→ Free tool
LTV & CAC Calculator
The unit economics investors scrutinise first. Enter your revenue per customer, gross margin, churn, and acquisition cost to see your customer lifetime value, your LTV:CAC ratio, and how many months it takes to earn back what you spend to acquire a customer.
Start from a template
→ Your unit economics
An LTV:CAC of 6.7:1
Investors look for roughly 3:1 or better, with CAC payback under ~12 months. Yours clears the bar — you can afford to spend more to grow.
Compare scenarios
Save the current inputs as a scenario, then compare best, base, and worst side by side. Saved in this browser.
Add this calculator to your website
Free to embed. Copy the code below — it includes a link back to Planypals.
<iframe src="https://planypals.com/embed/ltv-cac-calculator" title="LTV & CAC Calculator" width="100%" height="760" loading="lazy" style="border:1px solid #ddd3bf;max-width:760px"></iframe> <p style="font:13px/1.5 sans-serif">Free <a href="https://planypals.com/tools/ltv-cac-calculator">LTV & CAC Calculator by Planypals</a></p>
Download these results as a PDF report
Get a clean PDF of your unit economics — LTV, CAC, ratio, and payback for your deck or model.
No spam. We'll send occasional founder resources and you can unsubscribe anytime.
Calculations run entirely in your browser. Figures are estimates for planning, not financial advice.
What are LTV and CAC?
Customer lifetime value (LTV) is the total gross profit you expect to earn from a customer over the whole time they stay with you. Customer acquisition cost (CAC) is what you spend on sales and marketing to win one new customer. Read together they answer the question that decides whether a business can grow profitably: does a customer generate more than they cost to acquire, and how fast? Their relationship — the LTV:CAC ratio — is the clearest single signal of whether your growth engine builds value or burns it.
How LTV, CAC, and payback are calculated
- LTV = (ARPA × gross margin) ÷ monthly churn
- LTV:CAC ratio = LTV ÷ CAC
- CAC payback = CAC ÷ (ARPA × gross margin)
A worked example
A customer paying $100/month at 80% gross margin contributes $80 a month. At 3% monthly churn (≈33-month lifespan), LTV ≈ $80 ÷ 0.03 = $2,667. If CAC is $400, your LTV:CAC is about 6.7:1 and payback is 400 ÷ 80 = 5 months — strong economics that justify spending more to grow.
What is a good LTV:CAC ratio?
The widely cited benchmark is 3:1— you earn about three times a customer's acquisition cost over their lifetime. Below roughly 1:1 you lose money on every customer and should not scale spend. Between 1:1 and 3:1 the model works but is fragile. Far above 3:1 (say 5:1 or more) usually means you are under-investing in growth and ceding the market. Pair the ratio with CAC payback: most SaaS businesses aim to recover CAC within 12 months, and up to about 18 for enterprise, so cash is not tied up too long.
How to improve your unit economics
The ratio has a numerator and a denominator, and both are in play. On the CAC side, sharper targeting, better conversion, and referrals cut what you pay to win a customer. On the LTV side, higher pricing or expansion revenue lifts ARPA and cheaper delivery lifts margin — but the single most powerful move is reducing churn, because a longer customer life compounds through the whole calculation. Cutting monthly churn from 5% to 3% stretches the average lifespan from 20 months to 33 and lifts LTV by two-thirds without touching price.
Where the ratio misleads
A healthy-looking LTV:CAC can hide real problems. Build LTV on revenue instead of gross margin and you overstate it badly — it should reflect the profit a customer contributes, not their spend. A strong ratio paired with a 30-month payback still starves you of cash, so never read the two apart. Blending self-serve and enterprise customers averages away a segment that may be quietly broken. And ignoring expansion and contraction — net revenue retention — misses one of the largest drivers of real lifetime value.
These metrics anchor your unit economics and sit alongside the other SaaS metrics investors check before a term sheet.
→ Beyond the calculator
Build unit economics into a model that raises
A snapshot ratio is a start; investors want to see LTV, CAC, and payback projected forward in a driver-based model. We build that model so your unit economics hold up in diligence.
Frequently asked questions
- A common formula is LTV = (ARPA × gross margin) ÷ monthly churn rate. ARPA is average revenue per account per month, gross margin is the share left after the cost to serve, and churn is the fraction of customers you lose each month. Dividing by churn captures how long customers stay: 3% monthly churn implies an average lifespan of about 33 months.
- Around 3:1 is the widely cited healthy benchmark — you earn roughly three times the lifetime value for every dollar spent acquiring a customer. Much below 3:1 suggests you're spending too much or keeping customers too briefly; far above 3:1 can mean you're under-investing in growth.
- It's how many months of gross profit from a customer it takes to recover the cost of acquiring them: CAC ÷ (ARPA × gross margin). Investors generally want payback under 12 months for SMB SaaS and under ~18 for enterprise. Faster payback means you can reinvest in growth sooner.
- Work both sides of the ratio: lower CAC through better targeting, conversion, and referrals, and raise LTV through higher ARPA, better gross margin, and — most powerfully — lower churn, since a longer customer life compounds through the whole calculation. Reducing churn usually moves the ratio more than any single change to acquisition.
- Yes — it runs in your browser, nothing is stored, and there's no sign-up. When you need these unit economics built into an investor-ready model, that's what our financial modeling service does.