CAC & LTV Calculator

Why the ratio matters more than either number alone

A ₹420 acquisition cost tells you nothing on its own. It is cheap if the customer returns ₹1,600 in margin over eighteen months and ruinous if they buy once and leave. The ratio is the number worth watching, and 3:1 is the figure most operators steer by, which means the margin a customer produces over their life is roughly three times what it cost to get them.

Below 1:1 you lose money on every customer you buy, and more spend makes it worse rather than better. Between 1:1 and 3:1 you are growing but thinly, which is survivable when you have cash and dangerous when you do not. Well above 3:1 usually means you are underspending, since you could buy more customers profitably and are choosing not to.

Payback period is the one that constrains you

Lifetime value is money you have not received yet. Payback is when the customer has repaid what you spent to acquire them, and until that point every new customer makes your bank balance worse. A brand with a 3:1 ratio and a fourteen month payback can still run out of cash while growing, which is the most common way a healthy-looking D2C brand dies.

Shortening payback is usually a merchandising job rather than an advertising one: raise the first order value, bundle, or get the second purchase to happen sooner.

Where the inputs usually go wrong

Gross margin gets overstated because shipping, payment fees and returns are left out. Lifetime orders get overstated because people use the average of customers who came back rather than all customers, including the ones who bought once. If you are unsure, use a lower number here than feels right, because both errors push in the same direction and the result flatters you.