{
  "slug": "saas-ltv-cac-payback",
  "title": "LTV to CAC and Payback Period Calculator",
  "heading": "LTV:CAC and Payback Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/saas-ltv-cac-payback",
  "summary": "Check whether a customer returns more gross profit than they cost to acquire.",
  "description": "LTV:CAC compares the gross profit a customer generates over their lifetime to what you spent acquiring them, and payback period says how long you wait to get that acquisition cost back in cash. Both matter — a 5:1 ratio with a 30-month payback still starves a company of cash. This calculator uses gross-profit-based LTV rather than the naive revenue version, so the answer accounts for cost of serving the customer. The commonly cited targets are 3:1 or better on the ratio and under 12 months on payback for SMB, or under 18-24 months for enterprise where contract values and retention are both much higher.",
  "formula": "Lifetime months = 1 ÷ monthly churn. LTV = ARPA × gross margin × lifetime months. Payback = CAC ÷ (ARPA × gross margin).",
  "dateModified": "2026-08-25",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=saas-ltv-cac-payback",
  "inputs": [
    {
      "id": "arpa",
      "label": "Average revenue per account",
      "kind": "number",
      "hint": null,
      "default": 420,
      "unit": "$/mo",
      "min": 1,
      "max": null
    },
    {
      "id": "gm",
      "label": "Gross margin",
      "kind": "number",
      "hint": null,
      "default": 80,
      "unit": "%",
      "min": 1,
      "max": 100
    },
    {
      "id": "churn",
      "label": "Monthly revenue churn",
      "kind": "number",
      "hint": null,
      "default": 1.8,
      "unit": "%",
      "min": 0.05,
      "max": 50
    },
    {
      "id": "cac",
      "label": "Customer acquisition cost",
      "kind": "number",
      "hint": null,
      "default": 4200,
      "unit": "$",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "ratio",
      "label": "LTV : CAC ratio",
      "format": "decimal",
      "hint": null,
      "primary": true
    },
    {
      "id": "payback",
      "label": "CAC payback period (months)",
      "format": "decimal",
      "hint": null,
      "primary": false
    },
    {
      "id": "ltv",
      "label": "Lifetime gross profit per customer",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "lifetime",
      "label": "Expected customer lifetime (months)",
      "format": "decimal",
      "hint": null,
      "primary": false
    },
    {
      "id": "monthlyGP",
      "label": "Monthly gross profit per account",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Average revenue per account: 420 $/mo",
      "Gross margin: 80 %",
      "Monthly revenue churn: 1.8 %",
      "Customer acquisition cost: 4200 $"
    ],
    "outputs": [
      "LTV : CAC ratio: 4.44",
      "CAC payback period (months): 12.5",
      "Lifetime gross profit per customer: $18,666.67",
      "Expected customer lifetime (months): 55.6",
      "Monthly gross profit per account: $336.00"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter average revenue per account ($/mo).",
      "Enter gross margin (%).",
      "Enter monthly revenue churn (%).",
      "Enter customer acquisition cost ($).",
      "Read your ltv : cac ratio on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "arpa": 250,
        "gm": 48,
        "churn": 1.08,
        "cac": 2500
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "arpa": 420,
        "gm": 80,
        "churn": 1.8,
        "cac": 4200
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "arpa": 670,
        "gm": 100,
        "churn": 2.8800000000000003,
        "cac": 6700
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why use gross profit instead of revenue for LTV?",
      "a": "Because hosting, support, and payment processing consume real money every month the customer stays. A revenue-based LTV overstates the ratio by roughly the inverse of gross margin — at 70% margin, it inflates your number by more than 40%."
    },
    {
      "q": "Is a very high LTV:CAC ratio good?",
      "a": "Above roughly 5:1 usually signals underinvestment in acquisition rather than brilliance. If each customer returns five times their cost, spending more to get more is almost always the right call — assuming payback period stays fundable."
    },
    {
      "q": "Why does payback matter separately?",
      "a": "Because it's a cash constraint, not a profit one. A long payback means every new customer deepens your cash hole before filling it, so a fast-growing company with 30-month payback can go bust while being highly profitable per customer on paper."
    },
    {
      "q": "How do I handle expansion revenue?",
      "a": "Use net revenue churn rather than gross in the churn input. If expansion exceeds churn, net churn goes negative and the simple 1÷churn lifetime formula breaks — in that case model a cohort forward explicitly rather than trusting this shortcut."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/saas-churn-cost",
    "https://www.revenuelab.fyi/toolbox/saas-magic-number",
    "https://www.revenuelab.fyi/toolbox/saas-freemium-conversion"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — LTV to CAC and Payback Period Calculator (https://www.revenuelab.fyi/toolbox/saas-ltv-cac-payback)"
}