Free calculator
Is each customer worth what you pay for them?
Enter what a customer pays, your gross margin, churn and acquisition cost. See their lifetime value, your LTV:CAC ratio and how many months it takes to earn the acquisition cost back.
Your numbers
Average monthly revenue per paying account (ARPA).
Revenue minus hosting, support and payment fees.
Share of customers who cancel each month.
Sales and marketing spend ÷ new customers (CAC).
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LTV : CAC
Healthy4.4 : 1
Each customer earns back their cost 4.4 times. This is the range most SaaS investors look for.
- Lifetime value (LTV)
- $2,667
- CAC payback
- 7.5 months
- Average lifetime
- 33.3 months
- Gross profit per month
- $80
Gross profit from one customer
Payback in 7.5 months is fast: the cash you spend on growth comes back within the year.
Quick answer
How do you calculate LTV:CAC?
LTV = monthly revenue per customer × gross margin ÷ monthly churn. Divide LTV by CAC to get the ratio. A customer paying $100 a month at 80% margin and 3% churn is worth $2,667. If you spent $600 to win them, LTV:CAC is 4.4 : 1 and you earn the $600 back in 7.5 months.
How to use the LTV:CAC calculator
- Enter revenue per customer
Take last month’s recurring revenue and divide it by paying customers. Leave out one-off setup fees.
- Enter gross margin
Revenue minus the costs of serving customers: hosting, third-party APIs, support and payment fees. Most software lands between 70% and 85%.
- Enter monthly churn
Customers lost in the month divided by customers at the start of the month. Average three to six months to smooth out noise.
- Enter CAC and read the result
Divide last quarter’s sales and marketing spend by new customers won in that quarter. The calculator shows LTV, the ratio and the payback period. Copy the link to share it.
How the calculator works
Each month a customer leaves you their payment times your gross margin. That is their gross profit per month. On average they stay 1 ÷ churn months, so 3% churn means about 33 months.
Lifetime value is gross profit per month times that lifetime. We use gross profit, not revenue, because revenue overstates what a customer is worth: you still pay to host and support them.
CAC payback is the acquisition cost divided by gross profit per month: the months a customer must stay before they have paid for themselves. If churn is 0%, we cap the lifetime at 60 months, since no customer base keeps everyone forever.
LTV = ARPA × gross margin ÷ churn
LTV:CAC = LTV ÷ CAC
Payback (months) = CAC ÷ (ARPA × gross margin)What a good LTV:CAC ratio looks like
The common benchmark is 3 : 1 or better. David Skok’s SaaS Metrics 2.0 sets it as the bar for a healthy SaaS business, with the best companies reaching 7 or 8. Under 1 : 1, every new customer loses money. Between 1 and 3, customers pay back but leave little to fund growth. Above 5, you are often growing slower than you could afford to, and spending more on acquisition is usually the right move.
Why payback matters as much as the ratio
A 4 : 1 ratio that takes 30 months to pay back still drains cash, because you pay the CAC today and collect the profit over two and a half years. Skok’s guideline is to recover CAC within 12 months, and the best businesses do it in 5 to 7. If payback is longer than the average customer lifetime, most customers leave before they have paid for themselves.
How to improve your LTV:CAC
Churn has the biggest effect: cutting monthly churn from 5% to 3% lifts LTV by two thirds without any other change. Price is next. Annual plans and a higher entry tier raise ARPA and usually lower churn too. On the CAC side, channels with no media spend pull the blended cost down. Directory listings, launch platforms and content bring customers whose acquisition cost is mostly your time.
Blended CAC vs paid CAC
Blended CAC divides all sales and marketing spend by all new customers, including the ones who found you through search or word of mouth. Paid CAC counts only the customers and spend from paid channels. Blended CAC flatters the ratio. Use paid CAC when you decide whether to put more money into ads.
LTV:CAC questions
- What is a good LTV to CAC ratio?
- 3 : 1 or higher is the usual benchmark for SaaS. Below 1 : 1 you lose money on each customer. Above 5 : 1 you can probably afford to spend more on acquisition and grow faster.
- How do you calculate customer lifetime value?
- Multiply average monthly revenue per customer by gross margin, then divide by monthly churn. At $50 a month, 80% margin and 4% churn, LTV is $50 × 0.8 ÷ 0.04 = $1,000.
- What is CAC payback period?
- The number of months a customer must stay before the gross profit they bring in covers what you spent to acquire them. It is CAC divided by monthly gross profit per customer. Under 12 months is good for SaaS selling to small businesses.
- Should LTV use revenue or gross margin?
- Gross margin. Revenue-based LTV ignores what it costs to serve the customer, so it overstates what you can afford to spend on acquiring them.
- What if my churn is zero?
- The formula would give an infinite lifetime, so the calculator caps it at 60 months. Early products often show zero churn for a few months. That usually means too little data, not customers who stay forever.
- What costs go into CAC?
- All sales and marketing spend for the period: ad spend, sales and marketing salaries, tools, agencies, launch and listing fees. Divide it by the new customers won in the same period.
- Can the LTV:CAC ratio be too high?
- Yes. A ratio above 5 : 1 often means you are under-spending on growth. Competitors with the same unit economics who spend more will win customers faster.
- Is my data stored?
- No. The calculator runs in your browser and sends nothing to our servers. The share link puts your numbers in the URL, so only people you send it to see them.