LTV:CAC Ratio Calculator
Is your growth profitable? Calculate customer lifetime value, LTV:CAC ratio, CAC payback period, and model how churn improvements affect your unit economics. Works with any currency.
Try another scenario
Calculate for your country ▼
How to Use This Calculator
Tab "Ratio Dashboard"
Enter your monthly ARPU (average revenue per user), gross margin percentage, monthly churn rate, and customer acquisition cost (CAC). The calculator computes your Customer Lifetime Value and LTV:CAC ratio, then rates your unit economics: red for losing money (below 1:1), orange for weak (1-3), green for healthy (3-5), and blue for strong (above 5).
Tab "CAC Payback"
Enter your CAC and monthly gross profit per customer. The result shows how many months it takes for a customer to pay back their acquisition cost. Under 12 months is healthy for most subscription businesses; under 6 months is excellent.
Tab "Improve Unit Economics"
Model the impact of reducing churn. Enter your ARPU, gross margin, CAC, current churn rate, and a target improved churn rate. See how the LTV and LTV:CAC ratio change, plus the dollar value of each percentage point of churn reduction.
The Formulas
LTV = (ARPU × Gross Margin%) / Monthly Churn Rate
LTV:CAC Ratio:
LTV:CAC = LTV / CAC
CAC Payback Period:
Payback (months) = CAC / (ARPU × Gross Margin%)
Change in LTV from churn improvement:
ΔLTV = ARPU × Gross Margin × (1/New Churn − 1/Old Churn)
Average customer lifetime:
Lifetime (months) = 1 / Monthly Churn Rate
All calculations use simplified steady-state models. Real unit economics may differ based on expansion revenue, cohort behavior, seasonality, and discount rates.
Worked Examples
Example 1 — SaaS company with healthy unit economics
A B2B SaaS product charges $100/month per customer with 75% gross margin. Monthly churn is 3%. They spend $400 to acquire each customer.
With a 6.3:1 ratio, this company has excellent unit economics. They could afford to invest more aggressively in customer acquisition.
Example 2 — E-commerce subscription with tight margins
A subscription box service charges $45/month with 40% gross margin. Monthly churn is 12%. CAC is $25 through social media ads.
Despite lower ARPU and higher churn, the very low CAC produces strong unit economics. The CAC payback is just 1.4 months.
Example 3 — Churn improvement impact
A company with $85 ARPU and 70% gross margin reduces monthly churn from 5% to 3%. CAC is $500.
A 2 percentage point reduction in churn increased LTV by 67% and moved the business from weak to healthy unit economics.
Understanding LTV:CAC
What Is LTV:CAC Ratio?
The LTV:CAC ratio compares how much a customer is worth over their entire relationship with your business (Lifetime Value) to how much you spent to acquire them (Customer Acquisition Cost). It is the single most important unit economics metric for any recurring revenue business.
The 3:1 Benchmark
A 3:1 ratio is the widely accepted benchmark for healthy SaaS businesses. Below 3:1, your growth spending outpaces the value customers generate. Above 5:1, you are likely under-investing in growth and leaving market share on the table. The sweet spot for most venture-backed companies is 3:1 to 5:1.
Why Churn Dominates LTV
Because LTV = gross profit / churn, the relationship between churn and LTV is hyperbolic, not linear. Reducing churn from 10% to 5% doubles LTV. Reducing from 5% to 2.5% doubles it again. This is why even small churn improvements have an outsized impact on unit economics.
CAC Payback vs LTV:CAC
LTV:CAC tells you the total return on your acquisition investment. CAC payback tells you how quickly you get your money back. Both matter: a company can have a great LTV:CAC ratio but a long payback period, which creates cash flow problems. Ideally you want both a ratio above 3:1 and payback under 12 months.
Limitations of This Model
This calculator uses a simplified steady-state model. It assumes constant ARPU, churn, and margins. Real businesses have expansion revenue (upsells), non-linear churn curves, and cohort-specific behavior. For early-stage companies with limited data, these formulas provide a useful starting point. For mature companies, cohort-based LTV analysis is more accurate.