Customer LTV:CAC Ratio Calculator
This customer LTV:CAC ratio calculator checks whether your customer lifetime value justifies what you're spending to acquire each one — one of the core efficiency metrics for any subscription or repeat-purchase business. Enter your numbers to see your ratio against the commonly cited 3:1 benchmark.
Monthly recurring revenue per customer.
The percentage of revenue left after direct costs of serving customers (hosting, support, payment processing).
Used to estimate average customer lifetime.
Total sales and marketing spend divided by new customers acquired in the same period.
LTV:CAC ratio
3.29
A commonly cited healthy benchmark is 3:1 or higher.
How to use this customer ltv:cac ratio calculator
- 1Average revenue per customer and gross margin: used to estimate the actual profit (not just revenue) each customer generates monthly.
- 2Monthly churn rate: used to estimate how long the average customer sticks around.
- 3Customer acquisition cost (CAC): total sales and marketing spend divided by new customers acquired in the same period — be consistent about which costs you include.
Understanding your results
LTV:CAC ratio is the headline efficiency number — a commonly cited healthy benchmark is 3:1 or higher, meaning each customer generates at least three times what it cost to acquire them over their lifetime. Below that, growth may be unsustainably expensive; well above it (say, 8:1+) can sometimes signal under-investment in growth, since you could likely spend more on acquisition profitably.
The formula
LTV = Monthly revenue × Gross margin % × Average lifetime (months) · Ratio = LTV ÷ CACAverage customer lifetime is estimated as the inverse of the monthly churn rate (a 3% monthly churn implies roughly a 33-month average lifetime) — a standard simplifying assumption. Customer lifetime value multiplies monthly revenue by gross margin (since CAC should be compared against profit, not raw revenue) across that estimated lifetime, then divides by CAC to get the ratio.
A worked example
A customer paying $79/month at 75% gross margin, with 3% monthly churn (implying a 33.3-month average lifetime) and a $600 CAC: lifetime value is $79 × 0.75 × 33.3 ≈ $1,975, giving an LTV:CAC ratio of about 3.3:1 — comfortably above the commonly cited 3:1 healthy benchmark.
Notes for the UK, US and India
This calculator uses a simplified constant-churn-rate model — real customer cohorts often have declining churn rates over time (customers who survive the first few months tend to stick around longer), which would make real LTV somewhat higher than this simplified estimate suggests. Also consider payback period (how many months of margin it takes to recoup CAC) alongside the ratio, since a great ratio with a very long payback period can still strain cash flow.
Frequently asked questions
Why use gross margin instead of raw revenue for LTV?+
CAC is a real cost, so it should be compared against the actual profit a customer generates, not their raw revenue — using gross margin accounts for the direct costs (hosting, support, payment processing) of serving that customer.
Is a higher LTV:CAC ratio always better?+
Generally yes, up to a point — but an extremely high ratio (well above 5:1 or so) can also suggest you're being too conservative with growth spending and could likely acquire more customers profitably by investing more in acquisition.
What costs should be included in CAC?+
Total sales and marketing spend (salaries, ad spend, tools, commissions) for a given period, divided by the number of new customers acquired in that same period — be consistent about what's included so your ratio is comparable over time.
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