Why LTV:CAC ratio and payback period tell different stories
A healthy LTV:CAC ratio (commonly 3:1 or better) tells you a customer is worth acquiring in principle, but it says nothing about how long it takes to actually recover that acquisition cost in cash — a business can look great on the ratio and still run into a cash flow wall funding growth if payback stretches to 12+ months. This calculator reports both numbers together deliberately: the ratio for the "is this customer worth it" question, and payback period in months for the "can we actually afford to keep acquiring at this rate" question, because a healthy business needs a good answer to both.
The LTV figure here is a simplified model — average order value × purchase frequency × retention years × gross margin — built for a fast directional read, not a full cohort-based customer valuation model that tracks actual retention curves by acquisition month. Treat it as a planning number that gets more accurate the more your actual customers resemble the "average" customer you entered.
For the ad-spend side of this equation specifically, pair this with the ROAS calculator for e-commerce or the break-even CPL calculator for lead-gen, and see the pricing guide for how retainer structures scale alongside these numbers as spend grows.