By using this tool you acknowledge that all results are high-level estimates for educational purposes only — not financial, tax, legal, or investment advice, and not a formal valuation. Figures are rounded for display and may not sum exactly, though results remain directionally accurate. For real decisions, consult a qualified professional or talk to a CFO.

Free Unit Economics Tool

LTV:CAC Calculator

See if your unit economics actually work — measured against the 3:1 ratio investors look for.

Average monthly revenue per customer ($) Total recurring revenue divided by number of active customers.

Gross margin (%) Revenue minus cost of delivering the product, as a percentage.

Monthly customer churn rate (%) Percentage of customers who cancel in an average month.

Customer acquisition cost — CAC ($) All sales and marketing spend divided by new customers acquired.

Please check the highlighted fields — dollar amounts must be between $0 and $1,000,000,000 (CAC above $0), gross margin between 0% and 100%, and monthly churn between 0.01% and 100%.

LTV:CAC Ratio Calculator

How Does the LTV:CAC Calculator Work?

Customer lifetime value against acquisition cost is one of the fastest ways to tell if a growth engine is actually working. This LTV to CAC ratio calculator estimates customer lifetime value from your average revenue per account, gross margin, and churn rate, then compares it against your acquisition cost to produce the ratio investors and operators actually use.

What Is a Good LTV:CAC Ratio for SaaS?

The standard benchmark is 3:1 — for every dollar spent acquiring a customer, that customer should return three dollars in gross-margin-adjusted lifetime value. Below 1:1, you are losing money on every customer. Above roughly 5:1, you may be underinvesting in growth relative to what your economics could support.

Weak unit economics are rarely a single problem. They usually trace back to pricing that's too low, churn that's too high, or acquisition spend that's grown faster than sales efficiency. An outside FP&A review from the US Fractional CFO Alliance can isolate which lever is actually driving the number before you spend more on growth.

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Frequently Asked Questions

What is a good LTV:CAC ratio?

Most investors and operators look for an LTV:CAC ratio of 3:1 or higher. Below 1:1 means you're losing money on every customer you acquire. Above roughly 5:1 can actually signal you're underinvesting in growth rather than running efficiently.

How do you calculate LTV:CAC?

Customer lifetime value (LTV) is calculated as average revenue per account multiplied by gross margin, divided by your monthly churn rate. That LTV is then divided by customer acquisition cost (CAC) to produce the ratio.

What counts as customer acquisition cost?

CAC should include all sales and marketing spend — ad spend, sales salaries and commissions, tools, and agency fees — divided by the number of new customers acquired in that period. Leaving out sales headcount is the most common way CAC gets understated.

Why does LTV:CAC matter for fundraising?

Investors use LTV:CAC as a quick check on whether your growth is profitable growth. A weak ratio raises questions about your pricing, retention, or acquisition efficiency — exactly the things due diligence digs into before a term sheet gets signed.

How can a business improve its LTV:CAC ratio?

Three levers move the ratio: raise average revenue per account (pricing or upsells), reduce churn (retention and onboarding), or lower acquisition cost (better targeting, referral programs, sales efficiency). Fixing churn usually has the largest compounding effect.

What SaaS metrics are used to calculate LTV:CAC?

Average revenue per account, gross margin, and monthly churn rate combine to produce customer lifetime value (LTV). That figure is then divided by customer acquisition cost (CAC) — which should include all sales and marketing spend — to produce the ratio.