Ad campaign CAC vs LTV target

Inputs

Cost per click ($)	$4
Site conversion %	2.5%
Avg order value (first purchase)	$75
12-mo repeat rate %	35%
Avg repeats / repeat customer	3
Target LTV:CAC ratio (×100)	300%

Supporting metrics

1-year customer LTV	$154
Actual LTV:CAC	0.96×
Max CAC for target ratio	$51

About this calculator

The fastest CAC sanity check

Before scaling any ad campaign, run this back-of-envelope. Your CPC × your conversion rate determines CAC; your AOV × repeat economics determines LTV; LTV/CAC tells you whether to step on the gas.

The math

CAC = CPC ÷ site conversion rate
1-year LTV = first AOV × (1 + repeat rate × avg repeats)
breakeven CAC for target ratio = LTV ÷ target ratio

Default scenario: $4 CPC, 2.5% conversion, $75 AOV, 35% repeat, 3 repeats/yr, 3:1 target:

CAC = $4 / 0.025 = $160
1-year LTV = $75 × (1 + 0.35 × 3) = $153
LTV/CAC = 0.96 (loses money). Need to drop CAC to <$51 for 3:1 target.

How to lower CAC

Higher conversion rate: A/B test landing pages, reduce form friction. Going 2.5% → 4% halves CAC.
Lower CPC: tighter ad targeting, better Quality Score, alternative platforms. 20-30% reductions common.
Shorter purchase cycle: limited-time offers, urgency, abandoned-cart capture.

How to raise LTV

Higher first AOV: bundle offers, upsell at checkout
Increase repeat rate: subscription models, post-purchase email sequences
Cross-sell to other products: customer base monetized across SKUs

Rules of thumb

LTV:CAC < 1: bleeding money, stop spending
LTV:CAC 1-2: marginal, fix before scaling
LTV:CAC 3-5: healthy, scale aggressively
LTV:CAC >5: you're underspending, find more channels

FAQ

Should I use 1-year or 3-year LTV?

Match LTV horizon to your payback comfort. CFOs typically prefer 12-month LTV (more conservative, faster cash recovery). Growth-stage companies often use 24-36 month LTV (captures expansion). For paid ad budgeting, 12-month LTV is the standard — anything longer requires you to fund the gap.

What's a healthy LTV:CAC ratio?

Industry rule: 3:1 minimum, 4-5:1 healthy, 6:1+ means you're under-investing in growth. Below 3:1, customer acquisition is unsustainable; above 6:1, you're missing growth opportunities by under-spending.

Does this work for high-AOV B2B?

Yes — but use ARR (annual contract value) instead of one-time AOV, and replace repeat rate with NRR (net revenue retention). For a $30k/yr B2B SaaS deal at 110% NRR with 10-yr expected life: LTV ~$300k. CAC budget at 3:1 = $100k. The math is the same; the numbers are bigger.