LTV to CAC Ratio Calculator
Lifetime value tells you what a customer is worth. CAC tells you what they cost. The ratio between them, and how long it takes to earn the cost back, decides whether growing the business makes money or burns it. Enter your price, margin, how long customers stay and your CAC.
What a customer pays
How long they stay
Lifetime value (LTV)
$784
$39 gross profit a month for 20.0 months
LTV:CAC
2.6 to 1
Worth watching
Payback
7.7 months
Healthy
How the colors work. LTV:CAC is green at 3 to 1 or better, amber from 1 to 3, and red under 1 to 1, where every new customer loses money. Payback is green at 12 months or less, amber up to 24, and red beyond that. These are rules of thumb, not laws, and LTV here uses gross profit, not revenue.
How to read this
LTV here is gross profit, not revenue: what a customer pays each month, times your gross margin, times how many months they stay. Using revenue instead makes every business look healthier than it is, because it ignores what it costs to serve the customer.
If you know your monthly churn, lifetime is 1 divided by churn: lose 5% of customers a month and the average one stays 20 months. If you sell one-off or occasional purchases, or you have no churn data yet, enter an expected lifetime in months instead. Either way the calculator caps lifetime at 60 months, because a guess about year six is not something to plan around.
Payback is CAC divided by monthly gross profit per customer. It matters as much as the ratio: a 4 to 1 ratio that takes 30 months to pay back still means fronting the cost of every new customer for two and a half years, and that cash has to come from somewhere.
Common questions
- What is a good LTV to CAC ratio?
- A common target is 3 to 1 or better. Between 1 and 3 the business can work but has little room for mistakes. Under 1 to 1, every customer you win costs more than they will ever return, and growing faster makes the loss bigger.
- Can the ratio be too high?
- Yes. A very high ratio can mean you are spending too little on growth and leaving customers to a competitor who will pay more to win them. It can also mean the inputs are optimistic, so check the churn figure first.
- How do I calculate LTV for a business without subscriptions?
- Switch to the per purchase option. Enter what one purchase costs and how often a typical customer buys (0.25 per month means once a quarter), then use an expected lifetime in months rather than churn.
- Why does payback matter if the ratio looks fine?
- Because you pay CAC up front and collect gross profit slowly. The longer the payback, the more cash you need on hand to grow, even if each customer is profitable in the end.
Do this for your own business
The Founder Workbook inside PushStartGo builds this from your own customer interviews and your own numbers, keeps it with the rest of your plan, and checks it for the vague phrases and made-up figures that sink most plans. Customer discovery, value proposition, and prototype testing are free with no card. Go-to-market, profit model, and pitch prep are part of Pro.
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