LTV:CAC Ratio Calculator
Compare what a customer is worth with what they cost to acquire.
Quick answer
The LTV:CAC ratio is customer lifetime value divided by customer acquisition cost. LTV = ARPA x gross margin / churn. A ratio of 3 means each customer returns three times the gross profit spent to win them.
LTV:CAC Ratio Calculator
LTV : CAC
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LTV
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CAC
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Net Value per Customer (LTV − CAC)
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Reference Bands (rules of thumb)
| Ratio | Common reading |
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Assumptions & method
- Ratio = LTV ÷ CAC. When computed, LTV = ARPA × gross margin ÷ monthly churn (constant churn, no discounting).
- Net value per customer = LTV − CAC, before overheads and without discounting.
- The bands are widely quoted heuristics, not standards. Acceptable levels depend on sector, stage, funding and payback time.
- LTV and CAC should refer to the same customer segment and period.
- Not included: timing of cash, expansion revenue, discounting and cohort differences in churn.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
Reading the LTV:CAC ratio
The ratio compares the lifetime gross profit of a customer with the cost of acquiring them. Above 1 means each customer is expected to pay back their acquisition cost eventually, and higher values mean more margin is left over for overheads and profit. A figure near 3 is often quoted as a healthy reference, but it is a rule of thumb that varies with industry and stage. Low ratios suggest acquisition is expensive relative to value, while very high ones may suggest room to invest more in growth or an over-optimistic LTV. Because the ratio hides timing, always check it next to the payback period.