LTV:CAC Ratio Calculator | Free Customer Lifetime Value Tool
Calculate your Customer Lifetime Value (LTV) and LTV:CAC Ratio instantly. Use the LTV Calculator to find customer value based on ARPA, churn, and margin, then the LTV:CAC Ratio tool to assess your unit economics with payback period and health scoring.
📖 Want to understand your results?
Read our complete guide to the LTV:CAC Calculator — with real-world examples, expert insights, and pro tips.
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What is Customer Lifetime Value?
Customer Lifetime Value (LTV) is the total revenue a business can expect from a single customer account throughout their relationship. It is one of the most important metrics for understanding your business model and making informed decisions about marketing spend, product development, and customer support.
When combined with CAC (Customer Acquisition Cost), the LTV:CAC ratio tells you whether your unit economics are sustainable. A ratio of 3:1 or higher is considered healthy.
LTV Formula
For example, if ARPA is $100/month, monthly churn is 5%, and gross margin is 80%: LTV = $100 × (1 ÷ 0.05) × 0.80 = $1,600.
LTV:CAC Ratio Formula
If your LTV is $1,600 and your CAC is $100, your LTV:CAC ratio is 16:1 — excellent unit economics.
How to Use This Calculator
Enter ARPA, monthly churn rate, and gross margin. Optionally include expansion revenue. Get your customer lifetime value with a 3-year revenue projection.
Auto-import LTV from Calculator 1 or enter manually. Add your CAC to see your LTV:CAC ratio, payback period, and health assessment with optimization targets.
What is a Good LTV:CAC Ratio?
- >5:1 — Excellent: Very healthy unit economics. Consider investing more in growth.
- 3:1 to 5:1 — Healthy: The gold standard. Your business model is sustainable.
- 1:1 to 3:1 — Marginal: Breaking even or slightly positive. Room for improvement.
- <1:1 — Unhealthy: You're spending more to acquire customers than they're worth.
How to Improve Your LTV:CAC Ratio
- Increase ARPA/ACV: Raise prices, upsell, or introduce higher-tier plans to increase revenue per customer.
- Reduce Churn: Better onboarding, customer success programs, and product improvements keep customers longer. Even a 1% churn reduction can significantly increase LTV.
- Improve Gross Margin: Optimize delivery costs, hosting, and support to improve margin and LTV.
- Reduce CAC: Better targeting, higher conversion rates, and organic channels lower acquisition costs.
- Increase Expansion Revenue: Cross-sells, upsells, and usage-based pricing increase LTV over time.
LTV:CAC Calculator Pros & Cons
Pros
- ✅ Instant LTV & LTV:CAC ratio results
- ✅ Payback period & health assessment
- ✅ Free forever — no subscriptions
- ✅ Works offline after page load
- ✅ No sign-up or email required
Cons
- ✗ No Excel/CSV export option
- ✗ No dedicated mobile app
Reviewed by Alex Chen, MBA
Digital Marketing StrategistPerformance marketing expert with 8+ years managing multi-million dollar ad budgets.
Frequently Asked Questions
How do I calculate LTV?
LTV is calculated by dividing ARPA (Average Revenue Per Account) by your monthly churn rate, then multiplying by gross margin. Formula: LTV = ARPA × (1 ÷ Churn Rate) × Gross Margin. Example: $100 ARPA, 5% monthly churn, 80% margin = $1,600 LTV.
What is the LTV:CAC ratio?
The LTV:CAC ratio compares Customer Lifetime Value to Customer Acquisition Cost. It tells you how much value you generate for every dollar spent on acquisition. A ratio of 3:1 or higher is considered healthy for most businesses.
What is a good LTV:CAC ratio for SaaS?
For SaaS companies, an LTV:CAC ratio of 3:1 to 5:1 is the gold standard. Enterprise SaaS often achieves 5:1 to 10:1 due to higher contract values and lower churn. Below 3:1 indicates room for improvement. Below 1:1 means you're losing money on each customer.
How do I calculate CAC payback period?
CAC Payback Period = CAC ÷ (ARPA × Gross Margin %). It tells you how many months it takes to recover your customer acquisition cost from their revenue. SaaS companies typically aim for payback under 12 months.
What is the difference between LTV and ARPA?
ARPA (Average Revenue Per Account) is the monthly revenue per customer. LTV (Lifetime Value) is the total revenue a customer generates over their entire relationship. LTV considers how long customers stay (churn) and includes gross margin adjustments.
How does churn affect LTV?
Churn has an exponential impact on LTV. A 5% monthly churn means the average customer stays 20 months (1/0.05). Reducing churn to 3% extends the lifespan to 33 months — a 65% increase in LTV from a 2% churn reduction.
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