LTV:CAC Calculator

Assess unit economics sustainability and growth efficiency.

Unit Economics Ratio

Presets:

Unit Economics

Instant calculationStandard benchmark: 3.00:1

Acquisition Multiple

LTV : CAC Ratio

4.50:1

Every $1.00 spent on acquisition yields $4.50 in customer lifetime value.

Economics health statusHealthy (Optimal growth benchmark)

Net value per customer (LTV - CAC)$700.00

CAC recovery target (payback)

Formulas & Logic

Transparent mathematical formulas behind this calculation engine.

LTV to CAC Ratio

LTV:CAC Ratio = Customer Lifetime Value ÷ Customer Acquisition Cost

Calculates how many dollars of customer value are generated for each dollar spent winning new accounts.

Net Value per Customer ($)

Net Value = Customer Lifetime Value - Customer Acquisition Cost

Surplus customer value remaining after fully recovering acquisition marketing spend.

Worked Example

SaaS Unit Economics Benchmark ($600 LTV / $200 CAC)

A subscription business projects a Customer Lifetime Value of $600.00 with an average customer acquisition cost of $200.00.

Given

Customer Lifetime Value: $600.00
Customer Acquisition Cost: $200.00

Calculated

LTV:CAC Ratio: 3.00:1
Net Value: $400.00
Economic Status: Healthy (Target growth benchmark)

Calculation

LTV:CAC Ratio = $600.00 ÷ $200.00 = 3.00:1
Net Value per Customer = $600.00 - $200.00 = $400.00
CAC Share of LTV = ($200.00 ÷ $600.00) × 100 = 33.33%

Takeaway: Every $1.00 spent on acquisition delivers $3.00 in customer lifetime value, satisfying the classic 3:1 sustainability rule of thumb.

Methodology & Assumptions

Underlying definitions and operational accounting principles.

Gross vs Margin LTV: For optimal rigor, compare gross margin LTV against fully blended acquisition cost.
Fully Loaded CAC: Assumes CAC includes media costs, agency fees, sales commissions, and software tools.

Frequently Asked Questions

Practical answers regarding margins, markups, and pricing strategy.

What does LTV:CAC mean?

LTV:CAC is a core unit economics metric comparing the total lifetime value generated by a customer against the cost required to acquire them: LTV:CAC = LTV ÷ CAC. It indicates whether customer revenue adequately repays acquisition marketing and supports business growth.

What is a good LTV:CAC ratio?

While 3.0:1 is commonly cited as a healthy benchmark, context matters significantly. High-margin SaaS companies often target 3:1 to 4:1. Lower ratios (e.g., 2:1) can be viable if cash payback occurs within a few weeks, while higher ratios (e.g., 5:1+) may signal under-investment in growth.

What is CAC Payback Period?

CAC payback period is the time (in months) it takes a customer to generate enough gross margin to repay their acquisition cost. Top SaaS companies target payback periods under 12 months.