LTV:CAC Ratio Calculator
Calculate your LTV to CAC ratio to gauge the efficiency and health of your growth engine.
How to use this tool
- Enter customer lifetime value (ltv) and customer acquisition cost (cac) in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your ltv:cac ratio and the full breakdown beneath it.
The LTV:CAC ratio is the single most important efficiency metric for growth-stage companies. A ratio of 3:1 is the widely cited minimum for sustainable scaling; above 5:1 suggests underinvestment in growth.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
LTV:CAC Ratio = LTV ÷ CAC
Approximate payback period (months) = CAC ÷ (LTV ÷ 36)
The payback formula assumes LTV is earned evenly over 3 years (36 months), so monthly LTV = LTV ÷ 36.
How it works
This calculator divides Customer Lifetime Value by Customer Acquisition Cost to produce the LTV:CAC ratio, a standard SaaS health metric. It also estimates how many months it takes to recover the cost of acquiring one customer, assuming LTV accrues linearly over a 3-year horizon.
The 3-year assumption is a simplification — actual payback depends on your billing cadence and churn profile. Use the ratio as a directional signal: a ratio below 1 means you spend more acquiring a customer than you ever earn from them; 3x is often cited as a minimum healthy threshold.
Worked example
- LTV = $1,800; CAC = $100.
- LTV:CAC Ratio = $1,800 ÷ $100 = 18x.
- Monthly LTV = $1,800 ÷ 36 months = $50 per month.
- Payback period = $100 ÷ $50 = 2 months.
LTV:CAC Ratio = 18x; approximate payback period = 2 months.
Common mistakes to avoid
- Using revenue LTV instead of gross-profit LTV, inflating the ratio and masking unprofitable unit economics.
- Comparing LTV and CAC across different customer cohorts or time periods, producing a ratio that does not reflect any real cohort.
- Ignoring the payback period: a ratio of 3:1 sounds healthy but a 36-month payback means the business is cash-starved for three years.
Key terms
- Customer Lifetime Value (LTV)
- The total net revenue a business expects to earn from a single customer over the entire relationship.
- Customer Acquisition Cost (CAC)
- The total sales and marketing spend divided by the number of new customers acquired in the same period.
- LTV:CAC Ratio
- A ratio measuring how much value a customer generates relative to what it cost to acquire them; 3x or higher is a common benchmark for SaaS health.
- Payback Period
- The number of months required to recover the acquisition cost of a customer from the gross margin they generate.
Frequently asked questions
- What LTV:CAC ratio is healthy?
- 3:1 is the widely accepted minimum — you earn $3 for every $1 spent acquiring a customer. Below 1:1 means you lose money on every customer. Above 5:1 often means you could grow faster by investing more in acquisition.
- How do I improve my LTV:CAC ratio?
- You can improve it by reducing CAC (better targeting, referral programs, content SEO) or by increasing LTV (upsells, reducing churn, expanding revenue per customer). Both levers matter.