Customer lifetime value (LTV) and CAC
What a customer is worth over their lifetime, and how much you can spend to acquire one.
How it works
LTV = order × purchases per year × years × margin. An LTV / CAC ratio of 3 or more is often seen as healthy.
Results are for guidance only and do not replace professional advice.
Worked example
With the default values:
- Average order value60
- Purchases per year4
- Average customer lifespan (years)3
- Gross margin (%)55
- Customer acquisition cost (CAC)80
you get:
- Customer lifetime value (margin)€396.00
- LTV / CAC ratio4.95
- VerdictHealthy: you can spend more on acquisition
- Suggested max CAC (LTV / 3)€132.00
Frequently asked questions
How does the “Customer lifetime value” tool work?
LTV = order × purchases per year × years × margin. An LTV / CAC ratio of 3 or more is often seen as healthy.
What do I need to enter?
Just fill in: average order value, purchases per year, average customer lifespan, gross margin, customer acquisition cost. The result updates as you type.
Can you give an example?
Average order value: 60; Purchases per year: 4; Average customer lifespan (years): 3; Gross margin (%): 55; Customer acquisition cost (CAC): 80 → Customer lifetime value (margin): €396.00; LTV / CAC ratio: 4.95.
Is this calculator free, and is my data private?
Yes. HOD Calc is completely free with no sign-up. The calculation runs in your browser: nothing you type is sent or stored.