LTV:CAC Ratio Calculator

What Is the LTV:CAC Ratio?

The LTV:CAC ratio compares customer lifetime value (LTV) to customer acquisition cost (CAC): how many dollars of lifetime gross profit a customer returns for every dollar you spend to acquire them. A 4:1 ratio means $1 of sales and marketing spend buys $4 of lifetime gross profit. It is the fastest single read on your unit economics — a strong ratio says pour more into acquisition; a weak one says fix retention, pricing or CAC before you spend another dollar. This LTV CAC ratio calculator is free, requires no sign-up, and runs entirely in your browser, with CAC payback computed alongside the ratio.

The Formula, Explained With a Worked Example

Two formulas drive the calculator: Ratio = LTV / CAC and Payback (months) = CAC / (ARPA × gross margin %). LTV should be gross-margin-adjusted — LTV = (ARPA × gross margin %) / churn rate — because you recover CAC out of gross profit, not revenue.

Say you charge $500 per month per account, run an 80% gross margin, and lose 2% of revenue monthly:

• LTV = ($500 × 0.80) / 0.02 = $20,000
• Last quarter you spent $150,000 on sales and marketing and won 30 customers, so CAC = $5,000
• LTV:CAC = $20,000 / $5,000 = 4:1
• Payback = $5,000 / ($500 × 0.80) = 12.5 months

That is a business worth scaling: each customer returns four times their acquisition cost, and the cash comes back in about a year. If you need the inputs first, run the LTV calculator and the CAC calculator, then drop the results in here.

What's a Good LTV:CAC Ratio?

The classic SaaS benchmark, popularized by David Skok and OpenView, is 3:1. Directional 2026 medians run around 3:1 for bootstrapped and seed-stage companies, 3.5:1 at Series A, and 4:1 at Series B and beyond — later-stage companies are expected to have tightened their go-to-market motion. Higher is not automatically better, though: above roughly 5:1, most operators are underinvesting in growth and leaving market share for competitors.

These are directional medians, not underwriting standards — see how all your metrics stack up on the 2026 SaaS benchmarks page.

Common Mistakes That Flatter the Ratio

• Revenue-based LTV. Using revenue instead of gross profit inflates LTV by whatever your COGS are — at 80% margin that is a 25% overstatement; at 70% it is over 40%.
• Media-only CAC. Fully-loaded CAC includes sales and marketing salaries, commissions and tooling, not just ad spend. Skipping people costs can halve your apparent CAC.
• Treating LTV as cash. LTV is a projection — dividing by churn assumes today's churn rate holds forever. A 1% monthly churn implies a 100-month customer lifetime; be skeptical of any lifetime longer than your company has existed.
• Ignoring payback. A 4:1 ratio with a 30-month payback still burns cash today. Pair the ratio with the CAC payback period calculator before committing to spend.