LTV:CAC Ratio Calculator
Lifetime value against acquisition cost, rated against the 3:1 rule, with the four levers that move it most and what each is worth.
Updated · By Niraj Kumar · 3 sources
https://checkpre.com/finance/ltv-cac-ratio-calculator
Revenue and customers
ARPU $100 a month.
Retention
Customers who cancel each month. 2% a month is 22% a year.
Upgrades and added seats less downgrades, from customers who stay. Gives NRR of 92%.
Margin and acquisition
Revenue left after hosting, support, payment fees and third-party APIs.
Ads, tools and the pay of sales and marketing staff. CAC $733.
Cash
R&D, G&A, rent: everything outside cost of revenue and sales and marketing.
LTV settings
What future profit is worth today. 0 for an undiscounted LTV.
How long a customer's profit counts. 60 is common.
- Customer lifetime value
- $3,091
- 60 months, discounted 10%; simple LTV $3,900
- CAC
- $733
- $22,000 ÷ 30 new customers
- CAC payback
- 9.4 months
- Under 12 months: efficient
- Net revenue retention
- 92%
- Gross retention 78%; 22% of customers lost a year
- Implied valuation
- $2,457,000
- 3.4× ARR on 49% growth; Rule of 40: 16
- Cash runway
- Default alive
- Burning $20,200 a month; profitable in month 11, before the cash runs out
| Change | LTV | LTV:CAC | Payback | Valuation | Break-even |
|---|---|---|---|---|---|
| As entered | $3,091 | 4.2:1 | 9.4 months | $2,457,000 | Month 11 |
| Cut monthly churn by 1 point | +$953 | +1.30 | – | +$1,053,000 | −2 mo |
| Add 0.5 points of monthly expansion | +$417 | +0.57 | – | – | −1 mo |
| Acquire customers 10% cheaper | – | +0.47 | −0.9 mo | – | −1 mo |
| Raise gross margin by 5 points | +$198 | +0.27 | −0.6 mo | +$63,000 | −2 mo |
Expected profit from a new customer, allowing for the chance they churn and for expansion. Simple payback ignores churn: 9.4 months.
Burning $20,200 a month; profitable in month 11, before the cash runs out. New customers join at today's ARPU; costs stay flat.
| Metric | Yours | Median | Strong | Where you sit |
|---|---|---|---|---|
| Monthly churn | 2% | 2% | 1% | Above median |
| Net revenue retention | 92% | 92% | 102% | Above median |
| Gross margin | 78% | 75% | 82% | Above median |
| CAC payback | 9.4 months | 12.0 months | 8.0 months | Above median |
How is the LTV:CAC ratio calculated?
LTV:CAC divides a customer's lifetime gross profit by what it cost to acquire them. $3,091 ÷ $733 = 4.2:1. The benchmark is 3:1: below 1:1 every customer loses money, and above 5:1 you can usually afford to spend more on growth.
ARPU = MRR ÷ customers; gross profit per customer g = ARPU × gross margin;
annual churn = 1 − (1 − c)^12; NRR = ((1 − c) × (1 + e))^12; GRR = (1 − c)^12;
simple LTV = g ÷ c; LTV = Σ g × q^t for t = 0 … H − 1, q = (1 − c)(1 + e) ÷ (1 + d)^(1/12);
CAC = sales and marketing ÷ new customers; payback = CAC ÷ g; LTV:CAC = LTV ÷ CAC;
cash(t+1) = cash(t) + MRR(t) × margin − sales and marketing − other costs; runway = months until cash < 0This page uses the same method as the SaaS Unit Economics Calculator, which explains each term and assumption in full.
Worked example
An SMB SaaS on $60,000 MRR from 600 customers at $100 a month, adding 30 a month on $22,000 of sales and marketing, with 2% monthly churn, 1.3% monthly expansion, 78% gross margin, $45,000 of other monthly costs and $600,000 in the bank.
- 1LTV: $78 gross profit a month, with churn, expansion and a 10% discount over 60 months = $3,091
- 2CAC: $22,000 ÷ 30 = $733
- 3LTV:CAC: $3,091 ÷ $733 = 4.2:1
4.2:1: healthy, at or above 3:1.
Frequently asked questions
Can LTV:CAC be too high?
Yes. A ratio of 6:1 or more usually means you could spend more on acquisition and still earn a good return, so growth is slower than it needs to be. It can also mean CAC is understated, for example by leaving out sales salaries. Check the payback period too: a high ratio with a 30-month payback still needs a lot of cash.
How do I improve LTV:CAC?
Churn usually moves it most, because churn divides LTV; then expansion, price and gross margin, which raise the profit per customer; then CAC. The what-if table above tests each lever on your figures. Cutting acquisition spend raises the ratio but slows growth, so investors look at it together with growth rate.
Sources
Related calculators
- SaaS Unit Economics CalculatorChurn, LTV, CAC, payback, NRR and runway from one set of inputs: change churn by a point and watch every metric, the valuation and your cash runway move.
- SaaS LTV CalculatorCustomer lifetime value with gross margin, expansion and a discount rate, next to the simple ARPU ÷ churn formula, so the number survives investor scrutiny.
- CAC CalculatorCustomer acquisition cost from sales and marketing spend and new customers, with the LTV:CAC and payback that tell you whether it is too high.
- CAC Payback Period CalculatorMonths to earn back customer acquisition cost from gross profit, with the slower churn-adjusted payback and benchmarks for your segment.