SaaS LTV:CAC Ratio Calculator
SaaS growth efficiency metric.
Calculate SaaS LTV-to-CAC ratio from MRR, gross margin, monthly churn, and customer acquisition cost, plus the implied payback months.
What this tool does
LTV-to-CAC ratio and CAC payback months measure subscription business unit economics. The calculator takes average revenue per customer, gross margin, monthly churn rate, and customer acquisition cost as inputs, then models two outputs: the ratio itself (showing how many times over acquisition cost is recovered through customer lifetime value) and the payback period in months (how long until acquisition spend is recouped). The ratio reflects balance between revenue retention and acquisition efficiency, while payback duration illustrates cash flow recovery speed. Results depend most heavily on churn rate and gross margin—lower churn and higher margins both extend customer lifetime value. A typical scenario compares acquisition spending against expected revenue per customer over their subscription tenure. This calculator assumes stable monthly churn and margin rates and models neither price changes nor customer expansion, offering an illustration for educational purposes rather than exact business forecasting.
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
LTV:CAC compares the lifetime value of a customer against what it cost to acquire them. LTV = monthly gross margin ÷ monthly churn. CAC = sales and marketing spend ÷ new customers. Divide LTV by CAC to get the ratio. Below 1:1 every new customer loses money. 1:1 to 3:1 is growth-investing territory. 3:1 is healthy. 5:1+ means you're under-spending on growth.
100 average MRR at 80% gross margin = 80 margin. Churn 3%/month = 33 month lifetime. LTV = 80 × 33 = 2,640. CAC 500 gives 5.3:1 ratio. Healthy but on the edge of over-thrift. CAC payback = 500 ÷ 80 = 6.25 months, within the standard 12-month venture-acceptable target.
The ratio changes meaning with company stage. Early-stage SaaS (under 1M ARR) often runs 1:1 to 2:1 while scaling go-to-market. Mature SaaS should sit at 3:1 to 5:1 with CAC payback under 12 months. Anything significantly above 5:1 usually signals the company is leaving growth on the table - every pound of additional CAC would return 5+ in LTV.
Run it with sensible defaults
Using avg mrr per customer of 100, gross margin of 80%, monthly churn of 3%, cac of 500, the calculation works out to 5.33x. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Avg MRR per Customer, Gross Margin %, Monthly Churn %, and CAC — do not pull with equal force. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
How the math works
LTV = (MRR × gross margin) ÷ monthly churn. Ratio = LTV ÷ CAC. Payback = CAC ÷ (MRR × gross margin).
What the score tells you
Headline financial numbers — income, savings, debt — each tell part of the story. This calculation stitches several together into a single read you can track over time. The value is in the direction, not the absolute number.
What this doesn't capture
The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.
££100 MRR × 80% margin ÷ 3% churn ÷ ££500 CAC = 5.33x.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
The calculator computes the LTV:CAC ratio, a metric used to assess subscription business growth efficiency. It first calculates customer lifetime value by taking average monthly recurring revenue, multiplying by gross margin percentage, then dividing by the monthly churn rate expressed as a decimal. This models cumulative profit from a customer over their expected lifetime, assuming constant monthly revenue and churn. The ratio is then derived by dividing lifetime value by customer acquisition cost. The model assumes stable pricing and churn, treats margins as constant, and does not account for variable acquisition costs, changes in customer cohorts, or the timing of cash flows. It provides a comparative benchmark only and does not model future business performance or market conditions.
References
Frequently Asked Questions
What's a healthy LTV:CAC?
What's CAC payback?
Does this include expansion?
How do VCs use this ratio?
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