LTV : CAC Calculator
Customer acquisition cost from spend and new customers, lifetime value on gross margin and churn (with expansion and discounting), the LTV:CAC ratio, CAC payback months and what it takes to reach 3:1.
| Customer acquisition cost (CAC) | — |
|---|---|
| Gross margin per customer per month | — |
| Average customer lifetime | — |
| Customer lifetime value (LTV) | — |
| CAC payback period | — |
| Verdict | — |
| To reach 3:1 | — |
In short
CAC = sales and marketing spend ÷ new customers; LTV = monthly gross margin per customer ÷ monthly churn. ARPU 80 at 75% margin and 3% churn gives an LTV of 2,000; with 60,000 spent for 150 customers CAC is 400, so LTV:CAC is 5:1 and payback 6.7 months. The usual benchmark is 3:1 or better with payback under 12 months.
Who this is for: SaaS founders, marketers and investors checking unit economics.
The unit-economics trio
| Metric | Formula | Benchmark |
|---|---|---|
| CAC | Sales + marketing spend ÷ new customers | Falls as channels mature; rises with competition |
| LTV | ARPU × gross margin ÷ monthly churn | — |
| LTV : CAC | LTV ÷ CAC | ≥ 3:1 healthy; > 5:1 under-investing; < 1:1 losing money |
| CAC payback | CAC ÷ monthly gross margin per customer | < 12 months SMB, < 18–24 enterprise |
- Churn is the lever: halving churn doubles LTV. A 3% monthly churn means a 33-month lifetime; 1% means 100 months.
- Use gross margin, not revenue. LTV on revenue flatters the ratio by 20–40%.
- Blended vs paid CAC: organic signups lower the blended figure; investors also want paid CAC (ad spend ÷ paid customers) to judge whether growth spend scales.
- Expansion revenue (upgrades, more seats) can offset churn — net revenue retention above 100% makes the simple formula understate LTV; enter it to see the effect.
Assumptions
- CAC = spend ÷ new customers; LTV = margin per month × Σ (1 − churn)^t (1 + expansion)^t ÷ (1 + monthly discount)^t, closed form while the ratio is below 1.
- Payback = CAC ÷ monthly gross margin per customer.
- Changes needed for 3:1 use the simple margin ÷ churn formula.
Worked example
CAC = 400. Gross margin per customer = 60 a month; lifetime 33.3 months → LTV = 2,000. LTV:CAC = 5.0:1 and payback 6.7 months — strong economics; at this ratio the business could spend more on acquisition. If churn were 6%, LTV would halve to 1,000 and the ratio to 2.5:1.
Frequently asked questions
What is a good LTV to CAC ratio?
3:1 is the widely used benchmark for SaaS; 4–5:1 is excellent; above that, growth is probably being under-funded. Below 1:1 means each customer is acquired at a loss.
What costs go into CAC?
All sales and marketing: ad spend, agency and tool costs, SDR and marketing salaries, commissions, events — divided by the customers those efforts produced.
Should LTV use revenue or gross margin?
Gross margin. Revenue-based LTV is common in marketing decks but overstates the value available to repay CAC.
How do I convert annual churn to monthly?
Monthly ≈ 1 − (1 − annual)^(1/12). For 30% annual churn that is about 2.9% a month; dividing by 12 (2.5%) is close enough for rough work.
How do I calculate customer lifetime value?
Monthly revenue per customer × gross margin ÷ monthly churn; adjust for expansion revenue and a discount rate for a stricter figure.
What is a good CAC payback period?
Under 12 months for SMB SaaS, under 18–24 months for enterprise sales.
Related calculators
Found an error? Report it — tell us the inputs, the result you got, what you expected and the rule or source. Confirmed corrections are published within a week.
Ready to build your next digital solution?
Send the brief and you get a scoped response with approach, milestones and a fixed price range. Not a sales call.
A 30-minute call with the engineer who would run your project
Within 2 business daysA written scope: approach, module breakdown, milestones, fixed price range
Within 5 business daysYou decide. No retainer, no obligation, and the scope document is yours to keep either way
Your timelineSend your brief
Three fields to start. Add project details if you have them.