LTV:CAC calculator
Compare what a customer is worth over their lifetime against what it costs to acquire them: the core viability test of any SaaS model.
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LTV:CAC unit economics
What it measures
A core measure of unit economics. Compares the gross profit a customer brings over their lifetime (LTV) with the cost of acquiring them (CAC).
When to use it
Use it to judge whether a startup can grow profitably. Paying $100 to acquire a customer who brings $300 of gross profit is a strong position.
Watch out for
Churn has the largest effect on LTV. High ARPU is worth little if customers leave within a few months.
LTV:CAC unit economics
Customer lifetime value compared with acquisition cost.
Healthy: meets the usual benchmark.Target: 3:1
How it works
LTV = ARPU × Gross Margin % × (1 / Monthly Churn) · Ratio = LTV / CACLifetime value starts with average revenue per user, keeps only the gross-margin portion (the part that can actually repay acquisition spend), and multiplies by expected customer lifetime, which is simply the inverse of churn: 2% monthly churn implies a 50-month average life. Divide by customer acquisition cost and you get the multiple every SaaS investor checks first. Below 1×, growth destroys money; the classic health bar is 3× or better, provided you also recover CAC quickly enough to fund the next customer.
Worked example
A product charging €80/month at 80% gross margin with 2.5% monthly churn: lifetime is 1 ÷ 0.025 = 40 months, so LTV = €80 × 0.8 × 40 = €2,560. If sales and marketing spend works out to €800 per new customer, the ratio is a healthy 3.2×. But raise churn to 5% and LTV halves to €1,280, a 1.6× ratio that no amount of cheap acquisition fixes. Churn, not CAC, is usually the lever that matters.
Common questions
What is a good LTV:CAC ratio?
The conventional benchmark is 3:1 or higher: a customer should return at least three times what they cost to acquire, on gross margin. Much below that and growth burns cash; far above (8×+) may mean you're under-investing in growth.
Why use gross margin in LTV?
Because only the margin portion of revenue is available to pay back acquisition costs. €100 of revenue at 80% margin repays €80 of CAC; using raw revenue flatters the ratio and hides unprofitable growth (a common pitch-deck trick).
What are the limits of this metric?
It extrapolates today's churn far into the future, which is fragile for young cohorts, and it ignores the time it takes to collect the LTV. Pair it with CAC payback (months to recover acquisition cost) for the cash-flow half of the picture.
Last reviewed July 2026