LTV : CAC Ratio Calculator
Model customer lifetime value against acquisition cost, with payback period.
Healthy, at 6.7:1 each acquisition returns well above the 3:1 rule of thumb. Room to spend more if payback (5.0 mo) stays reasonable.
Uses gross-margin LTV (a conservative, CFO-friendly definition). Assumes steady-state churn and margin.
About this calculator
LTV:CAC is the single ratio investors and operators use to judge whether a growth engine actually works, whether it costs you more to acquire a customer than that customer is ever worth. This calculator builds both sides from primary inputs, ARPA, margin and churn on the LTV side, spend and new customers on the CAC side, rather than asking you to already know LTV and CAC as finished numbers.
How to use it
- Under Lifetime value, enter monthly ARPA (average revenue per account), gross margin, and monthly churn rate.
- Under Acquisition cost, enter total sales and marketing spend for the period and the number of new customers that spend acquired.
- Read the LTV:CAC ratio, and check it against the 3:1 rule of thumb shown in the verdict.
- Use CAC payback, months to recover CAC from gross-margin revenue, as a cash-flow check alongside the ratio.
Methodology
Average customer lifetime is 1 ÷ monthly churn rate. At 3% monthly churn, average lifetime is 33.3 months.
LTV here is gross-margin LTV: ARPA × gross margin × average lifetime. Using gross margin rather than raw revenue is the more conservative, CFO-defensible definition, it reflects what a customer is actually worth after cost of delivery, not top-line revenue.
CAC is total sales and marketing spend for the period ÷ new customers acquired in that period. This is a blended CAC across all channels, not per-channel.
CAC payback in months is CAC ÷ (ARPA × gross margin), how many months of gross-margin revenue from one customer it takes to recover what was spent acquiring them.
The 3:1 ratio and payback benchmarks used in the verdict are common SaaS heuristics, not universal laws, capital-efficient businesses often run higher, venture-backed growth-stage companies sometimes run lower deliberately to buy market share.
FAQ
Revenue LTV overstates what a customer is worth because it ignores cost of delivery, support, hosting, cost of goods. Gross-margin LTV (ARPA × margin × lifetime) is the number a CFO or investor will actually underwrite, since it reflects money that's really available to spend on acquiring the customer in the first place.
It's a widely used SaaS heuristic, not a hard rule. Below 1:1 you're losing money on every customer. Between 1:1 and 3:1 you're profitable but thin. Above 3:1 with fast payback, you likely have room to spend more aggressively on acquisition without hurting unit economics.
This calculator assumes a single blended churn rate, which understates LTV for your best cohorts and overstates it for your worst. If cohorts diverge significantly, run this separately for your strongest and weakest segments rather than relying on one blended number.
No, use total sales and marketing spend, salaries, tools, ad spend, everything that went into acquiring those new customers. A CAC that only counts media spend and ignores sales headcount will look artificially efficient.