LTV:CAC Ratio Calculator

Measure how efficiently you acquire customers

Enter your LTV and CAC values:

$
Total revenue from a customer over their lifetime
$
Cost to acquire one customer

What is LTV:CAC Ratio?

The LTV:CAC ratio compares Customer Lifetime Value to Customer Acquisition Cost. It tells you how much value you get from a customer relative to what you spent to acquire them.

Formula:

LTV:CAC = Lifetime Value / Acquisition Cost

Benchmarks:

  • 5:1 or higher: Excellent - may be underinvesting in growth
  • 3:1 to 5:1: Healthy - sustainable growth
  • 1:1 to 3:1: Warning - inefficient acquisition
  • Below 1:1: Critical - losing money on each customer

The ideal ratio is often cited as 3:1, meaning you earn $3 for every $1 spent on acquisition.

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CLV Calculator CAC Calculator Payback Period Churn Rate ARPU Calculator
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Frequently Asked Questions

What is a good LTV:CAC ratio? ▼
A 3:1 ratio is generally considered healthy for SaaS businesses. This means for every $1 spent acquiring a customer, you earn $3 in lifetime value. Ratios below 1:1 mean you're losing money on customer acquisition.
Can LTV:CAC be too high? ▼
Yes! A very high ratio (5:1+) might indicate you're underinvesting in growth. You could potentially acquire more customers profitably by increasing marketing spend. However, this depends on market conditions and growth stage.
How do I improve my LTV:CAC ratio? ▼
Either increase LTV (upsells, reduce churn, increase prices) or decrease CAC (improve conversion rates, focus on organic channels, better targeting). Often the biggest gains come from reducing churn.
Should I use gross margin in LTV? ▼
Yes, using gross margin LTV gives a more accurate picture. Instead of just revenue, multiply by your gross margin percentage. This accounts for the costs of serving the customer. Some investors prefer contribution margin for even more accuracy.
How often should I calculate this ratio? ▼
Monthly or quarterly tracking is recommended. The ratio can change as you scale, enter new markets, or adjust pricing. Early-stage companies often have lower ratios that improve over time as CAC decreases with brand awareness.

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