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LTV to CAC Ratio Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

Customer lifetime value is monthly revenue per customer × gross margin ÷ monthly churn. At $100 a month, an 80% margin and 3% monthly churn, LTV is about $2,667. If acquiring a customer costs $600, the LTV:CAC ratio is 4.4 and the acquisition cost is paid back in 7.5 months. A ratio of about 3 or more is a common target.

Unit economics

$
%
%
$

LTV:CAC ratio

4.4

About 3 or higher is a common benchmark for healthy growth.

Customer lifetime value
$2,667
CAC payback
7.5 months
Average customer lifetime
33.3 months

How this calculator works

Subscription businesses live or die by unit economics: how much gross profit a customer brings in over their lifetime compared with what it cost to win them. Lifetime value (LTV) uses gross profit, not revenue, because hosting, support and payment fees come out of every dollar.

With steady churn, the average customer stays 1 ÷ churn months, so LTV is monthly gross profit ÷ churn. CAC payback, the months of gross profit needed to recover acquisition cost, matters for cash flow: even a high ratio hurts if payback takes years.

The formula

Monthly gross profit
revenue per customer × gross margin
LTV
monthly gross profit ÷ monthly churn
LTV:CAC
LTV ÷ CAC
Payback
CAC ÷ monthly gross profit

Worked example

$100 a month at an 80% margin is $80 of gross profit per customer per month. With 3% monthly churn the average customer stays about 33 months, so LTV is $80 ÷ 0.03 = $2,667. Against a $600 CAC the ratio is 4.4 and payback takes 7.5 months.

Tips

  1. 01Calculate CAC with all sales and marketing costs, including salaries and tools.
  2. 02Reducing churn raises LTV faster than raising prices in most early-stage products.
  3. 03Annual plans paid upfront shorten payback dramatically.

Frequently asked questions

What is a good LTV:CAC ratio?

Around 3:1 is a widely used benchmark. Much lower suggests you're overspending to acquire customers; much higher can mean you're under-investing in growth.

Should LTV use revenue or gross profit?

Gross profit. Using revenue overstates what a customer is worth to the business.

How do I calculate churn?

Customers lost during the month divided by customers at the start of the month.

What is a good CAC payback period?

Many SaaS investors look for under 12 months for small-business customers; enterprise products often take longer.