LTV CAC Calculator
The ratio and the payback period must BOTH clear their thresholds — because a healthy 3:1 can hide a payback so long the business runs out of cash before it arrives.
LTV CAC Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Inherits every limitation of the lifetime value estimate.
- Blended across cohorts unless you segment.
- Assumes gross profit per customer is stable over time.
In short: The ratio alone is not enough. This business clears 3:1 at 4.0458 with a 10.59-month payback — but a 7.85:1 ratio with a 15.92-month payback passes one test and fails the other.
Formula
ratio = LTV ÷ CAC
payback = CAC ÷ monthly gross profit
[('ratio', 'is the customer worth more than they cost'), ('payback', 'how long your cash is committed'), ('both', 'must clear their thresholds independently'), ('high ratio', 'can signal underinvestment in growth')]
Worked Example
- Divide lifetime value by fully loaded CAC.
- Divide CAC by monthly gross profit for payback.
- Test the ratio against its target.
- Test the payback against its target separately.
- Accept the economics only if BOTH pass.
4,980.86 of lifetime value against 1,231.11 of loaded CAC is a 4.0458× ratio, comfortably above 3×. At 116.22 of monthly gross profit the payback is 10.59 months, inside the twelve-month threshold — both tests pass. Now the contrast: at a 1,850 CAC the ratio is still 2.6924× and the payback stretches to 15.92 months. Raise lifetime value by cutting churn to 0.8% and the ratio jumps to 7.8527× — passing comfortably — while the payback stays stuck at 15.92 months. A long lifetime rescues any ratio; it cannot rescue the cash flow.
Strengths & Limits Of This Model
Where this engine is strong
- Requires both the ratio and the payback to pass
- Demonstrates the two tests disagreeing on a live comparison
- Notes that churn improves the ratio and not the payback
Where it stops
- Inherits LTV assumptions
- Blended across cohorts
Practical Use Cases
Judging unit economics
Testing both the ratio and the payback.
Fundraising
Presenting the two metrics investors actually ask for.
Deciding to scale
Confirming cash returns fast enough to reinvest.
Diagnosing a cash squeeze
Finding a long payback behind a healthy ratio.
Comparing business models
Seeing where the two tests disagree.
Methodology & Editorial Standards
The ratio divides lifetime value by fully loaded acquisition cost, and the payback divides that cost by monthly gross profit. Both are tested against independent targets and the verdict requires BOTH to pass, because they measure different things — whether a customer is worth acquiring, and how long the cash is committed. A comparison business is evaluated alongside specifically to demonstrate that a long lifetime can rescue the ratio while leaving the payback unchanged, since payback depends only on cost and monthly gross profit.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
LTV CAC Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What is a good LTV to CAC ratio?
Three to one is the conventional benchmark, meaning a customer is worth three times what they cost to acquire. It is necessary and not sufficient — the payback period must clear its own threshold independently.
What is CAC payback period?
Acquisition cost divided by monthly gross profit per customer — how many months before a customer has paid back what they cost. Under twelve months is the common benchmark, because it means each customer funds the next acquisition within a year.
Can a good ratio hide a bad payback?
Routinely, and it is the central failure this page addresses. Lifetime value has no time limit, so a very long customer lifetime inflates the ratio indefinitely while the cash still takes years to return. The ratio passes and the business runs out of money.
Which CAC should I use?
The fully loaded one, including payroll, tools and agency costs. Lifetime value is measured carefully on gross profit, so pairing it with a media-only cost compares a well-costed numerator against an under-costed denominator.
Is a very high ratio good?
Not necessarily. Above roughly five to one it frequently indicates underinvestment in acquisition — you are leaving growth unfunded because you could profitably pay more for customers than you currently do.
Why does payback matter more when capital is expensive?
Because a long payback means growth consumes cash faster than customers return it, and that gap must be funded. When capital is cheap the gap is a financing decision; when it is expensive the same unit economics become existential.
Should payback use gross profit or revenue?
Gross profit. Revenue does not pay back anything — the cost of serving the customer comes out first. Using revenue understates the payback period by exactly the reciprocal of your gross margin.
How does churn affect both metrics?
Asymmetrically, which is the interesting part. Lower churn raises lifetime value and therefore the ratio, but leaves the payback period completely untouched, because payback depends only on CAC and monthly gross profit. Retention fixes one metric and not the other.
What if my payback exceeds my lifetime?
Then the ratio is below one and the business loses money on every customer. It should be arithmetically impossible to have a healthy ratio and a payback beyond the lifetime, so if you see it, one of the two inputs is wrong.
Should these be measured by cohort?
Ideally, because both depend on retention behaviour that only a cohort reveals. Blended figures across cohorts with different retention profiles produce a ratio that describes no actual group of customers.