---
title: "LTV to CAC ratio: definition, formula and example"
description: "What a customer is worth divided by what they cost to win. Above 1, acquisition pays for itself within the horizon; how far above is the return."
url: https://offersuite.io/glossary/ltv-to-cac-ratio
updated: 2026-10-13
---

# LTV to CAC ratio

What a customer is worth divided by what they cost to win. Above 1, acquisition pays for itself within the horizon; how far above is the return.

## In plain words

The LTV to CAC ratio divides a customer's lifetime value by the cost of acquiring them. A ratio of 2 means every dollar spent on acquisition comes back as two dollars of margin over the horizon.

It is a compact way to ask whether growth is worth buying. Below 1, each new customer loses money and more spend loses more. The ratio says nothing about when the money comes back, which is why it is always read next to the payback period.

## Formula

- LTV to CAC = customer lifetime value over the horizon ÷ customer acquisition cost

## Worked example

A coffee subscriber is worth $53.29 over twelve months and costs $30.00 to acquire. The engine puts the ratio at 1.78.

After the acquisition cost, that is $23.29 of profit per subscriber over the year, first reached in month 5.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## A ratio built on revenue is not this ratio

Lifetime revenue over CAC gives a figure several times higher, and it is the one most often quoted. A subscriber who pays $400 a year and costs $100 to win is said to return four to one, when the margin on that revenue may barely cover the $100. Use margin.

## Using it

State the horizon with the ratio: a twelve-month ratio and a three-year ratio are different claims. Compute it per offer and per channel. And never read it alone. A ratio of 3 that takes two years to arrive can still run a growing brand out of cash.

## In Offer Suite

Offer Suite's simulator reports the ratio per option and blended, as the margin a customer earns over the horizon divided by their acquisition cost.

Source: Offer Suite's offer simulator.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Subscription payback calculator: CAC and churn** How much a subscriber's first order loses against what you paid to acquire them, how many renewals it takes to earn that back with churn, and in which month.](https://offersuite.io/calculators/subscription-payback)
- [Calculator **Subscription intro offer calculator** Subscribe and save, a discount on the first order, a free trial or a free product: each as a cohort of subscribers with the same costs, ranked on profit per visitor after acquisition.](https://offersuite.io/calculators/subscription-intro-offer)
- [Glossary **Customer lifetime value (LTV): definition** The profit a customer brings over the orders they stay for: the first order's margin plus each later order's, weighted by who is still buying.](https://offersuite.io/glossary/customer-lifetime-value)
- [Glossary **Customer acquisition cost (CAC): definition** What it costs to win one new customer: spend divided by customers won, or the cost of a visitor divided by the share of visitors who buy.](https://offersuite.io/glossary/customer-acquisition-cost)
- [Glossary **CAC payback period: definition, formula and example** How long a customer takes to earn back what they cost to acquire. With churn counted, it is later than the simple division suggests.](https://offersuite.io/glossary/cac-payback-period)