CAC & LTV Calculator — Ratio and Payback Period
Enter what you spent on sales and marketing and how many customers it brought in to get CAC. Add revenue per customer and your gross margin, then choose how lifetime is measured — a length you have observed, or derived from a monthly churn rate — and the page returns LTV, the LTV:CAC ratio, and the payback period in months. Lifetime value is gross-margin adjusted here, not raw revenue, because the revenue version flatters every business that has costs.
Acquisition cost
For one period — a month, a quarter, a year.
In the same period as the spend.
Customer value
ARPU — average across the customer base.
Revenue left after the cost of serving the customer.
How long a customer stays, in months.
Result
Enter spend and new customers for CAC, and revenue per customer with a lifetime or churn rate for LTV.
Put these numbers in front of your board
Turn the unit economics into a designed slide or one-pager on a Moda canvas.
Try Moda free →LTV should be margin, not revenue
The most common way to inflate lifetime value is to compute it from revenue and forget the cost of serving the customer. A $60/month subscription with an 80% gross margin contributes $48 a month, not $60 — and over a 30-month lifetime that is a $1,440 LTV rather than $1,800, a 25% difference that lands directly on the ratio and on every decision made from it. This calculator asks for gross margin and uses it, which is why the number it returns is often lower than the one in the deck. Businesses with real delivery costs — hardware, services, anything with meaningful support load — see the gap widen further.
The two lifetime methods, and when 1 ÷ churn lies
If you have watched cohorts long enough to know how long customers stay, enter that directly. If you have not, the standard substitution is lifetime = 1 ÷ monthly churn: 3% monthly churn implies a 33-month average lifetime. That identity is exact only when churn is constant for every customer in every month, and real churn is neither. Early months churn far harder than later ones, so a blended rate taken from a young customer base understates how long the survivors stay and understates LTV; a rate taken from a mature base does the reverse for new cohorts. It is also unstable at small numbers — at 1% churn the implied lifetime is 100 months, which is longer than most companies have existed. Use it as an estimate, and prefer the observed lifetime when you have one.
Payback period is the number that decides whether you can afford to grow
The ratio says whether a customer is worth acquiring. Payback says whether you can afford to acquire the next one. It is CAC divided by monthly gross margin — how many months of that customer’s contribution it takes to get the acquisition cost back — and it is a cash-flow constraint, not a profitability one. A business with a 5:1 ratio and a 24-month payback is profitable on paper and starved of cash in practice, because every new customer is a two-year loan the company makes to itself. Two businesses with identical ratios and different paybacks can grow at wildly different speeds on the same bank balance.
What the 3:1 rule of thumb is worth
The widely quoted target is an LTV:CAC ratio of 3:1 or better, and it is a useful sanity check rather than a law. It exists because a ratio near 1:1 leaves nothing for the overhead that CAC excludes — engineering, general and administrative costs, the customers you failed to acquire — and because LTV is an estimate about the future while CAC is a fact about the past. A very high ratio is not automatically better either: 10:1 often means a company could profitably spend more on acquisition and is leaving growth on the table. The verdict this page prints follows that convention and is context-free by construction — it is arithmetic on numbers you supplied, not financial advice about your business.
Frequently asked questions
How do you calculate CAC?
Divide all sales and marketing spend for a period by the number of new customers acquired in that same period. Spending $45,000 to acquire 150 customers is a $300 CAC. The honest version includes salaries, tools, and agency fees, not just media spend — a CAC built from ad spend alone typically understates the true figure by a wide margin.
What is a good LTV:CAC ratio?
Three to one or better is the common software rule of thumb: each customer returns at least three times what they cost to acquire, leaving room for the overheads CAC does not include. Below 1:1 the business loses money on every acquisition. Far above 5:1 often signals under-investment in growth rather than excellence. These are conventions, not thresholds that apply to every business model.
Should LTV use revenue or gross profit?
Gross profit, which is what this calculator uses. Comparing revenue-based LTV to CAC compares a top-line number to a cost, and the ratio it produces is systematically too flattering — by exactly the proportion of your revenue that goes into serving customers. Enter your gross margin and the adjustment is applied for you.
What if my churn rate is zero?
Then the churn method has no answer: 1 ÷ 0 implies customers stay forever and lifetime value is infinite. The calculator says so rather than displaying an infinity. In practice a measured 0% is a sample-size artefact — a small base over a short window — so use the known-lifetime method with a realistic estimate instead.
How is payback period different from the LTV:CAC ratio?
The ratio measures whether a customer is worth more than they cost over their whole life. Payback measures how long your cash is tied up before that starts being true. A business can pass the ratio test comfortably and still run out of money, because growth consumes cash up front and returns it slowly. Read both together.
Does this account for expansion revenue or discounting?
No. LTV here is a flat monthly contribution times a lifetime — it does not model upsells, price increases, or the time value of money. A business with substantial expansion revenue will find this understates LTV, and one quoting long lifetimes should remember that money arriving in year four is worth less than money arriving now. For a formal valuation you want a discounted cohort model, not a one-line calculator.