LTV:CAC Calculator: Customer Lifetime Value to Acquisition Cost Ratio

Compute customer lifetime value, acquisition cost, and their ratio against the industry-standard 3:1 benchmark.

The famous 3:1 LTV:CAC benchmark is only as good as the lifetime value figure feeding into it, and that figure hinges entirely on how long you assume a customer sticks around. This calculator lets you supply that lifespan two different ways — directly, or derived from a churn rate — and refuses to guess a default when neither one is actually provided.

How to calculate LTV and CAC

Work out average monthly revenue per customer (ARPA) and your gross margin as a percentage.
Get a lifespan in months, either from cohort data or as 1 ÷ monthly churn, so 2% monthly churn gives 50 months.
Multiply them: LTV = ARPA × gross margin × lifespan in months.
Compute CAC as sales and marketing spend for a period divided by the new customers won in that same period.
Divide LTV by CAC; the calculator shows the result as a ratio such as 3.00:1 with its band.

Lifetime value is three numbers multiplied together

LTV here is average monthly revenue per customer, multiplied by your gross margin as a fraction, multiplied by customer lifespan in months. The gross margin step matters because LTV is meant to measure the profit a customer generates, not their raw revenue — a business with high revenue per customer but thin margins can have a materially lower LTV than the top-line number alone suggests.

Every input in that multiplication has to be a positive number for the result to mean anything: a zero or negative revenue figure, a margin outside the 0-to-100% range, or a non-positive CAC all produce an explicit error rather than a zero, negative, or nonsensical ratio.

LTV:CAC worked example with 2% monthly churn

Take a customer paying $150 a month at an 80% gross margin, with 2% monthly churn and a $500 CAC. Churn mode turns 2% into a lifespan of 1 ÷ 0.02 = 50 months. LTV is $150 × 0.80 × 50 = $6,000, and $6,000 ÷ $500 gives 12:1, which lands in the Healthy band.

Switch the churn period from Monthly to Annual with the same 2% and the lifespan becomes 600 months, pushing LTV to $72,000 and the ratio to 144:1. Getting that selector right matters more than any other input.

Two ways to get to a lifespan, never a default guess

You can enter customer lifespan directly, in months or years, or you can derive it from a churn rate using the standard inverse relationship — one divided by the churn rate — which is the textbook approximation for expected customer lifetime under a constant churn assumption. An annual churn rate is converted down to a monthly-equivalent lifespan first, so it stays on the same footing as a directly entered monthly lifespan.

If both the lifespan field and the churn-rate field are left blank, the calculator returns an explicit error asking for one of the two, rather than silently defaulting to some assumed retention period that would make every downstream number look confident but arbitrary.

LTV:CAC ratio benchmarks: 1:1, 3:1 and 5:1

A ratio under 1:1 means you're spending more to acquire a customer than that customer is worth over their lifetime — a business model that loses money on every customer it wins, growth notwithstanding.
Between 1:1 and 3:1 the calculator shows Marginal: each customer earns back what it cost to win, but little is left over to fund support, overhead and the next round of acquisition.
At 3:1 or above the result reads Healthy. The 3:1 target is the rule of thumb popularised by investor David Skok's SaaS metrics writing: roughly three dollars of lifetime gross profit for every dollar spent acquiring a customer.
Well above 5:1 is still labeled Healthy here, but many SaaS investors read a ratio that high as a sign you are under-spending on growth and could afford to acquire customers faster. The tool has no separate band for it.

CAC payback period

Payback measures how many months of gross profit it takes to earn back the cost of winning a customer: CAC ÷ (ARPA × gross margin). In the example above that is $500 ÷ $120, or about 4.2 months.

Skok pairs the 3:1 ratio with recovering CAC within about 12 months, and investors read the two together because a strong ratio built on a long lifespan can still tie up cash for years before it returns. The calculator does not display payback, so work it out from the same three inputs.

Where a churn-derived lifespan quietly misleads

The one-over-churn approximation assumes a constant churn rate forever, which real cohorts rarely do — churn is usually highest in a customer's first few months and settles lower afterward, so this method tends to understate lifespan for a business with strong early retention and can overstate it for one whose churn is still rising.

CAC entered here is also whatever single number you provide — it says nothing about whether that number includes fully loaded sales and marketing costs, payback period, or channel-specific acquisition cost, all of which can matter more to a real investment decision than the blended ratio this tool produces.

Questions people ask about LTV:CAC Calculator

Why do I need to enter gross margin instead of just revenue per customer?: Because LTV is meant to represent the profit a customer generates over their lifetime, not their raw revenue. Multiplying by gross margin as a fraction converts top-line revenue per customer into the actual contribution that revenue makes toward covering costs and, eventually, acquisition spend — skipping that step would overstate LTV for any business with real cost of goods sold.
Should I use a directly entered lifespan or derive it from churn?: Use a directly entered lifespan if you have real customer-cohort retention data — it's more accurate than an approximation. The churn-derived option (one divided by churn rate) is a reasonable stand-in when you only know your churn rate, but it assumes churn stays constant forever, which understates lifespan for businesses whose churn improves over time.
What does it mean if my ratio comes back under 1:1?: It means the calculator's inputs show you spending more, on average, to acquire a customer than that customer is worth in lifetime profit — a model that loses money per customer regardless of how fast you're growing. Revisit either your acquisition cost, your pricing, your margin, or your retention before scaling spend further.
What is a good LTV:CAC ratio?: About 3:1 is the most widely cited target for SaaS, and this calculator labels anything from 3:1 upward as Healthy. Treat it as a reference point rather than a pass mark: early-stage companies often run below it while testing channels, and the right target also depends on your payback period and cash position.
How do you calculate customer acquisition cost?: Add up sales and marketing spend for a period, including salaries, ad spend and tooling if you want a fully loaded figure, then divide by the number of new customers acquired in that same period. The calculator accepts CAC as one number, so settle which costs to include before typing it in.
Is a very high LTV:CAC ratio bad?: Not bad in itself, but a ratio far above 5:1 often means you could spend more on acquisition and grow faster. It can also point to an optimistic lifespan, such as a churn rate measured on a small or very young cohort, so sanity-check the inputs before celebrating the number.

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Content reviewed 2026-09-27.