CAC & LTV calculator: measure customer acquisition cost vs lifetime value
Calculate customer acquisition cost (CAC), lifetime value (LTV), LTV:CAC ratio, and CAC payback period. Industry benchmarks for SaaS, subscription, and service businesses. Free, no signup.
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Results
How to read this calculation
CAC = Total Marketing+Sales Spend ÷ Customers Acquired
Customer Lifetime = 1 ÷ Monthly Churn Rate (in months)
LTV = ARPU × Customer Lifetime × Gross Margin %
LTV:CAC Ratio = LTV ÷ CAC
CAC Payback = CAC ÷ (ARPU × Gross Margin %)
LTV:CAC ratio tells you whether acquiring customers is profitable over their lifetime. The industry-standard benchmark is 3:1 — every dollar spent on acquisition should return three dollars over the customer relationship. Below 3:1 indicates marginal economics; above 5:1 may indicate underinvestment in growth (you can spend more to acquire faster).
CAC payback period tells you how long until acquisition costs are recovered through gross margin. Sub-12-month payback is healthy for most SaaS; 12-18 months is acceptable for enterprise; 18+ months requires strong retention or large contract values to justify. Operators with long payback periods need either substantial capital or excellent retention.
The biggest LTV lever is retention, not pricing. Reducing monthly churn from 4% to 2% doubles average customer lifetime — and doubles LTV. Same effect requires a 100% price increase, which is operationally much harder. Operators looking to improve LTV:CAC should focus on retention first, expansion revenue second, pricing third.
Frequently asked questions
The questions operators most commonly ask about CAC, LTV, and unit economics.
What is a good LTV:CAC ratio?
The industry-standard benchmark is 3:1 — every dollar spent acquiring customers should return three dollars over their lifetime. Below 3:1 is marginal; 3-5:1 is healthy; 5-10:1 is strong but may indicate underinvestment in growth; above 10:1 typically means you could acquire faster without damaging unit economics. The ideal ratio varies by industry — enterprise SaaS often runs 5:1+, while consumer subscription targets 3:1.
How do I calculate customer lifetime in months?
Customer lifetime equals 1 divided by monthly churn rate. If 5% of customers churn each month, average customer lifetime is 1/0.05 = 20 months. If 2% churn monthly, lifetime is 50 months. This is why churn reduction is the highest-leverage LTV lever — cutting churn in half doubles customer lifetime, which doubles LTV. The same effect requires a 100% price increase.
Why should LTV use gross margin instead of revenue?
Revenue-based LTV overstates actual customer value because it ignores delivery costs. A customer generating $1,000 in revenue at 60% gross margin only delivers $600 in contribution — that's the actual value available to cover acquisition cost and generate profit. Using gross margin in LTV gives you the true unit economics that should drive acquisition decisions. Operators who use revenue-based LTV consistently overspend on acquisition.
Should CAC include sales salaries or just marketing spend?
Include everything that contributes to acquiring customers: ad spend, marketing software, agency fees, content production, sales team salaries and commissions, sales tools, and customer onboarding costs. A common mistake is calculating CAC using only ad spend, which dramatically understates true acquisition cost. Fully-loaded CAC is typically 2-4x ad-only CAC for B2B businesses. Use fully-loaded CAC for any decision that affects investment level.
Find the leak in your acquisition or retention
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