LTV:CAC Ratio Calculator

Calculate LTV:CAC ratio to evaluate customer acquisition profitability

The LTV:CAC ratio compares how much value a customer generates over their lifetime (LTV) against what it costs you to acquire that customer (CAC). It is one of the fastest ways to spot whether growth is healthy or misleading. A business can have rising revenue and still be destroying value if acquisition costs are too high relative to customer economics. This calculator gives you a practical ratio plus a few decision-friendly insights, without requiring perfect data.

If you already know your LTV and CAC, use the direct mode. You enter two numbers and get the ratio instantly. If you do not know LTV, use the estimate mode. It lets you approximate LTV using monthly revenue per customer (ARPA), gross margin, and either customer lifespan or churn. On the CAC side, you can compute CAC from total acquisition spend divided by new customers for the same period. This approach matches what most teams can reliably pull from billing and marketing reports.

The result is not just a number. The calculator also interprets what the ratio usually implies, shows the LTV and CAC values used, estimates payback time when enough information is available, and calculates a simple benchmark: the maximum CAC you could afford if you want a target ratio such as 3:1. Used properly, this helps with budgeting, channel decisions, and sanity-checking whether you are scaling sustainably or just buying growth.

Assumptions and how to use this calculator

• LTV in estimate mode is simplified to ARPA × gross margin × lifespan. This focuses on contribution value rather than top-line revenue.
• If lifespan is not provided, monthly churn is used to estimate lifespan as 1 ÷ churn (as a decimal). If neither is provided, a default lifespan of 24 months is assumed.
• Gross margin defaults to 70% if left blank. This is a placeholder, not a recommendation. Use your real margin if you have it.
• CAC is calculated as acquisition spend ÷ new customers. Ensure spend and customer counts cover the same period and acquisition scope.
• This calculator ignores retention expansion, discounts, refunds, and time value of money. For high-precision finance work, you would model cash flows by month.

Common questions

What is a “good” LTV:CAC ratio?

There is no universal target, but many businesses treat 3:1 as a healthy baseline. Under 1:1 usually indicates you lose money on acquisition. Between 1:1 and 3:1 is often fragile, meaning you may be relying on future improvements or cross-subsidies. Above 5:1 can be excellent, but it can also signal under-investment in growth if you could profitably spend more to acquire customers.

Should I use revenue LTV or gross profit LTV?

For decision-making, gross profit (or contribution) is more useful because acquisition spend is a real cost. If you use revenue LTV, the ratio can look artificially high in low-margin businesses. This calculator uses gross margin in estimate mode so you can keep the comparison closer to profit reality.

What if I do not know churn or lifespan?

You can still get a result. If you do not enter lifespan or churn, the calculator applies a default lifespan assumption. Treat that output as a directional estimate and update it once you can measure retention. Even a rough churn estimate is usually better than leaving it blank, as long as you are honest about the uncertainty.

My CAC varies by channel. What should I enter?

Start with blended CAC (total spend divided by total new customers) to get a baseline. Then rerun the calculator for each channel using channel-specific spend and customer counts. Channel-level ratios are more actionable for budget allocation, while blended ratios are better for executive-level health checks.

How do I improve accuracy without adding lots of complexity?

Use a consistent period, ensure your “new customers” count matches the spend window, and use a realistic gross margin. If you have cohort retention, use an average lifespan derived from cohorts rather than a guess. If your business has meaningful upsells or expansions, consider using ARPA that already reflects net revenue per customer over time.