LTV:CAC: Customer Lifetime Value to Acquisition Cost Ratio

The ratio of customer lifetime value to customer acquisition cost—a healthy LTV:CAC is 3:1 or higher, meaning each customer generates $3 in value for every $1 spent acquiring them.

Formula

LTV:CAC = Customer Lifetime Value (LTV) ÷ Customer Acquisition Cost (CAC)

Formula Components

Metric	Definition
Customer Lifetime Value (LTV)	Average total revenue generated per customer over 365 days from first purchase
Customer Acquisition Cost (CAC)	Total advertising spend divided by number of new customers acquired

Metadata
Type	Ratio
Data Source	Shopify, Meta Ads, Google Ads
Aggregation	Ratio

Example

Your store acquired 500 new customers last quarter with a $45,000 marketing spend, and your customers have an average 365-day lifetime value of $270:

Metric	Value
LTV (365d)	$270
CAC	$90
LTV:CAC	3.0:1

A 3:1 LTV:CAC ratio means each customer generates $3 in lifetime value for every $1 spent acquiring them—the industry benchmark for healthy unit economics.

How It Works

LTV:CAC divides the average revenue a customer generates over their lifetime (typically measured at 365 days) by the cost to acquire that customer. This ratio reveals whether your customer acquisition is sustainable—if you spend more to acquire customers than they’re worth, growth becomes unprofitable.

When to Use

Scenario	Action
Evaluating acquisition sustainability	Ensure LTV:CAC stays above 3:1 for healthy unit economics
Setting marketing budgets	Use LTV:CAC to determine maximum sustainable CAC
Comparing acquisition channels	Identify which channels produce highest-value customers relative to cost
Forecasting profitability	Project long-term returns on customer acquisition investments

Interpretation Guide

LTV:CAC Ratio	Interpretation
Below 1:1	Unsustainable—spending more to acquire than customers generate
1:1 to 2:1	Marginally profitable—limited room for overhead and reinvestment
3:1	Industry benchmark—healthy acquisition economics
Above 5:1	May indicate underinvestment in growth opportunities

Metric	Relationship
LTV 365d	Numerator—full-year customer lifetime value
CAC	Denominator—cost to acquire each new customer
LTV 90d	Short-term LTV for faster payback analysis
Payback Days	Time to recover acquisition cost

See all LTV metrics →

CLV 365 Payback Days

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​Formula

​Formula Components

​Example

​How It Works

​When to Use

​Interpretation Guide

​Related Metrics

Formula

Formula Components

Example

How It Works

When to Use

Interpretation Guide

Related Metrics