Startups & SaaS
LTV CAC Calculator
Check whether customer value outgrows acquisition cost.
LTV CAC Calculator
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How it works
The LTV:CAC ratio compares what a customer is worth over their lifetime with what it costs to acquire them. A $600 LTV against a $150 CAC is a 4.0 ratio: every acquisition dollar returns four dollars of lifetime value.
Ratios below 3:1 signal that growth is buying customers too expensively to build a durable business; very high ratios can mean the company under-spends on growth and leaves market share on the table. The healthy range sits between 3:1 and 5:1 for most subscription models.
Formula
LTV : CAC = Lifetime value / Acquisition cost
LTV = average price × gross margin × average customer lifespan. CAC = total marketing spend ÷ new customers.
Worked example
Example: LTV $600 and CAC $150 gives a 4.0 ratio, comfortably in the healthy 3-5 band. The unit economics page then shows the per-customer profit and the volume needed to cover fixed costs.
WORKED EXAMPLE — DEFAULT INPUTS
What to know
The LTV:CAC ratio is a snapshot that depends heavily on how you measure LTV. A generous LTV that assumes long lifespans and heavy expansion flatters the ratio; a conservative one that uses base margin only may look harsh. Pick one consistent definition and track its trend.
Trend matters more than the single number. A ratio falling from 5 to 3.5 while CAC climbs is a warning that growth is getting more expensive. A steady 4 with improving payback is a healthy machine, even if the headline never changes.
Review the ratio monthly with the same LTV definition; the trend tells you whether growth is getting cheaper or more expensive long before the cash flow statement does.
FAQ
What is a good LTV:CAC ratio?
Most teams target 3:1 or better. Below 3:1 the payback is slow and growth becomes expensive; above 5:1 you may be under-investing in acquisition.
How do I calculate LTV without the formula pieces?
Estimate average customer lifespan first: if customers stay 24 months at $25 monthly gross margin, LTV = $600. Then divide by CAC.
Does this include expansion revenue?
A richer LTV includes upsells and cross-sells. For a conservative check, start with base subscription margin only.
What is payback period in this context?
CAC divided by monthly gross margin per customer: how many months until a new customer repays their acquisition cost. Under 12 months is a common target.