How to use the max ad spend calculator
The starting point for any spend cap is allowable CAC = LTV per customer ÷ target LTV-to-CAC multiple. With a target of three, one third of LTV is what you can spend to win a customer. Add target new customers for a total budget cap, and a click-to-customer rate for the maximum cost per click.
The target multiple is an input, not a hardcoded number. Three times is often quoted but it is not a universal answer: payback period, churn and cost structure all change the multiple you need. The result label prints the multiple you entered, so trying several values is the point of the tool.
Enter your current CAC and you also see today's multiple and the distance to the cap. A negative difference means you are already spending past the cap. Use contribution-margin LTV, and if payback is slow, a windowed LTV such as 12 months is safer for cash-flow decisions.
Frequently asked questions
Three times is widely quoted but it is not a rule for every business. Fast payback with low churn can work at a lower multiple, while high cost of goods or slow payback needs a higher one. This calculator uses only the multiple you enter.
Contribution-margin LTV is the safer input. Revenue-based LTV leaves out cost of goods, shipping and payment fees, which makes the allowable CAC look higher than it really is.