

CAC = Monthly ad spend ÷ New customers per month · Profit per order = AOV × Gross margin % · LTV = Profit per order × Orders per year × Customer lifespan (years) · LTV:CAC ratio = LTV ÷ CAC (target ≥ 3:1) · Payback period (months) = CAC ÷ (Profit per order × Orders per year ÷ 12) · Max profitable CAC = LTV (break-even); healthy target = LTV ÷ 3

Worked example

AOV $60, gross margin 40%, customers order 3× per year, average lifespan 2 years, $3,000 monthly ad spend producing 150 new customers.

CAC = 3,000 ÷ 150 = $20
Profit per order = 60 × 0.40 = $24
Orders per customer (lifetime) = 3 × 2 = 6
LTV = 24 × 6 = $144
LTV:CAC = 144 ÷ 20 = 7.2 : 1 (healthy — well above 3:1)
Payback = 20 ÷ (24 × 3 ÷ 12) = 20 ÷ 6 ≈ 3.3 months
Max profitable CAC = $144 · healthy CAC target ≈ $48

Answer: $20 CAC · $144 LTV · 7.2 : 1 ratio · ~3.3 month payback

More worked examples

Low-AOV beauty brand: AOV $35, gross margin 55%, 4 orders/year, 2.5-year lifespan, $5,000/mo ads, 350 new customers/mo.

CAC = 5,000 ÷ 350 ≈ $14.29
Profit per order = 35 × 0.55 = $19.25
Orders per lifetime = 4 × 2.5 = 10
LTV = 19.25 × 10 = $192.50
Ratio = 192.50 ÷ 14.29 ≈ 13.5 : 1
Payback = 14.29 ÷ (19.25 × 4 ÷ 12) ≈ 2.2 months

Answer: 13.5:1 ratio · 2.2-month payback — under-spent on ads; room to scale aggressively.

One-and-done furniture: AOV $400, margin 35%, 1 order/yr, 1-year lifespan, $40,000/mo ads, 200 customers.

CAC = 40,000 ÷ 200 = $200
Profit per order = 400 × 0.35 = $140
LTV = 140 × 1 = $140
Ratio = 140 ÷ 200 = 0.7 : 1 (losing money)
Max profitable CAC = $140 · healthy target ≈ $47

Answer: 0.7:1 — every customer loses $60. Either drop CAC, raise AOV, or add a repeat-purchase line.

Subscription coffee: AOV $25, margin 45%, 12 orders/year, 1.5-year lifespan, $8,000/mo ads, 400 customers.

CAC = 8,000 ÷ 400 = $20
Profit per order = 25 × 0.45 = $11.25
Orders/lifetime = 18
LTV = 11.25 × 18 = $202.50
Ratio = 202.50 ÷ 20 ≈ 10.1 : 1
Payback = 20 ÷ (11.25 × 12 ÷ 12) ≈ 1.8 months

Answer: 10:1 ratio · 1.8-month payback — subscription is the most CAC-tolerant model in ecommerce.

How it works

Why LTV:CAC matters: a single sale rarely tells you whether ads are working. Many ecommerce categories lose money on the first order and only become profitable on the second or third purchase. LTV:CAC compresses pricing, margin, repeat rate, and retention into one number you can act on.

The 3:1 rule of thumb: most healthy DTC and marketplace stores aim for LTV at least 3× CAC. Below 1:1 you're losing money on every customer — scaling makes it worse. Between 1:1 and 3:1 you're profitable but fragile; raise LTV before raising spend. Above 3:1 you usually have room to spend more on ads and grow faster, as long as CAC doesn't creep up while you scale.

Payback period is the other half: a great LTV:CAC ratio that takes 18 months to pay back can starve a small store of cash. Most bootstrapped ecommerce brands want payback inside 3–6 months so ad spend recycles quickly.

Three levers to improve unit economics: (1) raise AOV via bundles, upsells, and free-shipping thresholds; (2) raise repeat purchase rate via email, SMS, and post-purchase flows — every extra order multiplies LTV at zero CAC; (3) cut CAC by killing the bottom 20% of campaigns and reallocating to your best-converting placements. Doubling any one of these usually moves the ratio more than doubling ad spend ever will.

Expert tips

Compute LTV from GROSS PROFIT, not revenue. Using revenue inflates LTV 2–3× and hides unprofitable products.
Set a max-CAC bid rule: LTV ÷ 3 as healthy ceiling, LTV ÷ 1 as absolute breakeven. Any campaign above the healthy line gets paused.
Repeat purchase rate is the highest-leverage variable. Doubling repeat rate doubles LTV at zero CAC — usually the cheapest way to grow.
Watch payback period independently of LTV:CAC — a 5:1 ratio with 24-month payback can starve cash flow.
CAC almost always rises as you scale — when modeling a 2× spend increase, model a 1.3–1.5× CAC increase too.

How to interpret your results

Dollar values are shown per sale, per order, or per item unless a result is explicitly labelled monthly, weekly, or daily.
Percentages (margin, ROI, conversion rate) are easier to compare across products and price points than raw dollars — use them when you benchmark.
A positive result means you're ahead after the costs and fees you entered. A negative result means the current numbers don't work — change a lever (raise price, cut a cost, lower ad spend) and recalculate.
Treat the output as a planning estimate, not a guarantee. Fees, taxes, and conversion rates shift over time — re-run the numbers whenever a key input changes.

Limitations

Assumes constant gross margin across the customer's lifetime — doesn't capture margin compression on promo-heavy buyers.
Doesn't separate paid CAC from blended CAC (which includes organic) — track both.
Doesn't model cohort retention curves — uses a simple average lifespan.
Doesn't account for refunds, returns, or chargebacks — bake those into gross margin.
Doesn't include retention software cost (email, SMS, loyalty). Subtract those from LTV for a fully-loaded number.

Common mistakes

Using revenue instead of gross profit when calculating LTV — it inflates the number 2–3× and hides unprofitable products.
Counting total orders as new customers — CAC is ad spend ÷ first-time buyers, not ÷ total orders.
Ignoring payback period. A 5:1 LTV:CAC ratio with a 24-month payback can still bankrupt a small business.
Forgetting to subtract platform fees, payment processing, and shipping from margin before computing LTV.
Scaling ad spend the moment LTV:CAC looks healthy — CAC almost always rises as you scale, eating the margin.

Go deeper with plain-English guides on the same topic.

FAQ

What is a good LTV:CAC ratio?: 3:1 or higher is the widely cited benchmark for healthy ecommerce unit economics. 1:1 means you break even per customer. Below 1:1 you lose money on every acquisition. Above 5:1 you may be under-spending on ads and leaving growth on the table.
How do I calculate LTV for ecommerce?: Multiply average order value × gross margin % × orders per year × years a customer typically stays active. That's the gross profit a customer brings back over their lifetime. For more precision, subtract retention costs (email tools, loyalty program) from the result.
What is a good CAC for an online store?: There's no universal number — what matters is CAC relative to LTV. A $50 CAC is great if LTV is $200 and terrible if LTV is $40. As a rule of thumb, CAC should be at or below one-third of LTV, and ideally pay back within 3–6 months.
Does CAC include organic customers?: Strictly defined, CAC is paid acquisition cost ÷ paid-acquired customers. Many founders compute a blended CAC (total spend ÷ total new customers including organic) to see overall efficiency. Track both — paid CAC tells you if ads work; blended CAC tells you if the business works.
How is payback period different from LTV:CAC?: LTV:CAC measures total return per customer; payback measures how fast you get the cash back. A 5:1 ratio with a 24-month payback is risky for a small business because your cash is locked up. Aim for a healthy ratio AND a payback inside 3–6 months.

Why trust this calculator?

This tool uses standard mathematical formulas and commonly accepted calculation methods, shown openly in the Formula section above so you can verify the math yourself. Results are estimates based on the information you enter and do not account for every individual circumstance. For important financial, tax, legal, medical, or business decisions, please double-check with a qualified professional before acting on the numbers.

Keep going

One calculator rarely tells the full story. Pair this one with a related tool below to pressure-test your numbers from a different angle, or browse Work & Money Calculators for more in the same category.

What to calculate next

You may also find these tools helpful.

Amazon FBA Cost Guide
Every Amazon FBA fee in 2026 — referral, fulfillment, storage, fuel surcharge — with worked profit examples at $10, $25, $50, and $100 price points.
Read guide →
Amazon FBA Inventory Management Guide
How to avoid stockouts and overstock on Amazon FBA — forecasting, lead times, reorder points, safety stock, and storage-fee strategy.
Read guide →
Amazon FBA vs FBM: Which Fulfillment Method Is Better?
A full 2026 comparison of FBA and FBM — costs, shipping, customer service, inventory, scalability, and net profit — with worked examples and a decision framework.
Read guide →

Amazon ACoS Calculator
Calculate ACoS, TACoS, break-even ACoS, and PPC profit per campaign.
Try calculator →
Amazon FBA Break-Even Calculator
Minimum Amazon selling price needed to cover product cost and FBA fees.
Try calculator →
Amazon FBA Product Sourcing Calculator
Estimate landed cost, Amazon fees, profit, and ROI before placing an inventory order.
Try calculator →

KDP Book Launch: Spend More on Ads or Improve the Cover?
A self-published romance author has $600 left in launch budget. The book is ranking but not converting — should that money go to more Amazon Ads or to a professional cover redesign?
Read case study →

Amazon FBA Fee Cheat Sheet
A quick-reference guide to understanding common Amazon FBA fees and profit calculations.
Open resource →
Amazon FBA Fee Guide
A plain-English overview of the common costs Amazon FBA sellers pay.
Open resource →
Amazon FBA Income Goal Planner
Turn your monthly Amazon income goal into a realistic plan using profit per unit, units per day, and product mix.
Open resource →