Start free →
Free calculator

LTV and LTV:CAC Ratio Calculator

Is each customer worth more than it costs to acquire them? Enter ARPA, gross margin, churn and CAC to get lifetime value, your LTV:CAC ratio and a verdict against the 3:1 benchmark.

Your numbers

$
%
%
$
LTV : CAC ratio
-
LTV
-
Avg customer lifetime
-
Verdict
-
CAC payback
-

The LTV:CAC formula

LTV = (monthly ARPA × gross margin) ÷ monthly churn rate, and LTV:CAC = LTV ÷ CAC. Churn sets the average customer lifetime (lifetime ≈ 1 ÷ churn), so a 2% monthly churn implies a ~50-month life. Using gross-margin LTV (not raw revenue) keeps the ratio honest, you keep the margin, not the whole invoice.

The rule of thumb is 3:1 or better: a customer should return at least three times their acquisition cost over their life. Below 1:1 you lose money on every sale. Well above 5:1 usually means the opposite problem, you're under-investing in growth and could spend more to acquire faster, as long as CAC payback stays reasonable.

The biggest lever on the ratio is retention: because churn is in the denominator of LTV, small improvements in churn move LTV a lot. See LTV:CAC explained and the churn calculator, and model the whole picture in unit economics.

Worked example: LTV and LTV:CAC at the default inputs

A customer paying $120 a month at an 80% gross margin, churning at 2% a month, acquired for $1,200:

Default inputs of the calculator above. Change any input to run your own numbers.
Monthly ARPA$120
Gross margin80%
Monthly churn2%
CAC$1,200
Monthly gross profit per customer ($120 × 80%)$96
Average customer lifetime (1 ÷ 2%)50 mo
LTV ($96 ÷ 2%)$4,800
CAC payback ($1,200 ÷ $96)12.5 mo
LTV:CAC ($4,800 ÷ $1,200)4.0 : 1 (Healthy)

Embed this calculator on your site

Free to use. Copy the snippet, it drops the calculator into any page and adds a small credit link back here.

Frequently asked questions

How do you calculate customer lifetime value (LTV)?
Multiply monthly ARPA by gross margin to get the monthly gross profit per customer, then divide by the monthly churn rate: LTV = (ARPA × gross margin) ÷ churn. With $120 ARPA, 80% margin and 2% churn that is $96 ÷ 0.02 = $4,800. More in lifetime value explained.
How do you calculate the LTV to CAC ratio?
Divide LTV by the fully loaded cost to acquire one customer (CAC). A $4,800 LTV against a $1,200 CAC gives 4.0:1.
What is a good LTV to CAC ratio?
The common rule of thumb is 3:1 or better. Below 1:1 every new customer loses money; well above 5:1 often means you are under-investing in growth. See LTV:CAC explained.
Should LTV use revenue or gross margin?
Gross margin. You keep the margin, not the whole invoice, so revenue-based LTV overstates what a customer is worth and flatters the ratio.
How much does churn change LTV?
A lot, because churn is the denominator. At the default inputs, cutting monthly churn from 2% to 1% doubles LTV from $4,800 to $9,600 and lifts the ratio from 4.0:1 to 8.0:1.
What is the CAC payback period in this calculator?
CAC divided by monthly gross profit per customer: $1,200 ÷ $96 = 12.5 months at the defaults. The CAC payback calculator goes deeper.
Cite this page

Citation

Adlega. "LTV Calculator: Customer Lifetime Value and LTV:CAC Ratio." Updated October 22, 2026. https://adlega.com/blog/tools/ltv-cac/

Link for your article

<a href="https://adlega.com/blog/tools/ltv-cac/">LTV Calculator: Customer Lifetime Value and LTV:CAC Ratio</a> (Adlega, updated October 22, 2026)

Plan the whole picture in Adlega

Adlega turns these one-off numbers into a live financial model for your SaaS, projections, scenarios, dashboards.

Try Adlega free