CAC and LTV explained with the ratio kept in its place
Define customer acquisition cost, a simple lifetime value, and the ratio. A labeled sample shows the arithmetic without setting a target.
Publisher: AI MarkTool. Published 2026-10-19. Updated 2026-10-28 No individual author is named.
CAC is a definition problem
Customer acquisition cost is the spend required to win a new customer, divided by the count of new customers, for the same period and the same rules. If you spent 2,000 and won 10 customers, CAC is 200. Say whether that 2,000 includes sales salaries, agency fees, and software, or only media. Marketing-only CAC looks better and answers a smaller question.
Do not mix customers from a free campaign into the denominator of a paid campaign. The ratio will flatter the paid work.
LTV needs a margin, not just revenue
A simple lifetime value multiplies what you earn from the customer over the relationship, after the costs required to serve them. Revenue alone overstates it. If you do not know gross margin, write the lifetime value as revenue and label it. Do not silently treat revenue as profit.
The retention period is an assumption. If you have not observed it, say "assumed" next to the number. The calculator will still multiply. The label keeps the result honest.
The ratio is not a universal target
In the sample above, an LTV of 800 and a CAC of 200 produce a ratio of 4. That is arithmetic. A ratio people repeat in SaaS planning conversations is 3 to 1, and it is only a heuristic. A low-margin product, a long payback, or a CAC that left out sales cost can make 3 to 1 the wrong comfort level. Set the target from your margin and the months you can wait to be repaid.
Use the LTV CAC ratio calculator to show the three numbers separately. Then write the payback window beside them, because the ratio hides time.
Count the customers before you divide
Customer acquisition cost needs a customer count. A marketing funnel calculator turns visitors and three stage rates into that count. The next stage multiplies the full previous number. Two-decimal text is for reading and is not fed back into the product.
Use your own rates. The page will not insert an industry average. After the count exists, divide spend by customers. Do not divide spend by visitors and call that CAC.
Sources and gaps
- The 3:1 ratio is not sourced The page calls 3 to 1 a repeated SaaS planning heuristic. No primary study is attached, so it is not a benchmark and it is not a target.