Calculate your CAC, customer LTV, LTV:CAC ratio, and CAC payback period in real time. Built for B2B service businesses evaluating growth investment.
Healthy B2B service businesses run LTV:CAC ratios of 3:1 or higher and CAC payback under 18 months. Below those thresholds, unit economics are tight.
Every service business has a ceiling on growth, and it is almost never ambition. It is the relationship between what one new customer costs to win and what that customer is worth once the work is delivered and paid for. Get that relationship right and marketing becomes a machine you can feed. Get it wrong and every extra dollar of spend accelerates a loss.
The trouble is that most owners carry a rough figure in their head that only counts advertising. Real acquisition cost includes the salesperson's time on unqualified calls, the proposal that took four hours and went nowhere, the software subscriptions, and the share of an owner's week spent on business development. Once those are in, the number is usually somewhere between two and four times the remembered one.
This tool asks for both sides of the equation because neither means anything alone. A three thousand dollar acquisition cost is reckless for a business whose customers spend two thousand dollars once, and conservative for one whose customers stay four years on a monthly agreement.
One more habit worth building: run the calculation twice, once with the figures you believe and once with the figures your bank statements and invoices support. The gap between those two runs is usually where the real decision sits, because it shows how much of your current confidence rests on estimation rather than evidence. Owners who close that gap tend to make faster budget decisions afterwards, since they no longer have to argue about the inputs every time the subject of increasing spend comes up.
Two of these inputs move the output far more than the others, and knowing which changes where you spend your attention.
Commission, salary time spent on prospects who never buy, travel to site visits and the hours spent writing quotes are all part of winning the customer. Businesses that count only advertising typically understate acquisition cost by forty percent or more, which makes an unprofitable channel look fine for a year.
A customer paying four thousand dollars at fifty five percent margin contributes twenty two hundred. Only that contribution can repay acquisition cost. Running the maths on revenue rather than margin is the single most common reason a business with growing sales runs out of cash.
Extending average retention from twelve months to eighteen raises lifetime value by half without winning a single extra customer. In practice that is usually cheaper to achieve than reducing acquisition cost by the same proportion, and it also improves referral volume.
Lifetime value can look healthy while payback takes two years, and that combination will strangle a business without external funding. Payback tells you how much cash sits tied up in each new customer before they become self-funding, which sets the pace at which you can safely increase spend.
Yes, valued at what you would pay someone to do it. Owner-led selling makes acquisition cost look artificially low, right up until the owner runs out of hours and growth stops for reasons nobody can explain from the reports.
Three to one is the usual floor for sustainability. Between three and five is a healthy operating range. Above five suggests you are leaving growth on the table rather than running an unusually efficient business.
Cost per lead measures the top of the funnel and can be improved by generating cheaper and worse leads. Acquisition cost measures the bottom and cannot be gamed the same way, which is why it is the number worth reporting to an owner.
Usually, yes. The cheapest demand gets captured first, and expansion reaches audiences with less existing intent. Plan for a gradual rise rather than assuming today's efficiency holds at three times the volume.