LTV:CAC Calculator
Calculate your Shopify store's Customer Lifetime Value (LTV), Customer Acquisition Cost (CAC), LTV:CAC ratio, and payback period. Benchmark your unit economics against ecommerce targets.
📈 Lifetime Value Inputs
Shopify Analytics → Returning customers report
After COGS + payment fees, before marketing
Use 0 for simple LTV; 10% is a common SaaS/eCom default
💸 Acquisition Cost Inputs
All paid channels: Meta, Google, TikTok, influencers, etc.
Shopify Analytics → Customers → New customers
Plan fee, apps, staff — included in fully-loaded CAC
LTV:CAC Benchmark Guide
| LTV:CAC Ratio | Signal | What It Means | Action |
|---|
LTV:CAC Sensitivity — CAC vs Margin
How your ratio changes as you vary gross margin (columns) at different CAC levels (rows). Your current values are highlighted.
Improvement Playbook
Frequently Asked Questions
What is a good LTV:CAC ratio for a Shopify store?
A healthy LTV:CAC ratio for ecommerce is 3:1 or higher — each customer generates 3× their acquisition cost. Below 1:1 you're losing money on every customer. Between 1–3× is marginal. Above 5:1 often means you're under-investing in growth and leaving revenue on the table.
How do I calculate LTV for my Shopify store?
LTV = AOV × Purchase Frequency (orders/year) × Gross Margin % × Customer Lifespan (years). Example: $85 AOV × 3 orders/year × 40% margin × 2 years = $204 LTV. Use Shopify Analytics 'returning customers' for frequency and cohort analysis for lifespan estimates.
How do I calculate CAC for a Shopify store?
CAC = Total Marketing Spend ÷ New Customers Acquired per month. Include all paid channels (Meta, Google, TikTok, influencer fees). Don't include organic — those customers have near-zero CAC. Shopify Analytics shows new vs returning customers.
What is CAC payback period and why does it matter?
CAC payback = CAC ÷ (Monthly gross profit per customer). It tells you how many months until a customer pays back their acquisition cost. Target under 6 months for bootstrapped stores; funded stores can tolerate 12–18 months. Beyond 24 months strains cash flow significantly.
How can I improve my LTV:CAC ratio on Shopify?
Three levers: (1) Increase LTV — email/SMS sequences, subscriptions, AOV upsells. (2) Reduce CAC — improve conversion rate, ad creative, add referral programs. (3) Improve margin — negotiate COGS, switch to Shopify Payments, remove low-ROI apps. Email retention is usually the fastest lever.
Should I include Shopify plan fees in my CAC calculation?
No — plan fees are fixed overhead, not variable acquisition costs. Include them in gross margin or operating costs. CAC should only include variable spend directly tied to acquiring new customers. However, payment processing fees do affect gross margin, which flows into LTV.
Understanding LTV and CAC for Shopify Stores
LTV (Customer Lifetime Value) and CAC (Customer Acquisition Cost) are the two most important metrics in ecommerce unit economics. Together, they tell you whether your business model is fundamentally profitable — regardless of revenue growth.
The LTV formula: LTV = AOV × Purchase Frequency × Gross Margin × Customer Lifespan. A more sophisticated version applies a discount rate to account for the time value of money — a customer who buys over 5 years is worth less in today's dollars than a customer who buys the same amount in 1 year.
Why gross margin matters so much: Increasing gross margin from 35% to 45% (by negotiating COGS or switching to Shopify Payments) increases LTV by 29% with no other changes. It's usually faster to improve margin than to increase purchase frequency.
Blended vs channel-specific CAC: This calculator uses blended CAC (total spend ÷ total new customers). For channel optimization, calculate CAC per channel (Meta-only spend ÷ Meta-attributed new customers). Your blended CAC should be below LTV/3 to maintain healthy unit economics across your whole acquisition mix.
Payback period for cash flow: A low LTV:CAC ratio isn't just about long-term profitability — it's about cash flow. If your CAC payback is 18 months, you're funding 18 months of customer value before you break even. That requires capital. Shortening payback to 6 months means you can reinvest revenue into acquisition much faster.
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