Customer lifetime value & max acquisition cost calculator

How to use this calculator

Start with what an average job or sale is actually worth, then how many times a year a typical customer buys from you, and how many years they tend to stick around before they stop calling — whether that's because they move, switch providers, or the work is simply done. Apply your real gross margin so the result reflects profit, not top-line revenue, and set the LTV:CAC ratio you want to hold yourself to. The calculator does the rest instantly — no submit button, no signup.

Why profit-based LTV, not revenue-based

A revenue-only LTV number is easy to calculate and easy to be misled by. Two customers who each spend $5,000 a year with you are not equally valuable if one job runs at a 60% margin and the other at 15% — the first is worth four times as much to the business. Applying gross margin before computing lifetime value turns a top-line vanity number into the figure that should actually drive a marketing budget: what a customer is worth in dollars you keep, not dollars that pass through.

Setting a marketing budget from max CAC

Max recommended CAC is the ceiling, not the target — spending right up to it leaves no room for customers who churn early or acquisition costs that creep up over a campaign. A common approach is to budget toward roughly half of max CAC per channel as a comfortable operating target, then let channels performing well below that number earn a bigger share of spend. Any channel consistently running above your max CAC is losing money on every customer it brings in, no matter how good the lead volume looks.

Frequently asked

Why is Customer Lifetime Value based on profit, not revenue?

Revenue-based LTV treats every dollar of sales the same, regardless of what it costs to deliver. A job with thin margins and a job with fat margins can bring in identical revenue but leave very different amounts in your pocket. Marketing spend has to be justified against actual profit, so this calculator applies your gross margin before computing LTV — the number you get is what a customer is really worth to the business, not just what they paid you.

What is a healthy LTV:CAC ratio?

A 3:1 ratio — spending at most a third of a customer's lifetime profit to acquire them — is the widely used baseline: it leaves enough margin to cover overhead, fund growth, and absorb the customers who churn early. Below 3:1, growth gets expensive fast. Well above 5:1 or 6:1 can actually mean you're underspending on marketing and leaving growth on the table, not that you're doing great.

How do I use max CAC to set a marketing budget?

Max recommended CAC is a ceiling per customer, not a number to hit exactly. Compare it against what you actually pay per new customer today, by channel — ads, referrals, SEO, direct mail. Any channel bringing in customers below your max CAC has room to scale; any channel above it is quietly losing you money on every new customer, even if the leads look cheap on a cost-per-lead basis.

Why does retention matter so much to LTV?

Retention years is a direct multiplier on lifetime revenue, so small changes compound. A customer who stays 5 years instead of 2 is worth roughly two and a half times as much before you've changed a single price or margin — which is why service agreements, maintenance plans, and simply staying in touch after the first job are some of the highest-leverage ways to raise LTV without raising CAC at all.