LTGP:CAC calculator

What LTGP:CAC measures

LTGP:CAC compares the lifetime gross profit of a customer to what it cost to acquire that customer. A ratio of 4:1 means every dollar you put into acquisition comes back as four dollars of gross profit over the life of the customer.

Alex Hormozi popularized the metric, and it has become the cleanest single read on whether a growth engine works. Most teams still track LTV:CAC, which puts revenue in the numerator and flatters every business with real delivery costs. Gross profit is the money actually available to pay for the next customer, so it belongs in the numerator instead.

The number moves for four reasons: price, margin, retention and acquisition cost. Any lever you pull in marketing, product or pricing shows up here, which is why it works as a single north star that a whole company can point at.

How to read your number

• Below 1:1. Each customer costs more to acquire than they return in gross profit. Growth here makes losses larger.
• 1:1 to 3:1. Acquisition pays for itself, but very little is left over to fund the next round of growth or cover overhead.
• 3:1 to 10:1. The healthy range. Every acquisition dollar comes back several times over, so more spend usually means more profit.
• Above 10:1. Strong economics, and often a sign of underspending. There is usually room to buy more customers at a higher cost per acquisition.

Payback period sits alongside this number. A 5:1 ratio that takes 30 months to return cash is a very different business from a 5:1 ratio that pays back in 3 months, so read the two together.

Why I split CAC in two

Front-end CAC is the media cost of producing a customer. It answers one question: what did the ads have to spend to get someone to buy or to book. This is the number a media buyer can move week to week.

Back-end CAC is the sales cost of closing that customer. Commissions, bonuses and the loaded cost of the rep time spent per close. Blending the two hides which side is broken. When the ratio drops, splitting CAC tells you in a minute whether media got more expensive or the sales team got less efficient.

For the longer version, including how I ran this metric across a marketplace, a subscription product and a services business, read how I ran three business models on this one number.