LTV:CAC Ratio Calculator
The LTV:CAC ratio is the single clearest read on whether your growth is sustainable — how much a customer is worth versus what they cost to acquire.
LTV:CAC Ratio Calculator
Healthy — you recover acquisition cost with strong margin to reinvest.
LTV = Monthly ARPA × Gross margin (fraction) × Lifetime (months). Ratio = LTV ÷ CAC. Aim for ≥ 3×.
Formula
LTV = Monthly ARPA × Gross margin × Lifetime (months) · Ratio = LTV ÷ CAC
Gross margin is entered as a percentage and applied as a fraction (80% → 0.80). The ratio compares the margin-adjusted lifetime value of a customer to their acquisition cost. A ratio of 3× or higher is the common benchmark for a healthy business.
Worked example
A customer pays $100/month at 80% gross margin and stays 24 months. LTV = 100 × 0.80 × 24 = $1,920. With a CAC of $400, the ratio is 1,920 ÷ 400 = 4.8× — healthy.
What this tells you
Revenue-based LTV overstates how much a customer is really worth, because it ignores the cost of delivering the product. Multiplying by gross margin fixes that. Dividing the result by CAC gives the ratio investors and operators use to judge unit economics: below 1× you lose money on every customer; around 3× you have a durable, reinvestable model; far above 3× you may be underspending on growth.
Benchmarks
How to read the ratio your inputs produce.
| LTV : CAC | Verdict |
|---|---|
| < 1× | Underwater — each customer costs more than they return |
| 1× – 3× | Thin — works, but hard to scale profitably |
| ≈ 3× | The classic healthy benchmark |
| > 5× | Strong — consider spending more to grow faster |
Directional ranges only — your targets depend on margins, business model, and stage.
Common mistakes
Using revenue LTV instead of margin-adjusted LTV — it overstates customer value.
Assuming a constant lifetime; rising churn shortens it and shrinks LTV.
Chasing a very high ratio, which often signals underinvestment in acquisition.
Pairing lifetime LTV with a single-channel CAC — keep the scope consistent.
When to use it
- Validating unit economics before scaling acquisition spend
- Setting a maximum CAC from a target LTV:CAC ratio
- Reporting growth efficiency to investors or leadership
FAQ
Why multiply by gross margin?
Because lifetime revenue isn't lifetime value. If a customer pays $1,000 over their life but it costs you $400 to serve them, their true value is the margin, not the revenue. Margin-adjusted LTV keeps the ratio honest.
What is a good LTV:CAC ratio?
3× is the widely used benchmark for a healthy SaaS or DTC business. Below 1× is unsustainable. Much above 3× often means you're leaving growth on the table and could spend more to acquire faster.
How do I estimate customer lifetime?
If you know monthly churn, average lifetime ≈ 1 ÷ monthly churn rate. A 4% monthly churn implies a ~25-month average lifetime.
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