Max Allowable CAC Calculator

CAC is customer acquisition cost: what you spend on ads to win one new customer. Max allowable CAC is the most you can spend and still meet your goals for profit and cash. It's the ceiling you set before you look at ad results, so you can tell at a glance whether a campaign is working.

Two limits usually apply. The first is size: a customer should bring back several times what they cost over their lifetime. The second is time: you need the cash back soon enough to keep running. This calculator works out both and uses whichever is lower.

LTV                  = margin per order ÷ (1 − repeat rate)
max CAC by ratio     = LTV ÷ target LTV:CAC ratio
max CAC by payback   = expected margin from orders inside the payback window
max allowable CAC    = the lower of the two
lowest first-order ROAS = first order value ÷ max allowable CAC

• LTV is lifetime margin per customer. Enter your own if you have it, or the calculator estimates it from margin per order and repeat rate.
• LTV:CAC ratio: how many times its cost a customer should bring back. A 3:1 target means a $30.00 customer should earn $90.00 in margin.
• Payback window: orders on day 0, then every few days, until the window ends. Each later order is a little less likely, so it counts for a little less.
• Lowest first-order ROAS turns max CAC into a number you can check in an ad report: first order value ÷ what you paid for the customer.

A made-up brand makes $12.00 of margin per order. Customers reorder every 45 days, and 70% place each next order. It wants a 3:1 LTV:CAC ratio and its money back within 180 days. These are the calculator's example values.

1. LTV = $12.00 ÷ (1 − 0.7) = $40.00.
2. Max CAC by ratio = $40.00 ÷ 3 = $13.33.
3. In 180 days a customer can place 5 orders (days 0, 45, 90, 135 and 180). Their expected margin adds up to $33.28, so max CAC by payback = $33.28.
4. The lower limit wins: max allowable CAC is $13.33, set by the LTV:CAC ratio.
5. With a $32.00 first order, ads need a first-order ROAS of at least $32.00 ÷ $13.33 = 2.40.

If the brand needed its money back within 30 days, only the first order would count. The payback limit would drop to $12.00 and become the tighter one.

3:1 is the most quoted rule of thumb, and it came from subscription software, so treat it as a starting point. The right ratio depends on your margin before other costs and how much you trust your LTV:

• Below 1:1: customers cost more than they bring in. Each new one loses money.
• Around 1:1 to 2:1: you roughly get your ad spend back, with little left for overhead, team and growth.
• Around 3:1: a common target that leaves room for costs that LTV doesn't count.
• Far above 3:1: you may be underspending. Raising CAC could win more customers who still pay back.

• Using revenue LTV. A revenue LTV makes every customer look worth more than they are. Use margin.
• Ignoring cash. A customer worth $100 over five years doesn't help if you run out of cash in five months. Set a payback window too.
• Comparing with platform-reported CAC. Ad platforms count customers who would have bought anyway, so their CAC looks lower than it is. Compare max CAC with measured CAC.
• Using one LTV for every channel. Customers from different channels and products can repeat at very different rates.

Max CAC is only useful if the CAC you compare it with is real. If your ads report $10.00 per customer but half those customers would have bought anyway, your true CAC is $20.00, and a campaign that looked well under the limit is over it.

A holdout test measures the customers your ads caused. Plan one with the holdout test calculator, see how fast customers pay back with the CAC payback calculator, and check whether free samples fit under your limit with the sample conversion calculator.

Spillmark measures what your Meta ads cause on Amazon and keeps each result on record. See how lift is calculated.