LTV:CAC Ratio Calculator
(Lifetime Value to Acquisition Cost)
Compare what a customer is worth with what it costs to win them. If you do not know your lifetime value, estimate it from monthly revenue, margin and lifespan.
Step 1 — Calculation Goal
Step 2 — Core Metrics
Total revenue expected from one customer over their lifetime
Fully loaded cost to acquire one customer
LTV:CAC Ratio Result
💡 Formula Guide
This LTV:CAC ratio calculator compares customer lifetime value with customer acquisition cost. Enter both to get the ratio. It also works backwards: give it a CAC and a target ratio to find the lifetime value you need, or a lifetime value and a target ratio to find the most you can spend on a customer. If you do not have a lifetime value figure, the builder estimates one.
How to Calculate the LTV:CAC Ratio
Divide customer lifetime value by customer acquisition cost.
A customer worth $900 who cost $200 to win gives 900 ÷ 200 = 4.5:1. Every dollar spent on acquisition returns $4.50 over the life of the customer.
| To find | Formula | Example |
|---|---|---|
| LTV:CAC ratio | LTV ÷ CAC | $900 ÷ $200 = 4.5:1 |
| Required LTV | Target Ratio × CAC | 3 × $200 = $600 |
| Maximum CAC | LTV ÷ Target Ratio | $900 ÷ 3 = $300 |
What Is a Good LTV:CAC Ratio?
The 3:1 guideline comes from David Skok's SaaS Metrics 2.0. In his words, the best SaaS businesses have an LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8.
| Ratio | What it means |
|---|---|
| Below 1:1 | A customer brings in less than it cost to win them. Each sale loses money. |
| 1:1 to 3:1 | Customers return their cost, but little is left for the other costs of the business. |
| 3:1 or higher | At or above the guideline. |
The guideline was written for software subscriptions with high gross margins. A business with thin margins needs a higher ratio on revenue-based lifetime value to be in the same position. A very high ratio is sometimes read as a sign that a company could afford to spend more on growth; that is a judgement about the business, and the ratio alone cannot settle it.
Estimating Lifetime Value
If you do not track lifetime value, the builder in the calculator uses this estimate.
$75 a month at an 80% gross margin over 24 months gives 75 × 0.80 × 24 = $1,440. Against a $200 CAC that is 7.2:1. Leave the gross margin field empty and the builder uses revenue alone.
Lifespan can be taken from churn: 1 divided by the monthly churn rate. At 4% monthly churn the average customer stays 25 months. The Churn Rate Calculator gives the churn rate. The estimate assumes revenue per customer and churn stay constant, so it is rough for young businesses with little history.
What the Ratio Does Not Show
- Time: a 5:1 ratio earned over six years ties up cash for much longer than a 3:1 ratio earned in one. Check the payback period beside the ratio, which the CAC Calculator shows.
- Averages: one ratio for the whole business mixes cheap and expensive channels. Work it out per channel or per plan if you can.
- Forecast error: lifetime value is a prediction. A lifespan guessed too long makes any ratio look healthy.
How to Use the LTV:CAC Calculator
- Choose what to solve for: Pick the LTV:CAC ratio, the lifetime value a target ratio needs, or the highest CAC a target ratio allows.
- Enter the two known values: Type in two of lifetime value, CAC and target ratio. The third is calculated as you type.
- Estimate lifetime value: Optional. If you do not know your lifetime value, open the builder and enter average monthly revenue per customer, gross margin and average customer lifespan in months. The estimate is used when the lifetime value field is empty.
Frequently Asked Questions
How do I calculate the LTV:CAC ratio?
Divide customer lifetime value by customer acquisition cost. A customer worth $900 who cost $200 to win gives 900 ÷ 200 = 4.5, written 4.5:1.
What is a good LTV:CAC ratio?
3:1 is the usual guideline. It comes from David Skok's SaaS Metrics 2.0, which says the best SaaS businesses have a ratio higher than 3, sometimes as high as 7 or 8. Below 1:1 a customer brings in less than it cost to win them.
How do I calculate customer lifetime value?
A simple estimate is average monthly revenue per customer × gross margin × average customer lifespan in months. $75 a month at an 80% gross margin over 24 months gives 75 × 0.80 × 24 = $1,440.
How do I estimate customer lifespan from churn?
Divide 1 by the monthly churn rate. At 4% monthly churn the average customer stays 1 ÷ 0.04 = 25 months. This assumes the churn rate stays the same over time, which is rarely exact.
Should lifetime value use revenue or gross profit?
Gross profit. Revenue-based lifetime value ignores the cost of serving the customer and makes the ratio look better than it is. If you enter a revenue figure, read the result as an upper limit.
Is LTV the same as CLV?
Yes. LTV, CLV and CLTV all mean customer lifetime value: what one customer is expected to bring in over the whole time they stay.
The 3:1 guideline was checked against David Skok's SaaS Metrics 2.0 in October 2026.