LTV to CAC Ratio Calculator

The LTV to CAC ratio compares the lifetime value of a customer (LTV) against the cost to acquire that customer (CAC). It is a core SaaS unit-economics check: a ratio of 3:1 means each customer returns three dollars of margin-weighted lifetime value for every dollar spent to win them. Higher is generally better, up to a point.

This calculator uses the gross-margin LTV formula: LTV = (ARPA times gross margin) divided by churn rate. ARPA is average revenue per account per period, gross margin is the share of revenue left after serving the customer, and churn is the share of customers lost each period. Dividing by churn captures the average customer lifetime, which equals 1 divided by the churn rate.

There is no universal target. A ratio below 1:1 means the simple gross-margin formula gives less lifetime value than CAC, but it still omits overhead, financing, and cohort changes. Compare the ratio with CAC payback, retention, growth capacity, and your economics rather than treating 3:1 or any other number as a pass line.

Yes. If you enter monthly ARPA, use a monthly churn rate; if you enter annual ARPA, use annual churn. The period selector keeps the labels consistent. The period cancels out in the formula, so the resulting LTV and ratio are the same either way, as long as both inputs share the same period.

CAC payback is the number of periods of gross-margin revenue it takes to recoup one customer acquisition cost, computed as CAC divided by (ARPA times gross margin). The ratio measures total lifetime return against CAC, while payback measures how fast you recover the upfront spend. A strong ratio with slow payback can still strain cash flow.

No. This calculator gives an estimate based on the gross-margin LTV model and the inputs you provide; it is not financial advice. Real LTV depends on cohort behavior, expansion revenue, discount rates, and changing churn over time, which a single-point formula simplifies. Use it for directional planning, not as a guarantee of returns.