Calculator for CAC, LTV and ROAS | Federico Calò
Calculate customer acquisition cost (CAC), lifetime value (LTV), and return on advertising spend (ROAS). Optimize your marketing campaigns with precise data.
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Frequently Asked Questions
What is CAC (Customer Acquisition Cost)?
CAC is the average cost to acquire a new customer, calculated by dividing total marketing and sales spend by the number of new customers acquired in the same period. A low CAC relative to LTV indicates efficient marketing.
What is LTV (Customer Lifetime Value)?
LTV estimates the total economic value a customer generates throughout their relationship with the company. It is calculated by multiplying the average transaction value, purchase frequency, and estimated years of the relationship. Increasing LTV is often more cost-effective than lowering CAC.
What is a good LTV:CAC ratio?
For SaaS and eCommerce, a LTV:CAC ratio of 3:1 is considered healthy: it means that every euro invested in acquisition generates 3 euros in value over time. Below 1:1 the company loses money on each customer. Above 5:1 more investment in growth may be possible.
How is ROAS calculated?
ROAS (Return on Ad Spend) is calculated by dividing the revenue generated by the campaign cost. A ROAS of 4 means that for every euro spent on ads, four euros in revenue are generated. The break-even point is typically at 1, but actual margins determine the minimum profitable ROAS.
How is it used?
- Enter marketing expense
Total marketing and sales spend for the period considered (e.g., month, quarter, year). Includes advertising costs, sales staff, and tools.
- Define customer parameters
Enter the number of new customers acquired, average purchase ticket, annual purchase frequency, and estimated years of relationship.
- Add campaign data
For ROAS, enter the revenue generated by the campaign and its total cost. You can use data from Google Ads, Meta or other platforms.
- Interpret the results
LTV:CAC ≥ 3 indicates sustainable marketing. ROAS ≥ 3-4 is considered good for eCommerce. If CAC exceeds LTV, the acquisition model is not profitable.