LTV to CAC calculator
LTV:CAC is the easiest SaaS metric to make look good. Use revenue instead of gross margin and divide by a low churn rate, and a mid-market customer is suddenly worth thirteen years of revenue. This calculator uses gross margin, caps the implied lifetime at a limit you can defend, and shows the capped and uncapped ratios side by side so nobody mistakes an assumption for a result.
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What you get
- A segment calculator for LTV and LTV:CAC on gross margin
- A lifetime cap with capped and uncapped ratios shown together
- Formulas in plain arithmetic with a worked example
- A revenue vs gross margin comparison showing how much revenue-based LTV overstates
- A sanity-check checklist before the ratio goes in a deck
Who it's for
- RevOps and finance teams building unit economics
- Founders and CROs preparing investor metrics
- Growth leaders comparing segments for investment
What's inside
6 sections, each listed with its own size. The first is previewed below; the remaining 5 come with the download, with blank rows ready to fill in.
| Section | Size | Previewed |
|---|---|---|
| LTV:CAC by segment | 10 columns, 3 worked example rows | Below |
| Formulas | 3 columns, 5 worked example rows | In the download |
| Revenue vs gross margin LTV | 4 columns, 2 worked example rows | In the download |
| Assumptions | 5 fields to complete | In the download |
| Sanity checks before you report | 7-point checklist | In the download |
| Why the lifetime assumption decides the answer | Guidance notes | In the download |
Preview of section 1
LTV:CAC by segment
Worked example with a 60-month lifetime cap. Inputs are illustrative; use your own churn, margin, and CAC.
| Segment | Monthly revenue per account | Gross margin | Monthly revenue churn | Implied lifetime (months) | Lifetime used (cap 60) | LTV | CAC | LTV:CAC | Uncapped LTV:CAC |
|---|---|---|---|---|---|---|---|---|---|
| SMB | 500 | 80% | 2.5% | 40 | 40 | 16,000 | 6,000 | 2.7x | 2.7x |
| Mid-market | 2,000 | 80% | 1.0% | 100 | 60 | 96,000 | 30,000 | 3.2x | 5.3x |
How to use it
1. Use gross margin, not revenue
LTV is the profit a customer returns, not the revenue. Multiply monthly revenue per account by gross margin from finance before multiplying by lifetime.
2. Derive lifetime from churn, then cap it
Implied lifetime in months = 1 / Monthly revenue churn rate. At 1% monthly churn that is 100 months, more than eight years. Cap it at a period you can defend, such as 60 months, unless you have retention history that long.
3. Use CAC from the same segment
Pair each segment's LTV with that segment's fully loaded CAC. Blended CAC against segment LTV gives meaningless ratios.
4. Show both ratios when the cap binds
If the cap changes the answer, show capped and uncapped side by side and state the cap. That makes the assumption visible to anyone reading the number.
Frequently asked questions
How do you calculate LTV to CAC?
LTV = Monthly revenue per account x Gross margin x Lifetime in months, where lifetime = 1 / Monthly revenue churn. Divide LTV by fully loaded CAC. With 2,000 per month, 80% margin, 60 months, and 30,000 CAC, LTV:CAC is 3.2x.
Should LTV use revenue or gross margin?
Gross margin. LTV is meant to compare the profit a customer returns with the cost to acquire them. Revenue-based LTV overstates the ratio by the inverse of your gross margin.
What is a good LTV:CAC ratio?
3x is a widely repeated rule of thumb, not a benchmark. What counts as good depends on your payback period, cash position, and how reliable your lifetime assumption is. Compare against your own history.
Why cap customer lifetime in LTV?
Low churn rates imply lifetimes longer than most companies have existed. Capping lifetime at a period supported by your retention history keeps LTV from being driven by extrapolation.