What is a customer
worth to you?
Acquisition cost against lifetime value, and how long the payback actually takes. Three times or better is the usual bar.
Your numbers
Everything spent to acquire customers.
First-time buyers, not total orders.
Your blended AOV.
After cost of goods.
Repeat rate over twelve months.
How many years an average customer keeps buying.
LTV : CAC
——
Estimates from the figures you entered. Treat them as a directional model of your own economics, not an audited result.
CAC: what a customer costs to win
Customer acquisition cost is total marketing spend divided by the number of new customers it produced. The most common error is dividing by total orders, which quietly counts repeat buyers as new ones and makes CAC look far better than it is.
LTV: what a customer is worth
Lifetime value should be built on gross profit, not revenue. A customer who spends ₹10,000 with you at 40% margin is worth ₹4,000, and it is the ₹4,000 you can spend to acquire them.
The ratio, and the payback
Two numbers matter. LTV:CAC tells you whether the model works at all — three times or better is the usual bar. Payback period tells you whether you can survive it, because a brilliant ratio that takes eighteen months to repay will still run you out of cash.
For a bootstrapped Indian D2C brand, payback under six months is comfortable, and under three is strong. A funded brand can carry longer payback because someone else is financing the gap.
Moving the ratio
- Raise repeat rate. The cheapest lever by a distance — it multiplies LTV without touching CAC.
- Raise margin. Every point of gross margin flows straight into LTV.
- Cut failed deliveries. A customer whose first order never arrived does not come back, so RTO destroys LTV and CAC at the same time.
- Fix the checkout. Cheaper than buying more traffic: the same ad spend produces more customers when fewer of them abandon.
Frequently asked questions
What is a good LTV to CAC ratio?
Three to one is the widely used benchmark: a customer should be worth at least three times what it costs to acquire them. Below two to one the model is usually fragile. Far above five to one often means you are underinvesting in growth rather than running a brilliant business.
How do I calculate CAC correctly?
Divide total sales and marketing spend for a period by the number of genuinely new customers acquired in that period. Include agency fees, creative costs and platform spend. Exclude repeat orders from the denominator, otherwise repeat purchases will make acquisition look cheaper than it is.
Should LTV use revenue or profit?
Profit. Revenue-based LTV consistently overstates what you can afford to spend on acquisition. Use gross profit — revenue minus cost of goods — and ideally subtract variable fulfilment costs too.
What is CAC payback period?
How many months of gross profit from a customer it takes to earn back what you spent acquiring them. It matters more than the ratio for cash-constrained brands, because it determines how fast your money comes back and can be spent again.
How does RTO affect CAC?
Directly and badly. If you pay to acquire a customer and their order never gets delivered, you have paid full CAC for zero revenue, and that customer is unlikely to return. Undelivered first orders are one of the most expensive forms of acquisition waste in Indian D2C.
Other calculators
Fix the leak,
not the spreadsheet.
Zelly Checkout scores every order before you pack it, so the numbers above start moving on their own.