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Customer Lifetime Value to CAC Ratio Calculator

LTV:CAC from ARPU, gross margin, monthly churn, and fully loaded CAC.

Page updated 2026-09-04.

Customer Lifetime Value to CAC Ratio Calculator visual
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Calculator

Default $79.

Default 80%.

Default 2.5%.

Default $420.

Calculated Results

LTV : CAC

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LTV

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Customer lifetime value against acquisition cost

At $79 monthly ARPU, 80% gross margin, and 2.5% monthly logo churn, lifetime value comes to $2,528 (ARPU x margin / churn rate). Against a $420 fully loaded CAC, that's an LTV:CAC ratio of 6.02:1 -- well inside the 'at or above 3:1' band commonly cited as healthy.

Churn rate is the most sensitive input in this formula: LTV is inversely proportional to churn, so a jump from 2.5% to 5% monthly churn would roughly halve LTV to about $1,264 and cut the ratio to roughly 3.0:1 -- from comfortably healthy to right at the minimum acceptable line, with every other input unchanged.

The implied average customer lifetime here is 1 / 2.5% = 40 months -- LTV is really a shorthand for 'monthly gross profit per customer, multiplied by how long they're expected to stick around.'

Why gross margin belongs in the LTV formula

LTV = ARPU x margin / churn. Pair with the SaaS LTV page if you already have LTV dollars. Using raw ARPU instead of margin-adjusted ARPU overstates LTV, since it's the gross profit per customer -- not the revenue -- that actually funds the cost of serving and retaining that customer over their lifetime.

Fully loaded CAC ($420) should include all sales and marketing costs divided by customers acquired in the period, not just ad spend -- leaving out sales salaries, tools, or content costs understates CAC and inflates this ratio artificially.

Churn and CAC must both be greater than zero for the ratio to compute, since a 0% churn rate would imply infinite customer lifetime (undefined LTV) and a $0 CAC would make the ratio meaningless.

What a healthy ratio doesn't guarantee

A strong LTV:CAC ratio says nothing about payback period -- a company can have excellent lifetime economics but still run out of cash waiting to recoup CAC. See the CAC Payback Calculator for that timing question specifically.

If you're starting from a known LTV dollar figure instead of the ARPU/margin/churn inputs used here, the SaaS LTV Calculator works directly from that number.

Frequently Asked Questions (FAQ)

How is the $2,528 LTV figure calculated?

LTV = ARPU x gross margin / monthly churn rate = $79 x 0.80 / 0.025 = $2,528. It represents expected gross profit generated over a customer's full expected lifetime.

Why does churn have such a big effect on the ratio?

Because churn is in the denominator of the LTV formula, so LTV moves inversely and disproportionately with it. Doubling churn from 2.5% to 5% roughly halves LTV, which is why even small improvements in retention have an outsized effect on this ratio compared to similar-sized changes in ARPU or CAC.

Should CAC include only marketing spend, or sales too?

Fully loaded CAC should include all costs to acquire a customer -- marketing spend, sales salaries and commissions, and related tools -- divided by the number of customers acquired in the period. Using ad spend alone understates true CAC and inflates the LTV:CAC ratio.

Is 3:1 a hard rule for a healthy SaaS business?

It's a commonly cited rule of thumb, not a universal standard. Some efficient, capital-light businesses target higher (5:1+), while some venture-backed companies intentionally run lower ratios during a land-grab growth phase. Context (stage, funding strategy, market) matters more than the single number.

Does a good LTV:CAC ratio mean the business has healthy cash flow?

Not necessarily. This ratio measures lifetime economics, not the timing of cash recovery. A business can have excellent LTV:CAC and still face a cash crunch if CAC payback period is long -- check that separately with the CAC Payback Calculator.

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