LTV:CAC Ratio Calculator
Calculate your LTV:CAC ratio from customer lifetime value and customer acquisition cost, with a payback period and a health verdict.
How to use this tool
- Enter your customer lifetime value (use gross-margin LTV for the most honest figure).
- Enter your fully-loaded customer acquisition cost.
- Optionally enter the monthly gross margin per customer to estimate CAC payback.
- Read the ratio, net value per customer, payback period, and verdict.
Check whether your customer acquisition pays off. Enter your customer lifetime value and acquisition cost to get the LTV:CAC ratio, net value per customer, and a health verdict against the 3x SaaS benchmark.
Formula
LTV:CAC ratio = Customer lifetime value ÷ Customer acquisition cost
Net value per customer = LTV − CAC
CAC payback (months) = CAC ÷ Monthly gross margin per customer
A widely-cited SaaS benchmark is a ratio of about 3x: roughly $3 of lifetime value for every $1 spent to acquire the customer. Below 1x you lose money on each customer; well above 5x can signal you are under-spending on growth.
How it works
The LTV:CAC ratio is the headline test of SaaS unit economics. It compares the lifetime value of a customer (the gross-margin profit you expect to earn from them over their whole relationship) against the cost to acquire them (your fully-loaded sales and marketing spend per new customer). Dividing one by the other tells you how many dollars of value each acquisition dollar buys.
This calculator takes LTV and CAC as inputs rather than recomputing them, because every company defines them slightly differently — some use revenue LTV, others gross-margin LTV; some load CAC with salaries and tools, others count only paid media. Be consistent: a gross-margin LTV paired with a fully-loaded CAC is the most defensible combination. The CAC payback period here is an optional extra: it divides CAC by the monthly gross margin a customer contributes, estimating how many months of that customer's margin it takes to recover acquisition cost.
Reviewed by the AbraCalc Business Desk. This is an educational estimate, not investment or accounting advice; the 3x benchmark is a heuristic, not a rule, and varies by business model and stage.
Worked example
LTV $3,000, CAC $1,000, $125/mo margin
- LTV:CAC ratio = 3,000 ÷ 1,000 = 3.00x.
- Net value per customer = 3,000 − 1,000 = 2,000.
- CAC payback = 1,000 ÷ 125 = 8.00 months.
- A ratio of 3x sits in the efficient growth zone.
LTV:CAC ratio = 3.00x, net value per customer = $2,000.00
LTV:CAC ratio for a $1,000 CAC at various LTVs
| LTV | LTV:CAC ratio | Net value / customer | Verdict |
|---|---|---|---|
| $500 | 0.50x | -$500 | Unprofitable |
| $1,000 | 1.00x | $0 | Below target |
| $2,000 | 2.00x | $1,000 | Below target |
| $3,000 | 3.00x | $2,000 | Healthy |
| $4,000 | 4.00x | $3,000 | Healthy |
| $5,000 | 5.00x | $4,000 | Healthy |
| $8,000 | 8.00x | $7,000 | Very high |
Key terms
- LTV (lifetime value)
- The total gross-margin profit expected from an average customer over their entire relationship with you.
- CAC (customer acquisition cost)
- Fully-loaded sales and marketing spend divided by the number of new customers acquired in the same period.
- LTV:CAC ratio
- Lifetime value divided by acquisition cost; a measure of how efficiently growth spend converts into long-run value.
- CAC payback period
- How many months of a customer's gross margin it takes to recover the cost of acquiring them.
Frequently asked questions
- What is a good LTV:CAC ratio?
- A ratio around 3x is the common SaaS benchmark — about $3 of lifetime value per $1 of acquisition cost. Below 1x you lose money on each customer; much above 5x can mean you are under-investing in growth and leaving expansion on the table.
- Should LTV be revenue or gross margin?
- Gross-margin LTV is more conservative and more defensible because it reflects money you actually keep after the cost of serving the customer. If you use revenue LTV, your ratio will look better than the economics really are.
- How is this different from CAC payback?
- LTV:CAC measures lifetime efficiency; CAC payback measures speed — how many months it takes to earn back the acquisition cost. A strong business usually wants a high ratio and a short payback (often cited as under 12 months).