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LTV:CAC Ratio Calculator

Compare lifetime value to acquisition cost

Result

3.75:1

How it is calculated

The tool divides what a customer is expected to bring in over their lifetime by what it cost to win them: ratio = LTV ÷ CAC, shown as x:1 with two decimals. LTV is customer lifetime value, in money; CAC is customer acquisition cost, in the same currency. It does not calculate LTV or CAC itself, so how you define them decides what the ratio means.

CAC must be greater than zero, otherwise there is no result. LTV is not restricted, so a zero or negative value gives a ratio of 0:1 or below. For a meaningful ratio, use LTV based on gross margin (not revenue) and a CAC that includes all sales and marketing costs for the same period and customer group.

Worked example

A subscription app expects a customer to generate $1,500 of lifetime value and spends $400 to acquire each customer. Dividing, 1500 ÷ 400 = 3.75:1. Each acquisition dollar returns about $3.75 over the customer's lifetime. Note this says nothing about timing: if it takes three years to earn that value back, cash flow may still be tight.

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Common mistakes

  • Computing LTV from revenue rather than gross margin. That overstates the ratio, since the cost of serving the customer is ignored.
  • Leaving out part of CAC, such as salaries, tools or agency fees, so the denominator is too small and the ratio too high.
  • Mixing currencies or periods, for example monthly LTV against a one-off CAC.
  • Relying on a blended ratio across channels. A good average can hide one unprofitable channel.
  • Reading a very high ratio as purely good news; it can mean growth spending is too cautious.

About this calculator

This calculator computes the LTV:CAC ratio — customer lifetime value divided by customer acquisition cost — a core SaaS and subscription-business metric popularized in growth and venture-capital circles (notably by SaaS investor David Skok) as a proxy for whether a business's growth engine is fundamentally profitable. A ratio around 3:1 is the widely cited rule-of-thumb benchmark: below that, a company may be spending too much to acquire customers relative to what they're worth; well above it (say, 5:1 or higher) can actually signal under-investment in growth.

SaaS founders track this ratio to decide how aggressively to spend on sales and marketing, venture capital investors use it during due diligence to judge unit economics before funding, and growth and finance teams monitor it over time to catch a deteriorating acquisition efficiency before it shows up in the bottom line.

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