CAC : LTV Ratio Calculator
Enter your average monthly revenue per account (ARPA), gross margin, monthly churn rate, and customer acquisition cost. The calculator shows your LTV, LTV:CAC ratio with a plain-English verdict, and how many months it takes to recover what you spent to acquire each customer.
LTV : CAC Ratio
4.0:1
healthy SaaS benchmark (≥3:1)
Customer LTV
$1,600.00
gross-margin-adjusted
CAC Payback
5.00 mo
months to recover CAC
Monthly Gross Profit / Customer
CAC Recovery Over Time
Month 0–12 · Lines cross at payback ≈ 5.00 mo
Month-by-month recovery schedule
| Month | Cum. GP | % Recovered |
|---|---|---|
| 1 | $80.00 | 20.00% |
| 2 | $160.00 | 40.00% |
| 3 | $240.00 | 60.00% |
| 4 | $320.00 | 80.00% |
| 5(breakeven) | $400.00 | 100.00% |
| 6(breakeven) | $480.00 | 120.00% |
| 7(breakeven) | $560.00 | 140.00% |
| 8(breakeven) | $640.00 | 160.00% |
How it works
Customer Lifetime Value (LTV) is the total gross profit a single customer generates before they churn. The formula is LTV = ARPA × gross margin ÷ monthly churn rate. Dividing by churn converts the stream of monthly gross profit into a lump-sum present value, assuming churn is constant — a standard simplification used at the planning stage. A 5% monthly churn means the average customer stays roughly 20 months, so LTV ≈ 20 × monthly gross profit.
The LTV:CAC ratio is the single most-watched unit economics metric in SaaS. It answers: for every dollar spent acquiring a customer, how many dollars of lifetime value does the business get back? The widely cited benchmark bands are: below 1× (losing money), 1–3× (marginal), 3–5× (healthy), above 5× (best in class). These thresholds come from David Skok's widely cited SaaS Metrics research and are baked into the verdict labels shown by this calculator. A ratio below 3× usually signals the need to cut acquisition cost, raise price, improve retention, or improve margin.
CAC payback months answers a different question: how long until each new customer has paid back what it cost to win them? The formula is CAC ÷ (ARPA × gross margin). Unlike the LTV:CAC ratio, payback ignores what happens after breakeven — it is a cash-flow metric that matters most when capital is tight. A 12-month payback is generally considered acceptable for growth-stage SaaS; sub-6-month is strong. Neither metric replaces the other: a high LTV:CAC with long payback can still create cash-flow pressure; a fast payback with low ratio signals margin or churn problems.
Frequently asked questions
Why does this calculator use gross-margin-adjusted LTV, not revenue LTV?+
Revenue LTV (ARPA ÷ monthly churn) inflates the number by ignoring what it costs to deliver the service. Gross-margin LTV — ARPA × gross margin ÷ churn — represents what the company actually keeps from each customer and is the figure that should be compared against CAC. Using revenue LTV can make unit economics look three to four times better than reality for a business with 25–30% margins. This calculator uses gross-margin LTV throughout. If you want to run the revenue-only version, set gross margin to 100%.
What counts as CAC?+
CAC should include all costs that vary with acquiring customers: sales team salaries and commissions, marketing spend, ad budget, demand-gen headcount, and the cost of free trials or onboarding resources consumed before conversion. Exclude product and infrastructure costs — those belong in gross margin. A common mistake is using only ad spend as CAC; this understates the true cost and leads to overconfident unit economics. Fully-loaded CAC divided by new customers acquired in a period is the most honest figure.
Is a 3:1 LTV:CAC ratio always enough?+
The 3:1 benchmark is a rule of thumb, not a guarantee of health. A business with 36-month payback and 3:1 ratio may still face serious cash-flow problems growing quickly. Conversely, a business with a 1.5-month payback and 2:1 ratio may be perfectly healthy if capital is cheap and churn is falling. Use the ratio alongside payback months, net revenue retention, and your fundraising or profitability horizon. This calculator shows both metrics deliberately — neither alone tells the full story.