What a customer is worth vs. what they cost.
LTV (lifetime value) is the total gross profit one customer brings you before they leave — their monthly spend, times your margin, times how long they stay. CAC (customer acquisition cost) is what you spend on sales and marketing to win that one customer. The LTV:CAC ratio compares the two: how many dollars of value you get back for every dollar you spend acquiring.
The trap is spending on growth before knowing this ratio. If LTV is below CAC, every new customer makes the hole deeper — growth accelerates the loss. The widely-used target is around 3:1: enough margin to fund the rest of the business after acquisition costs. Enter your numbers below.
- ARPU / month
- Average revenue per customer per month — what a typical customer pays you monthly.
- Gross margin %
- The share of that revenue left after the direct cost of serving them. Use gross, not net.
- Monthly churn %
- The share of customers you lose each month. Lower churn means longer-lived, more valuable customers.
- CAC
- Customer acquisition cost — total sales and marketing spend divided by customers won.
What a customer brings in
How long they stay
What they cost to win
The ratio tells you if you can grow. The levers tell you how.
A weak ratio is rarely fixed by spending less on marketing — it's usually retention, margin, or pricing. I help founders find which lever actually moves their unit economics, so growth spending compounds instead of leaks. The first conversation is free.
Fix my unit economics →How the math works (for the curious)
Start with how long a customer stays. With a steady monthly churn rate, the average lifetime is 1 ÷ churn — so 5% monthly churn gives a 20-month average life. If churn is zero we can't divide, so we cap the lifetime at 120 months (10 years) and flag it — no real customer base stays forever, so treating 0% as infinite would flatter the numbers.
Lifetime value is the gross profit that customer produces over that life: LTV = ARPU × Gross margin × Lifetime months. We use gross margin, not revenue, because the cost of serving them isn't yours to keep. The headline LTV:CAC = LTV ÷ CAC is how many dollars of lifetime gross profit you get back per dollar spent acquiring a customer.
CAC payback is CAC ÷ (ARPU × Gross margin) — the number of months of gross profit it takes to earn back the acquisition cost. Under ~12 months is generally healthy; longer means your cash is tied up in growth for a long time before it returns. Benchmarks: under 1:1 loses money on every customer; 1–3 works but is thin; 3–5 is healthy (3:1 is the classic target); above 5 is strong and may mean you're under-investing in growth.
An estimate for planning — not accounting, tax, or financial advice. Uses the numbers you enter; pull them from your billing and marketing data for the best read. The simple LTV formula assumes steady churn and margin. Nothing leaves your browser. Logic current as of June 2026.