LTV to CAC Ratio Calculator

How to calculate the LTV to CAC ratio

The LTV:CAC ratio compares what a customer is worth over their lifetime with what it cost to win them. It takes three steps:

1. Calculate CAC. Add up all sales and marketing costs for a period (salaries, commissions, ad spend, tools, agencies, events) and divide by the number of new customers won in the same period. See CAC.
2. Calculate LTV. Monthly ARPA multiplied by gross margin, divided by monthly churn. The LTV calculator does this for you.
3. Divide LTV by CAC. The result is how many dollars of lifetime gross profit each dollar of acquisition spend brings back.

The "CAC to LTV ratio" is the same comparison turned upside down, CAC divided by LTV, usually shown as a percentage. An LTV:CAC ratio of 3:1 is the same as a CAC that is 33% of LTV. The calculator shows both.

Worked example

In one quarter a B2B SaaS company spends $90,000 on sales and marketing and wins 60 new customers. Its ARPA is $150 a month, its gross margin is 80% and its monthly churn is 2.5%.

• CAC: $90,000 / 60 = $1,500
• Gross margin LTV: $150 x 0.80 / 0.025 = $4,800
• LTV:CAC: $4,800 / $1,500 = 3.2:1
• CAC as % of LTV: $1,500 / $4,800 = 31%
• CAC payback on revenue: $1,500 / $150 = 10 months
• Gross-margin-adjusted payback: $1,500 / ($150 x 0.80) = 12.5 months

The ratio clears the 3:1 mark, and the company earns its acquisition cost back from gross profit in just over a year. Had it used revenue LTV ($6,000) instead, the ratio would have shown 4.0:1, a flattering number that ignores the cost of serving customers.

Matching time periods

CAC and LTV only compare cleanly when both come from the same period and the same customers. A single month of spend is noisy, because one conference or one big campaign moves it a lot. Quarterly or trailing 12-month CAC is steadier.

Sales cycles matter too. Spend in one quarter often wins customers in the next. If your sales cycle is long, compare this quarter's new customers with last quarter's spend, or your CAC will swing with your pipeline rather than your efficiency. For LTV, use monthly ARPA with monthly churn, or annual figures for both.

Common LTV:CAC mistakes

• Using revenue LTV. Acquisition is funded from gross profit. Revenue LTV overstates the ratio by the inverse of your gross margin, 25% at an 80% margin.
• Leaving costs out of CAC. Ad spend alone is a channel metric. Your CAC includes the salaries, commissions and tools behind every deal.
• Letting free signups hide paid CAC. Blended CAC averages organic and paid customers, which can make expensive channels look cheap. Calculate CAC per channel as well.
• Optimistic churn. LTV moves inversely with churn, so a churn rate measured on your best cohort inflates the ratio. Use churn across all customers, and be wary of very long implied lifetimes.
• Ignoring time. A 5:1 ratio that takes three years to pay back ties up far more cash than a 3:1 ratio that pays back in eight months. Always read the ratio together with payback.

What's a good LTV to CAC ratio?

The most cited benchmark is 3:1. In his SaaS Metrics guide, David Skok writes that LTV must be at least three times CAC, and that startups should recover CAC in less than 12 months. Below 1:1 you lose money on every customer you acquire.

Payback expectations depend on who you sell to. Bessemer Venture Partners recommends targeting CAC payback under 12 months for SMB-focused companies, under 18 months for mid-market and under 24 months for enterprise. The Benchmarkit 2025 report makes the same point: about 12 months is the common rule, but payback is highly correlated with contract value.

The last row comes from Aleph's analysis of Benchmarkit data for full-year 2025, based on 198 companies that reported payback. The bottom quartile took 24 months or more.

A very high ratio is not automatically good news. If LTV:CAC is far above 3:1 and payback is short, you may be spending too little on growth and leaving room for competitors to outspend you.

How this calculator works

• LTV:CAC ratio is the LTV you enter divided by the CAC you enter, shown as X:1. Enter gross margin LTV for the most honest result.
• CAC as % of LTV is CAC divided by LTV, the CAC to LTV view of the same numbers.
• CAC payback period is CAC divided by monthly ARPA, the months of revenue needed to recover CAC. It only appears when you enter ARPA.
• GM-adjusted payback is CAC divided by monthly ARPA x gross margin. If you clear the gross margin field, it uses 80%.
• Limitations: payback here assumes every customer keeps paying until CAC is recovered. With meaningful churn, real payback is longer. The CAC payback calculator adjusts for churn. The math runs in your browser.

How to improve LTV:CAC and payback

To raise LTV:CAC:

• Reduce churn, the biggest lever for LTV
• Increase ARPA through pricing, upsells and expansion
• Move spend to the channels with the lowest CAC per retained customer
• Improve sales efficiency so each rep closes more

To shorten CAC payback:

• Focus on higher-ARPA customers
• Shorten the sales cycle
• Improve trial-to-paid conversion
• Raise gross margin by cutting cost of goods sold

Related metrics and guides

• LTV:CAC ratio, the full guide
• CAC and CAC payback period
• Magic number, a sales efficiency check
• Burn multiple and capital efficiency, growth versus cash spent

Need the inputs first? Use the LTV calculator, then check how fast you recover CAC with the CAC payback calculator.