📈 LTV : CAC Ratio Calculator

Measure your startup's unit economics health in seconds

LTV : CAC Ratio
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Customer Lifetime Value (LTV)
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Customer Acquisition Cost (CAC)
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LTV:CAC Ratio — The Key Startup Health Metric

For subscription, SaaS, and recurring-revenue businesses, the ratio between Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC) is one of the most important indicators of business sustainability — investors and founders watch it closely.

Customer Lifetime Value (LTV)

LTV estimates the total gross profit a customer generates over their entire relationship with your business. It's calculated as: Average Monthly Revenue × Gross Margin % × Average Customer Lifetime (1 ÷ Monthly Churn Rate).

Customer Acquisition Cost (CAC)

CAC is simply your total sales and marketing spend divided by the number of new customers acquired in that period. It should include ad spend, sales team salaries, and marketing tool costs attributable to acquisition.

The 3:1 Benchmark

A widely-cited rule of thumb in the startup world: a healthy LTV:CAC ratio is 3:1 or higher — meaning each customer generates at least 3x what it costs to acquire them, leaving room for operating costs and profit. Below 1:1 means the business model loses money on every customer.

Frequently Asked Questions

What's a good payback period alongside LTV:CAC? +
Beyond the ratio, check how quickly you recover CAC — ideally within 12 months for most SaaS businesses. A great LTV:CAC ratio with a 3-year payback period still strains cash flow significantly.
Does this work for non-subscription businesses? +
The framework is designed for recurring revenue models. For one-time purchase businesses, a simpler comparison of average order value/margin against acquisition cost serves a similar purpose, though 'lifetime value' would need redefinition around repeat purchase behavior.
My churn rate is 0% — how do I calculate LTV? +
If churn is genuinely 0% (rare), lifetime value becomes theoretically infinite using this formula. In practice, use a realistic estimated customer lifetime (e.g., 36-60 months) directly instead of dividing by churn.