LTV, CAC & break-even calculator

How the calculator works

We start from the margin each order leaves behind, not from revenue, because the money that matters is what remains after you have paid for the product, delivery and fees. The formulas are below, and every assumption is visible and editable.

• Margin per order = average order value × gross margin − variable costs;
• Margin-based LTV = margin per order × purchases per year × customer lifetime in years. If you choose retention, lifetime is 1 ÷ (1 − annual retention): at 75% retention, a customer stays four years on average;
• CAC = the cost of one new customer, entered directly or calculated as acquisition budget ÷ new customers;
• LTV:CAC = LTV ÷ CAC;
• Payback period = the month in which an average customer’s cumulative margin reaches the CAC. The chart assumes purchases are spread evenly through the year, and in retention mode the number of customers shrinks each year;
• Break-even ROAS = 1 ÷ the first order’s contribution margin. Below this value the first sale does not cover the ad cost on its own, and you rely on repeat purchases;
• Maximum CAC at 3:1 = LTV ÷ 3.

About the 3:1 rule: many practitioners use it as a starting point, but it is not a law. A lower ratio can be acceptable if you recover your money quickly and have capital to spare, while a higher one guarantees nothing if the assumptions are too optimistic. That is why the tool also shows the payback period: a good ratio with a 24-month payback can still squeeze your cash flow.

What it leaves out: taxes, fixed costs, the time value of money and differences between customers. When you have data, check these figures against real cohorts, meaning groups of customers who joined in the same month. For how to set the budget, see how much to spend on online advertising; on margins, read the profit margin of an online store; and for conversion rate, how conversion rate is calculated.