LTV:CAC ratio calculator

Lifetime gross-margin value of a customer, and how it compares to what you paid to win them.

LTV:CAC asks whether a customer is worth more than it cost to acquire. It pairs naturally with CAC payback: payback is the cash-flow view (how soon), LTV:CAC is the profit view (how much, over the whole relationship).

The formula

LTV = ARPA × gross margin % ÷ monthly churn % · Ratio = LTV ÷ CAC

How to read it

This is a simple, honest LTV: gross margin per month divided by churn. It ignores expansion and discounting on future revenue — enough to steer decisions, not a valuation model.
A ratio around 3× is the number people quote, but it is a rule of thumb, not a law — a lower ratio can be fine if payback is fast, and a very high ratio can mean you are under-investing in acquisition.
Churn is the most sensitive input: halving churn doubles LTV. If the ratio looks off, check that number first.

FAQ

Why is churn in the denominator?

Average customer lifetime is 1 ÷ churn rate. At 3% monthly churn the average customer stays ~33 months, so lifetime margin is the monthly margin times that.

Is a higher LTV:CAC always better?

Not necessarily. A very high ratio often means you could profitably acquire more customers than you are — you may be leaving growth on the table.

Want these numbers computed from your real ad and CRM data, updated daily?