Max CPA, LTV and LTV/CAC calculator
Find out how much you can pay per customer: break-even CPA, the CPA for your target LTV/CAC ratio, profit per customer and payback.
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Max CPA and LTV calculator
Result
- Margin LTV
- $200.00
- Max CPA for the target ratio
- $66.67
- Revenue LTV
- $500.00
- Break-even CPA on 1st purchase
- $80.00
- Current LTV/CAC
- 2.50x
- Profit per customer
- $120.00
- Payback in purchases
- 1.00 purchases
- Payback in months
- 4.8 months
- Max CPA for the wanted payback
- $100.00
Bands are a market convention (loss below 1, attention up to the target ratio, healthy above), not a law. Margin, repeat purchases and cash change what is acceptable.
How to calculate max CPA, LTV and the LTV/CAC ratio
What is a customer worth? If you pay more for one than they return in margin, every sale deepens the loss, however big the revenue. This calculator turns average order value, margin and repeat purchases into the maximum CPA your numbers can bear, and compares it with the CAC you pay today.
It separates the first-purchase break-even CPA from the CPA that still keeps the LTV/CAC ratio at the level you chose, because anyone betting on repeat purchases can pay more for the first order, as long as cash can wait.
- Enter the order value and margin. Use the average value of each purchase and the contribution margin: what is left of revenue after product cost, taxes, shipping and fees, before ad spend.
- Enter how many purchases a customer makes. It is the average number of purchases per customer over their lifetime with the brand. Two decimals are accepted, for example 2.5. With no repeat purchases, use 1.
- Enter the current CAC. Type the cost per acquired customer, or choose to calculate it from the acquisition budget and the number of new customers.
- Set the target ratio and, if you like, the time frames. The default is 3.0. If you add the customer lifetime and the payback you want, in months, you also see how many months it takes for CAC to come back.
- Read the numbers. Compare CAC with the two maximum CPAs and look at profit per customer, the verdict and how many purchases are needed to recover the investment.
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How the calculation works
All money is handled in whole cents, margin in hundredths of a percentage point and purchases in hundredths of a purchase. Each calculation rounds once, using integer arithmetic, so the result does not suffer from floating-point error.
CPA and CAC are close relatives. CPA (cost per acquisition) is the cost of any conversion, such as a sale or a sign-up. CAC (customer acquisition cost) is the cost of winning a new customer and, depending on the company, also includes staff and tools. Here CAC is the value you type and max CPA is the ceiling your numbers allow.
Revenue LTV (order value × purchases) shows what a customer brings in, but the money that pays for ads is margin. That is why margin LTV is the one to compare with CAC. The 3 to 1 ratio is a widely repeated rule of thumb, not a law: high margin, predictable repeat purchases and ample cash accept lower ratios; thin margin, uncertain churn and tight cash call for higher ones. That is why the target ratio is a field you can change.
LTV is an estimate of the future. Cash is the present: an excellent LTV does not pay for today's ad if the purchases arrive over two years. Enter the payback you want to see the CPA that still recovers the investment in that time, assuming margin is spread evenly over the period.
- Revenue LTV
order value × purchases per customer - Margin LTV
order value × margin × purchases per customer - First-purchase break-even CPA
order value × margin - Max CPA for the target ratio
margin LTV ÷ target ratio - LTV/CAC
margin LTV ÷ CAC - Profit per customer
margin LTV − CAC - Payback in purchases
CAC ÷ (order value × margin) - Max CPA for the wanted payback
margin LTV × payback months ÷ lifetime months
Examples
Below the target ratio, but profitable
Order value of $200, 40% margin, 2.5 purchases per customer and a CAC of $80. Revenue LTV is $500 and margin LTV is $200. First-purchase break-even CPA is $80 and max CPA for 3:1 is $66.67. The LTV/CAC ratio is 2.50x, profit per customer is $120 and CAC comes back on the first purchase.
A healthy ratio, but the 1st purchase does not repay CAC
Order value of $150, 50% margin, 4 purchases per customer and a CAC of $90. Margin LTV is $300 and the ratio is 3.33x, with $210 of profit per customer. But the first purchase leaves $75 of margin, less than the $90 CAC: the investment comes back at purchase 1.20. If cash cannot wait, the nice number does not help.
A customer who does not pay for their own acquisition
Order value of $80, 30% margin, 1.2 purchases per customer and a CAC of $60. Margin LTV is $28.80, the ratio is 0.48x and each customer leaves a $31.20 loss. It would take 2.50 purchases to recover CAC, more than the customer makes. For 3:1, max CPA would be $9.60.
Frequently asked questions
What is the difference between CPA and CAC?
CPA is the cost per acquisition of any conversion, and CAC is the cost of winning a new customer. Many companies use the two as synonyms, but CAC usually includes more costs, such as sales staff and tools, while CPA usually comes from ad spend alone. Pick one definition and always use the same.
How do you calculate LTV?
Multiply average order value by the average number of purchases per customer and, for margin LTV, by the contribution margin. With a $200 order, 2.5 purchases and a 40% margin, revenue LTV is $500 and margin LTV is $200.
Why is the ideal LTV/CAC ratio 3 to 1?
Because 3:1 is a popular rule of thumb, not a law. It leaves room for costs LTV does not see and for the risk that the customer buys less than expected. With high margin and predictable repeat purchases lower ratios can work; with tight cash, even 3:1 can be too little.
Should I use revenue LTV or margin LTV?
Use margin LTV to decide how much to pay for a customer. Revenue includes product cost, taxes and shipping, which are not left over to pay for ads. Comparing revenue with CAC makes every customer look more valuable than they are.
What is the maximum CPA I can pay?
There are two ceilings. The first-purchase break-even CPA (order value × margin) is the most you can pay without losing money on the first order. The max CPA for the target ratio (margin LTV ÷ ratio) is higher and only holds if the customer buys again and cash can wait.
Does a high LTV justify a high CAC when cash is tight?
Not always. LTV is estimated future revenue, while CAC is paid today. If payback takes more months than cash can bear, the company runs out of money before it profits from repeat purchases. That is why the calculator shows payback in purchases and in months.
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