How do I calculate LTV and CAC?

Lifetime value is monthly revenue per customer multiplied by gross margin and average lifetime in months. Divide LTV by customer acquisition cost to get the ratio. AED 9,600 against AED 1,000 is 9.6:1.

What is a good LTV to CAC ratio?

3:1 is the widely used benchmark. Below it, acquisition is too expensive relative to what a customer is worth; well above it usually signals underinvestment in growth.

CAC & LTV Calculator, Unit Economics

Summary Response

"Lifetime value is monthly revenue per customer multiplied by gross margin and average lifetime in months. At AED 500 monthly revenue, 80% gross margin and a 24-month lifetime, LTV is AED 9,600: against AED 1,000 acquisition cost that is a 9.6:1 ratio and a 2.5-month payback."

Reading Unit Economics

A ratio of 3:1 or better is the venture benchmark; far above it often means you are underspending on growth rather than winning.

Use gross profit, not revenue. LTV built on revenue ignores the cost of serving the customer and flatters every ratio.

CAC payback under 12 months matters more than the ratio for a self-funded business, because it determines how fast you can recycle cash into growth.

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