LTV:CAC Ratio Calculator (Unit Economics)
Derive customer lifetime value from your revenue, gross margin, and churn rate, then compare it to acquisition cost to get the LTV:CAC ratio that signals whether growth is sustainable.
Last updated: May 2026
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About this calculator
Lifetime value is built from unit economics rather than entered directly. Average customer lifetime in months is the inverse of monthly churn: 100 / churnRatePercent (a 5% monthly churn implies a 20-month average lifespan). Each month a customer pays arpa, of which you keep the gross margin fraction, so LTV = arpa x (grossMarginPercent / 100) x (100 / churnRatePercent). Dividing this margin-adjusted lifetime value by the customer acquisition cost (cac) gives the LTV:CAC ratio. A ratio around 3:1 is widely considered healthy for SaaS; below 1:1 you lose money on every customer, and far above 3:1 may mean you are underinvesting in growth.
How to use
With $50 average revenue per account per month, an 80% gross margin, 5% monthly churn, and a $300 acquisition cost: the average lifetime is 100 / 5 = 20 months. Margin-adjusted monthly value is $50 x 0.80 = $40, so LTV = $40 x 20 = $800. The ratio is $800 / $300 = about 2.7:1, just under the 3:1 benchmark, suggesting you should either lower CAC or reduce churn before scaling spend.
Frequently asked questions
What is a good LTV:CAC ratio for a SaaS business?
A ratio of about 3:1 is the common benchmark, meaning a customer is worth three times what it costs to acquire them. Below roughly 1:1 you lose money on each customer and growth makes things worse. A ratio well above 3:1 (say 5:1 or more) often signals you are leaving growth on the table and could profitably spend more on acquisition. This calculator derives the ratio from your actual churn and margin so it reflects true unit economics.
How does churn rate affect customer lifetime value?
Lifetime value is inversely proportional to churn: average customer lifespan equals one divided by the monthly churn rate. Cutting churn from 5% to 2.5% doubles the average lifetime from 20 to 40 months and therefore doubles LTV without changing your pricing. That leverage is why reducing churn is often the single most powerful way to improve the LTV:CAC ratio, which this calculator shows by tying lifetime directly to the churn input.
Should LTV be based on revenue or gross margin?
Use gross margin, not raw revenue. Lifetime value should reflect the cash you actually keep after the direct cost of serving a customer (hosting, support, payment fees), because that is what funds acquisition and profit. Basing LTV on full revenue overstates it and can make unhealthy unit economics look fine. This calculator multiplies revenue by your gross margin percentage so the resulting ratio is conservative and decision-ready.