LTV to CAC Calculator
Acquisition cost, lifetime value on gross profit, the ratio between them, and how long payback takes.
LTV here is gross profit, not revenue. That distinction is the whole point: a business with thin margins can show a healthy revenue-based ratio while losing money on every customer it acquires. The usual benchmarks are 3:1 or better on LTV to CAC and payback inside 12 months.
Unit economics ask a single question: does one customer generate more profit than it costs to acquire them? Customer acquisition cost is sales and marketing spend divided by customers acquired. Lifetime value is the gross profit that customer produces before they leave.
Worked example. Spend $100,000 to win 200 customers and CAC is $500. At 2% monthly churn the average customer stays 50 months. At $100 a month with an 80% gross margin, that is $80 of monthly gross profit and $4,000 of lifetime value, an 8:1 ratio with payback in 6.25 months.
Frequently asked questions
What LTV to CAC ratio is healthy?
3:1 is the usual benchmark. Below that, acquisition costs eat the profit. Far above it is not automatically good either: a 10:1 ratio often means underinvestment in growth, and the company could profitably spend more.
Why does churn matter so much?
Because lifetime is its reciprocal. At 2% monthly churn the average customer stays 50 months; at 5% they stay 20. Nothing else in the model moves lifetime value as violently, which is why retention work usually beats acquisition work.
What is CAC payback and why track it separately?
It is the months of gross profit needed to recover acquisition cost. It matters independently of the ratio because it is a cash question: a business can have great lifetime economics and still run out of money waiting for them. Under 12 months is the common target.
Should CAC include salaries?
Yes. Fully loaded CAC includes sales and marketing salaries, commissions, tools, and ad spend. Counting only ad spend is the most common way CAC gets understated, often by a factor of two or more.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.