Free tool
SaaS LTV & LTV:CAC Calculator
Find out whether each customer earns back what they cost — and how long that takes.
Whether a customer earns back what they cost, and how long that takes. CAC on its own cannot tell you either.
- Monthly revenue per account
- Gross margin
- Monthly churn
- Customer acquisition cost
Calculate LTV:CAC
Example
Monthly revenue per account $100 · Gross margin 80%
3.2 : 1
LTV to CAC ratio
Signal Healthy
How it works
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1
Enter your numbers
Fill in monthly revenue per account, gross margin, monthly churn and customer acquisition cost. Change a number and the answer updates.
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2
Press calculate ltv:cac
One button. Change any input afterwards and the answer updates as you type.
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3
Read the result
You get ltv to cac ratio, plus lifetime value, cac payback, average lifetime.
How the LTV:CAC ratio works
Lifetime value is the gross margin you keep from a customer across their whole time with you. Divide monthly revenue per account by your churn rate to get lifetime revenue, then multiply by gross margin. At $100 a month, 80% margin and 5% monthly churn, lifetime value is $1,600.
The ratio divides that by what the customer cost to acquire. A $500 CAC against $1,600 of lifetime value is 3.2:1 — right at the threshold investors look for.
Use gross margin, not revenue
This is the single most common error in LTV maths. Billing a customer $100 a month at 80% gross margin means you keep $80, not $100. Using the revenue figure inflates lifetime value by exactly the cost of serving the customer, and for businesses with real infrastructure or support costs that overstatement can be 30% or more.
Subtract hosting, payment processing, third-party API costs and support before you calculate. The number gets smaller and far more useful.
Why payback period matters more than the ratio
A 4:1 ratio looks healthy, but if it takes three years to recover the acquisition cost, growth will drain your bank account long before those economics show up. The ratio tells you whether a customer is profitable eventually. Payback tells you whether you can afford to acquire the next one.
CAC payback is acquisition cost divided by monthly gross margin per customer. Under 12 months is strong for SMB, under 18 for enterprise. Beyond 24 months you are effectively financing your customers, and you need either cheaper acquisition or a higher price.
Reading your ratio
Below 1:1 you lose money on every customer and growth makes it worse. Between 1:1 and 3:1 the model works but leaves little room for overheads. Between 3:1 and 5:1 is the range investors expect to see.
Above 5:1 is usually not a victory lap — it often means you are underspending on acquisition and leaving growth on the table. If your ratio is 8:1, the interesting question is how many more customers you could profitably buy.
What this does not do
- Assumes churn stays constant. Real churn is highest in the first months and falls for the customers who survive, so a single rate flattens the curve.
- Ignores expansion revenue. If accounts grow over time, this understates lifetime value — sometimes substantially.
- The ratio says a customer is profitable eventually. Payback period says whether you can afford to buy the next one, which is usually the more urgent question.