CAC & LTV Calculator
Calculate customer acquisition cost, lifetime value, and the LTV:CAC ratio.
Customer Acquisition Cost (CAC)
Customer Lifetime Value (LTV)
What is it?
This calculator computes two of the most important SaaS and startup metrics — Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV) — along with the LTV:CAC ratio and CAC payback period used to judge whether a business's growth spending is sustainable.
Formula
CAC = Sales & Marketing Spend ÷ New Customers Acquired
LTV = Avg. Revenue per Customer × Gross Margin % × Avg. Customer Lifespan
Formula Explanation
CAC measures how much it costs, on average, to acquire one new customer. LTV estimates the total gross profit a business can expect from a typical customer over their entire relationship, using churn rate to estimate average customer lifespan (1 ÷ monthly churn rate). Comparing the two — the LTV:CAC ratio — shows whether customers generate enough value to justify what it costs to acquire them.
Example Calculation
Spending $500,000 to acquire 100 customers gives a CAC of $5,000. If those customers pay $1,000/month at 70% gross margin with 5% monthly churn (a 20-month average lifespan), LTV is $14,000 — an LTV:CAC ratio of 2.8:1.
How to Use
- Enter total sales and marketing spend, and how many new customers it acquired, to calculate CAC.
- Enter average monthly revenue per customer, gross margin, and monthly churn rate to calculate LTV.
- Review the LTV:CAC ratio and CAC payback period together.
Benefits
- Combines two related metrics that are more meaningful together than separately.
- Calculates CAC payback period, showing how many months it takes to recover acquisition cost.
- Uses churn rate to estimate realistic customer lifespan instead of an arbitrary assumption.
Use Cases
- Evaluating whether a startup's growth spending is sustainable before raising funding.
- Deciding whether to increase or decrease marketing spend based on current unit economics.
- Presenting growth efficiency metrics to investors or in a board deck.
What Your Result Means
An LTV:CAC ratio of 3:1 or higher is a commonly cited benchmark for healthy SaaS unit economics — meaning each customer generates roughly three times what it cost to acquire them. A ratio near or below 1:1 suggests the business is spending more to acquire customers than they're worth, which is unsustainable without improvement.
Tips
- Track CAC and LTV by channel or campaign, not just in aggregate, to see which acquisition sources are actually efficient.
- A short CAC payback period (under 12 months) generally indicates healthier cash flow than a long one, even with the same LTV:CAC ratio.
- Revisit churn rate regularly — even small changes significantly affect LTV, since it compounds through the lifespan calculation.
Common Mistakes
- Using revenue instead of gross-margin-adjusted revenue in the LTV formula, which overstates true customer value.
- Excluding some marketing or sales costs (like salaries) from the CAC calculation, understating true acquisition cost.
- Assuming a 3:1 ratio is universally the right target — capital-efficient or early-stage businesses may need different benchmarks.
FAQs
What is a good LTV:CAC ratio?
3:1 is a commonly cited benchmark for healthy SaaS businesses, though the ideal ratio varies by industry, growth stage, and available capital.
What is CAC payback period?
It's the number of months it takes for a customer's gross-margin-adjusted revenue to cover the cost of acquiring them — shorter payback periods mean faster cash flow recovery.
Why does LTV use gross margin instead of full revenue?
Because LTV is meant to represent actual profit generated by a customer, not just revenue — gross margin removes the cost of delivering the product or service.
How is average customer lifespan calculated from churn rate?
It's the inverse of the monthly churn rate (1 ÷ churn rate) — for example, a 5% monthly churn rate implies an average customer lifespan of 20 months.
These are simplified unit economics estimates — actual LTV can vary significantly based on cohort behavior, pricing changes, and retention trends not captured by a single average churn rate.
Last updated: July 26, 2026