LTV:CAC Ratio Calculator
The "North Star" metric for SaaS growth. Are you paying too much for customers?
How This Tool Works
This calculator evaluates the health of your SaaS business model by comparing the value of a customer (LTV) to the cost of acquiring them (CAC). It determines if your growth is sustainable or if you are burning cash too fast.
- LTV (Lifetime Value): Total profit you expect from a single customer over their entire relationship.
- CAC (Customer Acquisition Cost): Total marketing and sales cost to win one new customer.
How to Use
- ARPU: Average Revenue Per User per month.
- Gross Margin: The percentage of revenue you keep after paying for servers and support (typically 80% for SaaS).
- Churn Rate: Percentage of customers who cancel per month.
- Marketing Spend: Total monthly budget for ads, sales team, and tools.
- New Customers: Number of paid signups generated from that spend.
The Golden Ratio
LTV per customer: $1,500.
Cost to acquire (CAC): $500.
• Ratio: 3:1 (Perfect).
• Verdict: Scale Aggressively. You have a
money-printing
machine.
Why This Matters
Investors look at LTV:CAC first. If your ratio is below 1, you lose money with every sale. If it's too high (e.g., 10:1), you are leaving money on the table and should spend more to grow faster.
Limitations & Disclaimer
• CAC often rises as you scale (exhausting cheap channels).
• LTV is a prediction, not a guarantee. High churn invalidates high LTV estimates.
FAQs
3:1 is the industry standard. If you make $3 for every $1 you spend, you have a sustainable business. If it's 1:1, you are losing money. If it's 5:1, you are under-investing in growth.
Divide your Total Sales & Marketing Spend by the Number of New Customers acquired in that same period.
The time it takes to earn back the cost of acquiring a customer. A healthy SaaS company should recover CAC in under 12 months.