LTV:CAC Calculator
Understand your unit economics. Calculate customer lifetime value, acquisition cost, payback period, and see how improving each lever impacts your ratio.
Customer Value
Acquisition Cost
Unit Economics
Improvement Scenarios (+10% each lever)
| Scenario | New LTV | New CAC | New Ratio | Improvement |
|---|---|---|---|---|
| +10% AOV | $136.13 | $50.00 | 2.7:1 | +10.0% |
| +10% Purchase Frequency | $136.13 | $50.00 | 2.7:1 | +10.0% |
| +10% Margin | $136.13 | $50.00 | 2.7:1 | +10.0% |
| -10% CAC (lower spend) | $123.75 | $45.00 | 2.8:1 | +11.1% |
Why LTV:CAC Matters for Ecommerce
The LTV:CAC ratio is the single most important metric for sustainable growth. It tells you whether you're spending the right amount to acquire customers relative to how much they're worth. A business with a strong LTV:CAC ratio can invest confidently in growth, while a weak ratio signals that you're burning cash faster than you're building value.
For e-commerce stores, understanding this ratio is critical for deciding how much to spend on advertising, whether to invest in retention programs, and how to price products for long-term profitability.
The Four Levers of LTV
You can improve your LTV by pulling four levers: increasing average order value (bundles, upsells), increasing purchase frequency (email marketing, subscriptions), extending customer lifespan (loyalty programs, great service), and improving gross margins (better supplier pricing, premium positioning).
Even small improvements compound dramatically. A 10% improvement in each lever can increase LTV by over 45%. The scenario analysis above shows exactly how each lever impacts your bottom line.
Related Resources
- Unit Economics Explained: CAC, LTV, and LTV:CAC
- Shopify Analytics vs. a Real CFO
- Sunforce AI CFO
- ROAS Calculator
Frequently Asked Questions
What is a good LTV:CAC ratio?
A 3:1 LTV:CAC ratio is the gold standard — you earn $3 in lifetime value for every $1 spent acquiring a customer. Below 2:1, you're likely unprofitable. Above 5:1, you may be under-investing in growth.
How do you calculate customer lifetime value?
LTV = Average Order Value × Purchase Frequency × Customer Lifespan × Gross Margin. For example, a customer who spends $50 per order, buys 3 times/year, stays for 2 years, with 40% margin has an LTV of $120.
How do you calculate customer acquisition cost?
CAC = Total Marketing Spend ÷ Number of New Customers Acquired. Include all marketing expenses: ad spend, content costs, marketing tools, and team salaries attributable to acquisition.
See your real LTV:CAC from actual data
Sun calculates your real LTV:CAC from actual store data — no estimates needed. It tracks trends over time and alerts you if your ratio is declining.
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