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FREE TOOL: NO SIGNUPWhat a customer is worth, and what you can afford to pay for one
Every acquisition decision, ad budgets, referral bonuses, door hangers, sponsorships, reduces to one comparison: margin-based lifetime value against acquisition cost. Enter five numbers from your books and get the ratio, the payback period, and your ceiling per customer.
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| Margin per customer per year | - |
|---|---|
| Lifetime value (margin-based) | - |
| Revenue lifetime value (for reference) | - |
| CAC payback | - |
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The 3:1 target is a rule of thumb, not a law, but 1:1 is arithmetic: below it, growth is a machine for converting cash into losses.
There are only three levers, and "spend more on ads" is none of them.
A weak LTV:CAC means raising retention, raising margin, or lowering acquisition cost. Which lever is yours is an evidence question, ad account, reviews, follow-up, pricing, and it's what a marketing audit answers with your real data, published pricing, no discovery call.
See the marketing services- Does anything I type get sent anywhere?
- No. The arithmetic runs in your browser as JavaScript on this page. There is no account, no upload and no server call.
- Why margin-based LTV instead of revenue LTV?
- Because you acquire customers with real dollars and keep only the margin. Revenue LTV makes every acquisition channel look affordable; margin LTV is what can actually repay your CAC. This calculator refuses to compute the flattering version.
- What LTV:CAC ratio is "good"?
- The commonly used rule of thumb is 3:1, and it is exactly that, a heuristic, not a law. What is unambiguous: below 1:1 you lose money on every customer, and payback longer than your cash runway hurts even when the lifetime math works. Judge the ratio together with the payback months this page shows.
- Where do I get my retention number?
- From your records, not your optimism. Count the customers who bought in a year and still bought the next year. Service businesses often know this as renewal or churn; if 20% leave each year, average retention is roughly 5 years (1 ÷ 0.20), but measure it, because this input moves the answer more than any other.
- My CAC is fine but I still feel broke. Why?
- Usually payback. If CAC comes back over 14 months, you are financing growth out of cash flow for over a year per customer. That is a working-capital problem the LTV ratio hides: look at the payback line, then decide how fast you can afford to grow.