Is each customer worth more than they cost to win? Enter four numbers for lifetime value, the LTV:CAC ratio, and how many months until acquisition cost is repaid.
Fill in the four numbers above — your LTV, LTV:CAC ratio and CAC payback period appear here instantly.
Lifetime value (LTV) estimates the gross profit one customer generates before they leave; customer acquisition cost (CAC) is what you paid to win them. Separately, both numbers are easy to flatter — LTV with optimistic churn assumptions, CAC by leaving salaries and tools out of the acquisition bill. The ratio between them is harder to fake and faster to read: it tells you whether the business model itself works, before scale enters the picture. A company can grow quickly on a broken ratio for a long time, funded by new money; the ratio is the early warning that the growth is being bought at a loss.
Customer lifespan = 1 ÷ monthly churn. LTV = Monthly revenue per customer × gross margin × lifespan. Note that LTV here is gross-profit LTV — revenue LTV without the margin step overstates value by exactly the cost of serving the customer, and comparing it against CAC is the single most common error with this metric. LTV:CAC = LTV ÷ CAC. And CAC payback = CAC ÷ (monthly revenue × gross margin) — the number of months until one customer's gross profit has repaid what they cost to acquire, which is the cash-flow view of the same relationship.
1. Enter average monthly revenue per customer — total recurring revenue divided by customer count, not your headline plan price.
2. Enter gross margin honestly: revenue minus the direct costs of serving customers (hosting, support, payment fees, delivery), divided by revenue.
3. Enter monthly churn as a percentage (the churn calculator on this site will work it out from raw counts). Then enter a fully-loaded CAC: total sales and marketing spend for a period, divided by the new customers it produced.
Customers pay $50 a month on average, gross margin is 70%, monthly churn is 4%, and CAC is $300. Lifespan is 1 ÷ 0.04 = 25 months, so LTV is $50 × 0.70 × 25 = $875. The ratio is 875 ÷ 300 ≈ 2.9:1, and CAC payback is 300 ÷ ($50 × 0.70) ≈ 8.6 months. Cut churn from 4% to 2% and lifespan doubles to 50 months: LTV rises to $1,750 and the ratio to about 5.8:1 — without spending a cent more on marketing. Retention is usually the cheapest lever on this page.
As widely used orientation — a rule of thumb, not a law — a ratio below 1:1 means each customer returns less gross profit than they cost to win: the model loses money on every sale. Around 1–2:1 the business may survive but has little left for product, overheads or mistakes. Roughly 3:1 is the level many operators treat as healthy, and payback inside about 12 months is the companion target, because a great ratio with a three-year payback can still starve a young company of cash. A very high ratio — 6:1 or more — is not automatically wonderful either: it can mean the business is under-investing in a channel that is demonstrably profitable and could be scaled.
Revenue LTV vs CAC: skipping the margin step inflates LTV by 30–50% in typical SaaS and far more in physical goods. Partial CAC: counting only ad spend and excluding the salaries, tools and agency fees that produced the customers. Blended everything: one ratio across all channels hides a profitable channel subsidising a disastrous one — compute per channel once the blended number looks sane. Churn from too-short a window: two months of data cannot support a 25-month lifespan claim; treat LTV from young cohorts as an estimate with wide error bars, and re-check it as real retention data accumulates.
Should CAC include salaries? For the ratio to mean anything, yes — fully-loaded CAC (all sales and marketing spend, including the people) divided by new customers in the same period. Ad-spend-only CAC is useful for channel management but flatters the business-level ratio.
What if I do not know my churn yet? Use your best current estimate, then test the ratio at double that churn. If the model only works at the optimistic number, that fragility is itself the answer the calculator is giving you.
Is a 3:1 ratio right for every business? No. Businesses with heavy fixed costs or long payback tolerance differ; the ratio is a lens, and the trend of your own ratio over time is more informative than any single benchmark.
Are my numbers uploaded? No. All four inputs are processed locally in your browser and never sent anywhere.