Free · Startup calculator

LTV to CAC Ratio Calculator

Find out whether each customer earns back what they cost — and how long that takes.

Free·No signup·Runs in your browser

Calculated

3.2 : 1

LTV to CAC ratio

Signal Healthy

Monthly revenue per account $100 · Gross margin 80%

Price
Free
Inputs
4
Account needed
No
Last updated
20 September 2026

Use the ltv:cac calculator

This free calculator runs in your browser. Nothing is sent to a server, and no account or email is required. Enter:

  • Monthly revenue per account — Average monthly bill per customer.
  • Gross margin — Revenue left after hosting, payments and support costs.
  • Monthly churn — Share of customers who cancel each month.
  • Customer acquisition cost — What it costs to win one customer.

How it works

  1. 1

    Enter your numbers

    Fill in monthly revenue per account, gross margin, monthly churn and customer acquisition cost. Nothing is sent anywhere — the maths runs in your browser.

  2. 2

    Press calculate ltv:cac

    One button. Change any input afterwards and the answer updates as you type.

  3. 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.

More on ltv:cac

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.

Accuracy and limitations

  • 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.

Frequently asked questions

How do you calculate LTV?
Multiply monthly revenue per account by gross margin, then divide by your monthly churn rate. $100 a month at 80% margin with 5% churn gives ($100 x 0.8) / 0.05 = $1,600.
What is a good LTV to CAC ratio?
Three to one or better is the usual benchmark. Below 1:1 you lose money on each customer. Above 5:1 often signals underinvestment in acquisition rather than exceptional efficiency.
Why should LTV use gross margin instead of revenue?
Because you do not keep revenue — you keep margin. Hosting, payment fees and support all come out before profit. Using revenue overstates lifetime value by the entire cost of serving the customer.
What is CAC payback period?
How many months of gross margin it takes to recover the cost of acquiring a customer: CAC divided by monthly gross margin per customer. Under 12 months is strong for SMB, under 18 for enterprise.
What if my churn is zero?
Lifetime value becomes mathematically unbounded, which is a sign the period is too short rather than that customers stay forever. Use a longer window, or a conservative estimate, until you have real churn data.

More ways to run the numbers.

  • CAC Calculator What it actually costs to win one customer. The input that lifetime value, payback and every paid channel decision depend on. Open →
  • Churn Rate Calculator How fast customers leave and what that does to average lifetime. Small churn improvements move lifetime value more than price changes do. Open →
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