CAC/LTV Ratio Calculator
Calculate your LTV to CAC ratio and CAC payback period. These metrics tell you if your customer acquisition is profitable and how long it takes to recoup your investment.
Calculate Unit Economics
Total sales & marketing spend / new customers acquired
Don't know your LTV? Use our LTV Calculator
Average revenue per account per month
Used for gross margin-adjusted payback period
The Formulas
The LTV:CAC ratio tells you how much value you get for each dollar spent on acquisition. A ratio of 3:1 means you get $3 in customer value for every $1 spent.
CAC payback period tells you how many months it takes to recover your customer acquisition cost. Shorter is better—it means faster return on investment.
Benchmark Ranges
LTV:CAC Ratio
CAC Payback Period
Understanding CAC and LTV
Calculating CAC
Customer Acquisition Cost includes all costs to acquire a customer:
- Sales team salaries and commissions
- Marketing spend (ads, content, events)
- Sales tools and software
- Any other costs directly tied to customer acquisition
The formula: CAC = Total S&M Spend / New Customers Acquired
Calculate this over a consistent period (usually monthly or quarterly) and be honest about including all relevant costs.
Why LTV:CAC Ratio Matters
The LTV:CAC ratio is arguably the most important metric for SaaS unit economics. It tells you:
- Profitability: Are you making money on each customer?
- Growth capacity: How much can you invest in acquisition?
- Sustainability: Will your growth model work long-term?
A ratio below 1:1 means you're losing money on every customer. A ratio above 5:1 might mean you're under-investing in growth.
CAC Payback: The Cash Flow Perspective
LTV:CAC tells you if acquisition is profitable. CAC payback tells you when you'll see that profit.
A 3:1 ratio with 24-month payback requires patience and capital. A 2:1 ratio with 6-month payback generates cash faster and is easier to scale.
This is why gross margin matters for payback calculations—you can only pay back CAC from the margin you keep, not from revenue that goes to cost of goods sold.
How to Improve These Metrics
To improve LTV:CAC ratio:
- Reduce churn (biggest lever for LTV)
- Increase ARPA through upsells and expansion
- Optimize marketing spend on highest-converting channels
- Improve sales efficiency (more deals per rep)
To shorten CAC payback:
- Focus on higher-ARPA customers
- Reduce sales cycle length
- Improve trial-to-paid conversion
- Increase gross margin
Related Metrics
- Magic Number — measures sales efficiency
- Burn Multiple — relates growth to cash burn
- Rule of 40 — balances growth and profitability
- Capital Efficiency — overall efficiency of growth investment
Track unit economics over time
GrowPanel calculates LTV automatically from your billing data, so you can track how your unit economics change as you grow.
