LTV:CAC Calculator
Are Your Unit Economics Profitable?

Calculate Customer Lifetime Value, Acquisition Cost, and the ratio that tells investors whether your business model actually works.

Used by 1,200+ SaaS founders to prove unit economics, optimize spend, and pitch investors with confidence.

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Revenue & Retention

Average Revenue Per User (ARPU)

$/mo

Monthly revenue per customer

Monthly Churn Rate

% of customers who cancel each month

Gross Margin

Revenue minus COGS (typically 70-85% for SaaS)

Acquisition Costs

Monthly Marketing Spend

Ads, content, SEO, PR

Monthly Sales Spend

Salaries, commissions, tools

New Customers per Month

Customers acquired this month

INDUSTRY DATA

SaaS Unit Economics Benchmarks

Metric	Poor	Acceptable	Good	Excellent
LTV:CAC Ratio	< 1x	1–2x	3–5x	5x+
Payback Period	24+ mo	12–18 mo	6–12 mo	< 6 mo
Monthly Churn	> 8%	5–8%	2–5%	< 2%
Gross Margin	< 60%	60–70%	70–80%	80%+
CAC (B2B SaaS)	> $500	$200–$500	$50–$200	< $50

Complete Guide

Understanding LTV:CAC — The Metric VCs Care About Most

The LTV:CAC ratio is the single most important metric for proving your SaaS business model works. It answers a fundamental question: for every dollar you spend acquiring a customer, how many dollars do you get back over their lifetime?

How to Calculate Customer Lifetime Value (LTV)

LTV = ARPU × Average Customer Lifespan × Gross Margin. The average lifespan is the inverse of your monthly churn rate. A company with 5% monthly churn retains customers for an average of 20 months (1 ÷ 0.05). With $50 ARPU and 80% gross margin: LTV = $50 × 20 × 0.80 = $800.

How to Calculate Customer Acquisition Cost (CAC)

CAC = Total Sales & Marketing Spend ÷ New Customers Acquired. Include all costs: ad spend, content creation, SEO tools, sales salaries, commissions, and any tools used for lead generation. A company spending $10,000/month on marketing and sales that acquires 50 customers has a CAC of $200.

The 3:1 Rule

Most venture capitalists want to see a LTV:CAC ratio of at least 3:1. This means every dollar spent on acquisition generates three dollars in lifetime gross profit. Below 1:1, you are losing money on every customer. Between 1:1 and 3:1, you are profitable but margins are tight and may not justify the investment risk.

Payback Period: The Time Dimension

Even with a 5:1 LTV:CAC ratio, if it takes 36 months to recover your CAC, you need enormous upfront capital. The payback period measures how many months of gross profit it takes to recoup the acquisition cost. Target 12 months or less. Under 6 months is excellent and enables aggressive growth reinvestment.

How to Improve Your Ratio

Three levers: increase LTV (raise prices, reduce churn, upsell), reduce CAC (organic channels, referrals, better conversion), or improve margins (automate support, optimize infrastructure). The highest-impact lever is usually reducing churn — a 1% reduction in monthly churn can increase LTV by 20–50%.

Use our Runway Calculator to see how your unit economics affect your startup's financial trajectory.

Frequently Asked Questions

What is a good LTV:CAC ratio?

A ratio of 3:1 or higher is considered healthy by most investors. Below 1:1 means you're losing money on every customer. 1-3x means you're profitable but margins are thin. Above 5:1 is excellent but could indicate you're under-investing in growth.

How do I calculate average revenue per user (ARPU)?

ARPU = Total Monthly Revenue ÷ Total Active Customers. Include all recurring revenue (subscriptions, usage fees) but exclude one-time charges. For multi-plan pricing, use the blended average across all tiers.

What monthly churn rate should I target?

For B2B SaaS: 2-5% monthly (good), under 2% (excellent). For B2C SaaS: 5-8% (acceptable), under 5% (good). Enterprise: under 1.5% monthly. High churn dramatically reduces LTV and is the fastest way to destroy unit economics.

Should I include salaries in CAC?

Yes. CAC should include all fully-loaded costs of acquiring customers: marketing spend, sales team salaries and commissions, tools used for lead generation, and a proportional share of overhead allocated to the sales and marketing function.

What is a good payback period?

Under 12 months is the standard target. Under 6 months is excellent. Over 18 months means you need significant capital to fund growth. The payback period determines how quickly you can reinvest in acquiring more customers.

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