Ecommerce LTV:CAC Calculator
Calculate ecommerce LTV, margin-adjusted LTV:CAC, and estimated CAC payback using AOV, repeat purchase behavior, gross margin, discounts, refunds, and acquisition spend.
Enter your numbers
Customer value
Acquisition numbers
Your result
Customer LTV
$11,045.52
Gross-profit-adjusted LTV
$6,848.22
CAC
$352.94
LTV:CAC ratio
19.40:1
Estimated payback
1.4 months
A 19.40:1 ratio is very strong. If growth is slower than you want, you may have room to invest more in acquisition.
Gross-profit-adjusted LTV: $6,848.22
What Is LTV:CAC in Ecommerce?
LTV:CAC compares how much a customer is worth over time with how much it costs to acquire that customer.
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
For ecommerce stores, this is useful when customers buy more than once. First-order ROAS may look weak, but repeat purchases can make acquisition profitable if margin and payback are healthy.
How This Calculator Works
This calculator estimates ecommerce LTV from:
- average order value
- discounts and refunds
- gross margin
- purchase frequency
- customer lifespan
It then compares that value with CAC:
CAC = Total Acquisition Spend / New Customers Acquired
The calculator shows both revenue LTV and gross-profit-adjusted LTV, then calculates the LTV:CAC ratio and estimated payback period.
Why Gross-Profit-Adjusted LTV Matters
Revenue-only LTV can make acquisition look better than it is. If a customer spends $1,000 over time, that does not mean you have $1,000 available to recover CAC.
Gross-profit-adjusted LTV is more useful because it accounts for margin. It gives you a better view of how much customer value is actually available after product costs.
Example Calculation
Imagine a store with:
- AOV of $145
- 62% gross margin
- 3.6 purchases per year
- 2.3-year customer lifespan
- CAC of about $350
The revenue LTV may look strong. After discounts, refunds, and gross margin, the more useful question is whether the remaining value still covers CAC with a comfortable payback period.
What a Good LTV:CAC Ratio Means
A healthy ecommerce LTV:CAC ratio usually means:
- margin-adjusted customer value is clearly higher than CAC
- payback timing fits your cash position
- repeat purchase assumptions are based on real behavior
The common 3:1 benchmark is a helpful reference, not a rule. A lower ratio may still work with fast payback. A high ratio may mean the business is acquiring efficiently, or that it has room to invest more in growth.
Common Mistakes to Avoid
- Using revenue-only LTV to justify CAC
- Copying SaaS LTV:CAC benchmarks directly into ecommerce
- Ignoring discounts and refunds
- Assuming every customer repeats at the same rate
- Looking at the ratio without checking payback time
Frequently asked questions
What is a good LTV to CAC ratio?
A good LTV:CAC ratio is generally 3:1 or higher — a customer generates at least $3 in lifetime value for every $1 spent acquiring them. For ecommerce, the right benchmark varies by margin, payback period, and repeat purchase rate. Subscription businesses often target higher; high-ticket, low-repeat businesses may operate on lower.
How do you calculate LTV:CAC ratio?
LTV:CAC = Customer Lifetime Value ÷ Customer Acquisition Cost. For ecommerce, LTV is typically Average Order Value × Gross Margin × Average Orders Per Customer over their lifetime. CAC is total acquisition spend divided by new customers acquired in the same period.
Should LTV be calculated on revenue or gross profit?
Gross profit. Revenue-based LTV overstates customer value by ignoring COGS, shipping, and fulfillment. Gross-profit LTV shows how much margin is actually available to justify acquisition spend — which is the number that matters when comparing against CAC.
What is a good CAC for ecommerce?
There is no universal right CAC — it depends on your LTV. The key is keeping LTV:CAC above 3:1 and payback within a period your cash position can support. A $50 CAC can be excellent for a brand with strong repeat purchase rates and unsustainable for one with a low average order value.
What does a low LTV:CAC ratio mean?
A ratio below 1:1 means you are spending more to acquire customers than they return in lifetime value. A ratio between 1:1 and 3:1 typically means acquisition is marginally viable but leaves little room for overhead or growth investment. Below 3:1, it is worth reviewing CAC, retention, or margin before scaling spend.
How does LTV:CAC relate to ROAS?
ROAS measures campaign-level revenue efficiency. LTV:CAC measures whether acquisition is justified when repeat purchase value is included. A campaign can show strong ROAS but poor LTV:CAC if customers do not return. Strong ecommerce teams track both — ROAS for campaign decisions, LTV:CAC for overall acquisition strategy.
How do I improve my LTV:CAC ratio?
The main levers are: increasing repeat purchase rate through retention programs, raising average order value through upsells or bundles, reducing CAC by improving targeting or on-site conversion, and reducing COGS or fulfillment costs to increase per-order margin. Which lever to prioritise depends on where the ratio is breaking down.
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