# Customer Profitability Calculator

Source: https://www.lucidmedia.co.nz/tools/cac-vs-ltv-calculator/

Free Tool

Find out if your customers are actually profitable.

Quick start: Find out if you're spending the right amount to acquire customers. A healthy business makes 3x more from customers than it costs to get them.

Running ecommerce ads? Try our [Meta Ads Unit Economics Calculator](https://www.lucidmedia.co.nz/tools/meta-ads-unit-economics-calculator/) for a more detailed per-order profitability breakdown.

### Customer Acquisition Cost (CAC)

How much did you spend on marketing and sales?

Include ads, sales team salaries, software, events - everything you spent to get customers

How many new customers did you get?

Count only paying customers in the same time period as your spend above

### Lifetime Value (LTV)

What does a customer typically spend per purchase?

Example: If your average order or invoice is $350, enter 350

How many times does a customer buy per year?

Example: Quarterly purchases = 4, monthly subscriptions = 12

How long does a customer stay with you (in years)?

Example: If customers typically stay for 2-3 years, enter 2.5

## Understanding CAC vs LTV

Customer Acquisition Cost (CAC) and Lifetime Value (LTV) are the **two most important unit economics metrics** for any business. Together, they tell you whether your growth is sustainable.

The formulas are:

CAC = Total Marketing Spend ÷ New Customers

LTV = Avg Purchase x Purchase Frequency x Customer Lifespan

### The 3:1 rule

The widely accepted benchmark is that your LTV should be **at least 3 times your CAC**. This ratio accounts for operational costs, overhead, and profit margin. A ratio below 1:1 means you are losing money on every customer. Between 1:1 and 3:1, you are likely breaking even after factoring in other business costs.

### How to improve your ratio

**Reduce CAC:**

- Improve your ad targeting to reach higher-intent audiences
- Invest in SEO and content marketing for lower-cost organic leads
- Optimise your conversion funnel to convert more visitors into customers

**Increase LTV:**

- Improve customer retention with better onboarding and support
- Increase purchase frequency through email marketing and loyalty programmes
- Raise average order value with upsells, cross-sells, and premium tiers

Want help improving your unit economics? Our [digital strategy services](https://www.lucidmedia.co.nz/services/digital-strategy/) can help you reduce acquisition costs and increase customer lifetime value.

## Related Tools

[Break-even Calculator](https://www.lucidmedia.co.nz/tools/break-even-calculator/)

How many customers to cover your ad spend

[Marketing ROI Calculator](https://www.lucidmedia.co.nz/tools/digital-marketing-roi-calculator/)

Evaluate your total marketing performance

[Meta Ads Calculator](https://www.lucidmedia.co.nz/tools/meta-ads-unit-economics-calculator/)

Per-order profitability for ecommerce ads

## Want Help Improving Your Customer Profitability?

Get a free growth strategy session and we will show you how to reduce acquisition costs and increase customer lifetime value.

Free consultation & quote

Response within 24 hours

No obligation to proceed

[info@lucidmedia.co.nz](mailto:info@lucidmedia.co.nz) [+64 27 582 4369](tel:+64275824369)