Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Result
LTV:CAC ratio
12.50
Customer lifetime value
$93,750
Implied average customer lifetime (years)
8.3
CAC used
$7,500
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How to use this
- 1Enter annual contract value (acv) ($).
- 2Enter gross margin (%).
- 3Enter annual revenue churn rate (%).
- 4Enter cac per customer ($).
- 5Read your ltv:cac ratio on the right — it updates as you type.
- 6Hit Share to keep the scenario or send it to someone.
About this calculator
LTV:CAC compares the total gross profit a customer generates over their lifetime against the cost of acquiring them, giving a single ratio that tells you whether your unit economics work at all. A ratio of 3:1 is the classic minimum bar for a healthy SaaS business — below that, you're spending too much to acquire customers relative to what they're worth, and growth destroys value rather than creating it. A ratio above 5:1 sounds great on paper but can also mean you're under-investing in growth and leaving market share on the table, since if unit economics are that favorable you should probably be spending more on acquisition, not less. LTV is highly sensitive to your churn assumption: a small change in monthly churn rate compounds into a large change in expected customer lifetime, so always sanity check the churn number driving your LTV rather than trusting a single historical average blindly, especially for a young cohort that hasn't lived through a full renewal cycle yet.
Worked example
Using the values the calculator loads with:
Inputs
- Annual contract value (ACV): 15000 $
- Gross margin: 75 %
- Annual revenue churn rate: 12 %
- CAC per customer: 7500 $
Results
- LTV:CAC ratio: 12.5
- Customer lifetime value: $93,750
- Implied average customer lifetime (years): 8.3
- CAC used: $7,500
What each field means
Inputs
- Annual contract value (ACV) ($)
- The annual contract value (acv) used in the calculation, measured in $. Starts at 15000 $ so you have a working example on load.
- Gross margin (%)
- The gross margin used in the calculation, measured in %. Starts at 75 % so you have a working example on load. Accepted range: 1–100 %.
- Annual revenue churn rate (%)
- The annual revenue churn rate used in the calculation, measured in %. Starts at 12 % so you have a working example on load. Accepted range: 0.5–100 %.
- CAC per customer ($)
- The cac per customer used in the calculation, measured in $. Starts at 7500 $ so you have a working example on load.
Results
- LTV:CAC ratio
- Returned as a decimal number and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Customer lifetime value
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Implied average customer lifetime (years)
- Returned as a decimal number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- CAC used
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
What LTV:CAC ratio should I target?
3:1 is the widely cited healthy minimum. Below 1:1 you're losing money on every customer. 3:1 to 5:1 is the sweet spot most investors want to see — good unit economics without obviously under-investing in growth. Consistently above 6-7:1 often means you should be spending more aggressively on acquisition.
Why does churn rate matter so much to this ratio?
LTV divides by churn, so it's inversely and non-linearly sensitive to it: cutting annual churn from 15% to 10% increases implied lifetime by 50%, which increases LTV by the same 50% holding everything else constant. Small retention improvements move this ratio far more than small CAC or pricing improvements.
Should I use gross margin or gross revenue in the LTV formula?
Always gross profit (revenue times gross margin), not raw revenue — the ratio is meant to compare acquisition cost against actual profit contribution, and using raw revenue overstates LTV by ignoring hosting, support, and other cost-of-service expenses.
Is a simple churn-based LTV formula accurate enough?
It's a reasonable approximation for mature cohorts with fairly stable churn, but it assumes constant churn forever, which understates real LTV if churn improves with tenure (common) or overstates it if a young cohort's churn rate hasn't stabilized yet. For precision, model cohort-based retention curves instead of a flat rate.
Accuracy and 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.
Related tools
CAC Payback Period Calculator
Find out how many months it takes to recoup what you spent acquiring a customer.
Net Revenue Retention (NRR) Calculator
See how much revenue your existing customers generate a year later, expansion included.
SaaS Gross Margin Calculator
Calculate true gross margin including hosting, support, and infrastructure costs.
Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). LTV:CAC Ratio Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/ltv-to-cac-ratio
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/ltv-to-cac-ratio" target="_blank" rel="noopener">LTV:CAC Ratio Calculator — RevenueLab</a> (2026).</p>
Source: [LTV:CAC Ratio Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/ltv-to-cac-ratio) (2026).