CAC & LTV:CAC Ratio Calculator
Find your customer acquisition cost and whether your growth engine is profitable
This calculator computes your Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and the LTV:CAC ratio investors use to judge whether a subscription business is sustainably profitable, plus your CAC payback period.
Acquisition & Retention Inputs
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CAC vs LTV
💸 CAC
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💎 LTV
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Key Metrics
LTV:CAC Ratio0:1
CAC Payback Period0 months
Gross Profit / Customer / mo$0
Verdict—
📖 CAC & LTV:CAC — Is Your Growth Engine Profitable?
Growth is easy to fake with enough spend. Profitable growth is not. CAC and LTV, taken together as a ratio, are the two numbers that reveal whether a subscription business is actually building a sustainable engine or just buying revenue it can't afford to keep buying.
Customer Acquisition Cost (CAC)
CAC = Total Sales & Marketing Spend / New Customers Acquired
CAC is the average fully-loaded cost of acquiring one new paying customer, including ad spend, sales salaries and commissions, and marketing tooling — anything spent specifically to acquire that customer. A company spending $50,000/month on sales and marketing and acquiring 25 new customers has a CAC of $2,000.
Customer Lifetime Value (LTV)
LTV = (Average Revenue Per Customer × Gross Margin %) / Monthly Churn Rate
LTV estimates the total gross profit — not just revenue — a customer generates over their entire relationship with the business. Using gross margin rather than raw revenue matters: a customer paying $200/month is worth less to the business than that number suggests once the actual cost of serving them is subtracted. A customer paying $200/month at 80% gross margin with 3% monthly churn has an LTV of ($200 × 0.80) / 0.03 = $5,333.
The LTV:CAC Ratio
Dividing LTV by CAC gives a single number that answers the real question: for every dollar spent acquiring a customer, how many dollars of gross profit does that customer return over their lifetime?
| LTV:CAC Ratio | Interpretation |
|---|---|
| Below 1:1 | Losing money per customer — unsustainable |
| 1:1 – 3:1 | Marginal, needs improvement in retention or acquisition cost |
| 3:1 – 5:1 | Healthy, generally considered a strong growth engine |
| Above 5:1 | Excellent — though may also signal under-investment in growth |
The widely cited rule of thumb is 3:1 or better for a sustainable SaaS business, popularized by venture investors as a baseline health check rather than a strict cutoff — context like sales cycle length and market stage still matters.
CAC Payback Period: The Cash Flow Reality Check
CAC Payback (months) = CAC / (Average Revenue Per Customer × Gross Margin %)
LTV:CAC tells you whether a customer is profitable eventually. CAC payback period tells you how long it takes to get your money back — which matters enormously for cash flow, since a business can have a great LTV:CAC ratio on paper and still run out of cash if payback periods are too long relative to available capital. Under 12 months is generally considered strong for SaaS; 12–18 months is common; beyond 24 months puts real strain on cash flow, especially without outside funding.
Why Gross Margin Changes the Picture
It's common to see LTV calculated using raw ARPU without adjusting for gross margin — this overstates the real number, sometimes significantly, especially for businesses with meaningful hosting, support, or fulfillment costs baked into serving each customer. A 60% gross margin business and a 90% gross margin business with identical ARPU and churn have very different true LTVs, even though a naive calculation would show them as equal.
💡 Track CAC and LTV separately by acquisition channel where possible — a blended CAC across all channels can hide the fact that one channel is highly profitable while another is quietly losing money on every customer it brings in.
❓ Frequently Asked Questions
What is CAC (Customer Acquisition Cost)?
CAC = Total Sales & Marketing Spend / New Customers AcquiredIt tells you how much you spend, on average, to acquire one paying customer.
What is LTV (Customer Lifetime Value)?
LTV = (ARPU × Gross Margin %) / Monthly Churn RateLTV estimates the total gross profit a customer generates over their lifetime as a customer.
What is a good LTV:CAC ratio?
A widely cited benchmark is 3:1 or higher. Below 1:1 means you lose money on every customer. 3:1 to 5:1 is generally considered healthy, and above 5:1 may signal under-investment in growth.
What is CAC payback period?
CAC Payback = CAC / (ARPU × Gross Margin %)How many months of gross profit from a customer it takes to recover their acquisition cost.
Should I use gross margin when calculating LTV?
Yes. Using raw revenue instead of gross-margin-adjusted revenue overstates LTV, since it ignores the cost of actually serving each customer.