The formulas
- Revenue per customer per year = average order value × purchases per year
- CLV (gross profit) = yearly revenue × gross margin × lifespan in years
- LTV:CAC = CLV ÷ customer acquisition cost
- CAC payback = CAC ÷ monthly gross profit per customer
A common rule of thumb is that LTV:CAC should comfortably exceed 1, and many businesses aim for around 3, but the right target depends on your cash flow and growth plans. Learn more in customer lifetime value explained and CAC and LTV:CAC.