Productivity and technology investment · Free
LTV / CAC calculator
Compare what a customer leaves you over their lifetime with what it costs to win them. It's one of the first figures an investor looks at in a subscription business.
Guide
How LTV and CAC are calculated
LTV = average monthly revenue per customer × gross margin ÷ monthly churn. At €99 a month, 80% margin and 3% churn: 99 × 0.8 ÷ 0.03 = €2,640.
CAC = acquisition spend ÷ new customers. Spend €6,000 a month and win 20 customers, and each costs €300. The LTV/CAC ratio would be 8.8:1.
CAC payback months
Beyond the ratio, it matters how long it takes to earn back what the customer cost: CAC ÷ monthly margin per customer. In the example, 300 ÷ 79.2 = 3.8 months.
A SaaS can have an excellent ratio and still run out of cash if each customer takes 18 months to pay back. Under 12 months is considered healthy.
How to improve the ratio
What usually moves the ratio most is reducing churn: going from 3% to 2% a month raises LTV by 50%. Good onboarding, reminders before cards expire and spotting people who stop using the product all help.
How it works
- Enter average monthly revenue per customer, gross margin and monthly churn.
- Enter your monthly acquisition spend and how many new customers you win.
- See LTV, CAC, the ratio and the payback months.
Frequently asked questions
What is LTV?
Lifetime value: the margin a customer brings in for as long as they stay. It is calculated as monthly revenue × gross margin ÷ monthly churn.
What is CAC?
Customer acquisition cost: everything you spend on marketing and sales in a period, divided by new customers in that period. It includes ads, tools and the relevant share of sales salaries.
What is a good LTV/CAC ratio?
The usual benchmark is 3:1 or better. Below 1:1 you lose money on every new customer. Well above 5:1 may mean you are underinvesting in growth.
What is churn?
The percentage of customers who cancel each month. With 3% churn, a customer stays about 33 months on average (100 ÷ 3).
Do you do this every day?
If you merge documents, prepare invoices or copy data between programs every day, that can be automated, and it's what we do.