CAC & LTV Calculator

CAC is your total sales and marketing spend divided by the number of new customers acquired in the same period. LTV is the gross-margin contribution per customer per period (revenue per period times gross margin) multiplied by the expected customer lifetime, where lifetime equals 1 divided by your churn rate. The ratio is simply LTV divided by CAC.

A common rule of thumb is 3:1 — each customer is worth about three times what it costs to acquire them. Below 1:1 you lose money on every customer; far above 3:1 can mean you are underinvesting in growth. Treat these as guidelines, not hard targets, and judge them alongside your CAC payback period.

Revenue overstates customer value because it ignores the cost of delivering the product or service. Multiplying revenue per period by gross margin gives the contribution that actually pays back acquisition cost, so the LTV:CAC ratio reflects real profitability. Set gross margin to 100% if you want a pure revenue-based LTV.

Use one consistent period for every field. If revenue per customer is monthly, then churn must be monthly churn, and the lifetime and payback results are in months. If you work in years, enter annual figures throughout. Mixing monthly and yearly numbers gives meaningless results.