Customer Acquisition Cost (CAC) vs LTV Ratio Calculator

Calculate your unit economics with CAC, LTV, and payback period. Understand if your customer acquisition is sustainable and profitable.

LTV = (Monthly Revenue × Gross Margin%) / Churn Rate | LTV:CAC = LTV / CAC | Payback = CAC / (Monthly Revenue × Gross Margin%)
Example: CAC $500, $100/mo revenue, 80% margin, 5% churn. LTV = (100×0.80)/0.05 = $1,600. LTV:CAC = 3.2x (healthy). Payback = 500/80 = 6.25 months. ROI = ((1600-500)/500)×100 = 220%.

What is a good CAC to LTV ratio?

The benchmark is 3:1 (LTV should be 3x CAC). 1:1 is breaking even, 3:1 is healthy, 5:1 is excellent but may indicate under-investment in growth. Below 1:1 means you're losing money on every customer. SaaS companies should target 3:1 or better for sustainable growth.

How is LTV calculated?

LTV = (Average Revenue per Customer × Gross Margin %) / Customer Churn Rate. Or simpler: Average Customer Value × Average Customer Lifespan. For subscription businesses, include expansion revenue in the calculation for more accurate LTV.

What is the payback period?

Payback period = CAC / (Monthly Revenue per Customer × Gross Margin %). This measures how long until the customer becomes profitable. SaaS target: 12 months or less. Longer payback periods strain cash flow and limit growth capacity.

How do I reduce CAC?

Strategies: improve conversion rates, optimize marketing channels, increase organic leads (SEO, content), build referral programs, use product-led growth, improve sales efficiency, target better-fit customers, reduce customer acquisition steps, and automate marketing.

What is LTV:CAC ratio for different business models?

B2B SaaS: 3-5x (higher contract values), B2C SaaS: 2-3x, E-commerce: 1-3x (lower repeat purchase), Subscription boxes: 2-4x, Financial services: 4-10x (high lifetime value). Adjust targets based on your specific business model.