Calculate your Customer Lifetime Value (LTV) to Customer Acquisition Cost (CAC) ratio. Essential SaaS metric for measuring business health and sustainability.
An LTV:CAC ratio calculator measures business health by comparing Customer Lifetime Value (LTV - total revenue from customer over relationship) to Customer Acquisition Cost (CAC - marketing and sales expense to acquire customer). Healthy SaaS and subscription businesses target 3:1 ratio or higher (earning $3 for every $1 spent acquiring customers), while ratios below 1:1 indicate unprofitable growth burning cash. Calculates LTV from average purchase value, purchase frequency, and customer lifespan; calculates CAC from marketing costs divided by new customers acquired. Essential for startups evaluating business model viability, investors assessing investment opportunities, and growth teams optimizing marketing spend.
Identify whether your business model is sustainable or burning cash to buy unprofitable customers—many startups look successful with growing revenue while actually losing money on each customer. Optimize marketing channel investment by calculating LTV:CAC per channel—maybe Facebook ads have 5:1 ratio while Google ads are only 1.5:1, indicating where to focus budget. Determine when to aggressively invest in growth versus optimize profitability—3:1+ ratio with short payback period justifies aggressive marketing spend, while 1:1 ratio requires fixing unit economics before scaling. Attract investors by demonstrating sustainable business model with healthy ratios—VCs and angels specifically look for 3:1+ LTV:CAC and 12-month payback periods. Forecast business viability and exit potential by understanding customer value relative to acquisition costs. Used by SaaS founders, growth marketers, CFOs, investors, and business analysts evaluating or optimizing customer acquisition strategies.
Calculate LTV: Enter average revenue per customer per period (e.g., $50/month for SaaS subscription), gross margin percentage (revenue minus direct costs, typically 70-80% for software, 30-50% for products), and average customer lifespan in periods (3 years = 36 months). LTV = (Average Revenue × Margin % × Lifespan). Calculate CAC: Enter total marketing and sales costs per period and number of new customers acquired that period. CAC = Total Costs / New Customers. Results show LTV:CAC ratio and payback period (months to recover CAC). Target 3:1+ ratio (earning $3 per $1 spent) with 12-month or shorter payback. Ratios above 5:1 may indicate under-investment in growth, while below 1:1 means losing money per customer. Track ratio quarterly and optimize by increasing LTV (improve retention, upsells, pricing) or decreasing CAC (marketing efficiency, conversion optimization).
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