Business & pro

Customer lifetime value (LTV) and CAC

What a customer is worth over their lifetime, and how much you can spend to acquire one.

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How it works

LTV = order × purchases per year × years × margin. An LTV / CAC ratio of 3 or more is often seen as healthy.

Results are for guidance only and do not replace professional advice.

Worked example

With the default values:

  • Average order value60
  • Purchases per year4
  • Average customer lifespan (years)3
  • Gross margin (%)55
  • Customer acquisition cost (CAC)80

you get:

  • Customer lifetime value (margin)€396.00
  • LTV / CAC ratio4.95
  • VerdictHealthy: you can spend more on acquisition
  • Suggested max CAC (LTV / 3)€132.00

Frequently asked questions

How does the “Customer lifetime value” tool work?

LTV = order × purchases per year × years × margin. An LTV / CAC ratio of 3 or more is often seen as healthy.

What do I need to enter?

Just fill in: average order value, purchases per year, average customer lifespan, gross margin, customer acquisition cost. The result updates as you type.

Can you give an example?

Average order value: 60; Purchases per year: 4; Average customer lifespan (years): 3; Gross margin (%): 55; Customer acquisition cost (CAC): 80 → Customer lifetime value (margin): €396.00; LTV / CAC ratio: 4.95.

Is this calculator free, and is my data private?

Yes. HOD Calc is completely free with no sign-up. The calculation runs in your browser: nothing you type is sent or stored.