LTV:CAC Ratio Calculator

The widely accepted benchmark is 3:1 or higher. Meaning you earn three dollars in gross-margin-adjusted customer lifetime value for every dollar spent on acquisition. Below 1:1 means you're losing money on every customer. Between 1:1 and 3:1 means you're covering acquisition but have little margin to fund growth. Above 5:1 is excellent but often signals under-investment in growth. You may be able to spend more on acquisition to accelerate.

LTV:CAC measures total lifetime profit per dollar spent acquiring a customer. CAC payback measures how many months until you've earned that dollar back. Two SaaS companies can have the same LTV:CAC but very different paybacks. High churn with high ARPU pays back fast but caps LTV; low churn with low ARPU pays back slow but accumulates large LTV. For cash-constrained founders, payback often matters more than ratio.

Always gross margin LTV. Raw LTV (ARPU × lifetime) ignores the cost of delivering the service, so it overstates profitability. Most SaaS companies have gross margins between 70-85%, so raw LTV overstates the ratio by ~25%. Using gross margin LTV gives you a number that reflects actual profit available to fund acquisition.

Fully-loaded paid CAC is most useful for decision-making: ad spend + sales salaries + tools + content production + a fraction of marketing overhead, divided by paid-acquired customers only (exclude organic). Blended CAC (across all channels including organic) makes you feel better but underestimates the true cost of growth, since organic isn't actually free. It took time, content, and SEO effort to build.

Churn has an inverse relationship with LTV, so it has a non-linear effect on LTV:CAC. Cutting monthly churn from 5% to 3% raises customer lifetime from 20 months to 33 months. A 65% LTV increase with no other change. This is why churn-recovery investment (dunning, exit feedback, win-backs) often beats acquisition investment for improving the ratio.