LTV:CAC ratio calculator: are your unit economics healthy?
Enter your revenue, margin, churn, and acquisition spend to see your LTV:CAC ratio, CAC payback period, and a benchmark verdict.
Calculate your LTV:CAC ratio
Enter your revenue, margin, churn, and acquisition spend to see if your unit economics are healthy.
Average monthly revenue per customer
Revenue left after cost of serving (hosting, support)
% of customers who cancel each month
Customers gained in the same period as your spend
Everything you spent to acquire those customers
Fill in all fields to see your ratio and benchmark.
How the LTV:CAC ratio works
The LTV:CAC ratio compares the lifetime value of a customer to the cost of acquiring them. A 3:1 ratio is the healthy target: you earn three dollars of gross-margin value for every dollar spent on acquisition. Below 1:1 means you lose money per customer; above 5:1 often means you're underinvesting in growth.
The formula
LTV = average revenue per account x gross margin x average customer lifetime. Average lifetime is the inverse of your churn rate (1 / monthly churn). CAC = total sales and marketing spend divided by new customers acquired in the same period. The ratio is simply LTV divided by CAC.
Benchmark zones
| Ratio | What it means | Action |
|---|---|---|
| Below 1:1 | You lose money on every customer | Stop scaling; fix pricing, churn, or CAC |
| 1:1 – 3:1 | Marginal; growth is inefficient | Improve retention or lower acquisition cost |
| 3:1 – 5:1 | Healthy - the target zone | Scale acquisition with confidence |
| Above 5:1 | Strong, possibly underinvesting | Consider spending more to grow faster |
Frequently asked questions
- What is a good LTV:CAC ratio?
- 3:1 is the widely cited target. Below 1:1 means you lose money per customer; above 5:1 often signals you're underinvesting in growth.
- How do you calculate LTV?
- LTV = ARPA x gross margin x average customer lifetime (1 / churn rate). Always use gross-margin LTV, not raw revenue.
- How do you calculate CAC?
- Total sales and marketing spend divided by new customers acquired in the same period.
- What is CAC payback period?
- How many months of gross profit it takes to recover the cost of acquiring a customer. Under 12 months is strong for most SaaS.
- Why use gross margin in LTV?
- Revenue isn't profit. Gross-margin LTV reflects the actual cash a customer generates, giving a realistic ratio.
- What should I do if my ratio is below 3:1?
- Growth spending is inefficient. Before scaling, raise LTV (pricing, retention, expansion), lower CAC, or cut churn - often the highest-leverage fix is the product itself.
- Why can a ratio above 5:1 be a problem?
- It usually means you're underinvesting in growth - you could profitably acquire more customers. Consider spending more on acquisition to grow faster.
- How is LTV:CAC different from CAC payback?
- LTV:CAC is a profitability ratio (lifetime value vs acquisition cost); CAC payback is how many months it takes to recover that cost. Aim for ~3:1 and under-12-month payback.
- Is this LTV:CAC calculator free?
- Yes - free, no signup, and entirely client-side. Your numbers never leave your browser.
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Why unit economics decide whether you can scale
The LTV:CAC ratio is the single clearest signal of whether growth spending is creating value or destroying it. If it costs more to acquire a customer than that customer will ever be worth, pouring money into marketing only accelerates losses. A healthy ratio means every dollar of acquisition spend compounds into profit.
The three ways to improve your ratio
| Lever | How to pull it |
|---|---|
| Raise LTV | Increase pricing, improve retention, expand revenue per account |
| Lower CAC | Improve conversion, lean into organic channels, sharpen targeting |
| Cut churn | Better onboarding, product stickiness, proactive customer success |
Often the highest-leverage fix isn't marketing at all - it's the product. A leaky onboarding flow or a feature gap that drives churn quietly halves your LTV. If your ratio is below target, it's worth auditing the product experience, not just the funnel.
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