Data Intelligence
How to calculate CAC and LTV
The two numbers that decide whether you can spend more on acquisition — with formulas, a worked example and the mistakes that inflate both.
Most companies that stall at a revenue ceiling share one problem: they do not know what a customer costs to acquire, or what that customer returns over time. Without both numbers, budget decisions are bets.
The CAC formula
CAC = (ad spend + marketing and sales payroll + tooling) ÷ new customers in the period
The most common error is counting only ad spend. If your sales team costs US$ 30k per month and you ignore it, real CAC can be double what the dashboard shows.
The LTV formula
LTV = average monthly revenue × contribution margin × average retention in months
For one-off purchase businesses, replace retention with average repurchase frequency over 24 months. Using gross revenue instead of margin is the second most common error — it inflates LTV and hides an operation that loses money.
Worked example
- Total acquisition cost in the month: US$ 40,000
- New customers: 40 → CAC = US$ 1,000
- Average ticket: US$ 400/month, margin 60%, retention 10 months → LTV = US$ 2,400
- LTV/CAC = 2.4 → healthy but not yet ready for aggressive scale
How to read the ratio
- Below 1: every new customer destroys cash. Stop scaling and fix the offer or the funnel.
- 1 to 3: the model works but has little room. Improve retention or margin before raising budget.
- Above 3: the math supports increasing acquisition spend.
Perguntas frequentes
How often should I recalculate CAC?
Monthly at minimum, and per channel. Blended CAC hides the channel that is quietly burning budget.
What is a good LTV/CAC ratio?
Three to one is the common benchmark. Much higher usually means you are underinvesting in acquisition.
