--- title: "LTV to CAC Calculator: Ratio and CAC Payback | Skipcall" description: "Calculate customer lifetime value, your LTV:CAC ratio and CAC payback period, for subscriptions or repeat purchases, with a verdict and the levers that move it. Free, no sign-up." url: https://skipcall.io/en/tools/ltv-cac-calculator language: en --- [Free tools](https://skipcall.io/en/tools) # LTV to CAC calculator Your revenue per customer, gross margin, churn and acquisition cost: customer lifetime value, the LTV:CAC ratio, CAC payback and a verdict, with the levers that move it. Know if each customer makes you richer Your numbers Results update with every change Currency Display only, no conversion. Your revenue model Revenue every month for as long as the customer stays: SaaS, recurring services, monthly contracts. Revenue and margin What a customer brings in, and for how long. Monthly revenue per customer (ARPA) Editable assumption $ / month Monthly recurring revenue divided by the number of paying customers. Gross margin Editable assumption % Revenue minus direct costs of service (hosting, support, shipping, payment fees). Churn rate Editable assumption % / month That is 21.5% a year (compounded, not ×12). The share of customers who leave over the period. Customer acquisition cost (CAC) What a new customer costs. Customer acquisition cost (CAC) Editable assumption $ What the CAC covers All acquisition spend: media, salaries, tools, agencies. Calculation options For a more conservative LTV. Cap the customer lifetime Only count margin over a set horizon, useful if your history is short. Discount the LTV A dollar collected three years from now is worth less than a dollar today. Results updated: LTV:CAC ratio 3.8:1. ## Your results Per customer, in gross margin LTV:CAC ratio 3.8:1 A healthy ratio CAC payback 13.3 months Months of margin to recover the CAC LTV (customer lifetime value) $11,250 Average lifetime: 50 months\ $15,000 in revenue CAC $3,000 Fully loaded ### Where your ratio sits Commonly cited benchmarks: 1:1, 3:1 and 5:1. 1:1 3:1 5:1 Loss Thin Healthy Underinvesting? ## Verdict A healthy ratio You are in the range commonly cited as healthy, between 3:1 and 5:1. Keep an eye on payback: a good ratio does not tell you when the money comes back. - The CAC is recovered in 13.3 months of margin: beyond the 12-month benchmark, your growth burns cash. - Counting customers who leave, a cohort recovers its CAC in 15.4 months. By the payback month, 24% of customers have already left. - To hold 3:1, your CAC should not exceed $3,750. - Each customer generates $8,250 of margin over their lifetime, after CAC. - Strongest lever here: churn −1 point, +100% on the ratio. 3:1 and 12-month benchmarks: proposed by David Skok (“SaaS Metrics 2.0”) and widely repeated. They are benchmarks, not rules. ## When the money comes back Cumulative margin of an average customer, churn included, against their CAC. Cumulative margin CAC Months Payback reached in month 16 ## What would move the ratio One lever at a time, everything else unchanged. | Lever | LTV | Ratio | Payback | | - | - | - | - | | Today | $11,250 | 3.8:1 | 13.3 months | | Churn −1 point2% → 1% | $22,500 | 7.5:1+100% | 13.3 months | | Order value +10%$300 → $330 | $12,375 | 4.1:1+10% | 12.1 months | | Margin +5 points75% → 80% | $12,000 | 4:1+7% | 12.5 months | | CAC −10%$3,000 → $2,700 | $11,250 | 4.2:1+11% | 12 months | ## How it is calculated Your numbers, in the formulas. 1. Churn: 2% a month, that is 21.5% a year. Compounded conversion: annual = 1 − (1 − monthly)^12. 2. LTV = ARPA × margin ÷ monthly churn = $300 × 75% ÷ 2% = $11,250 3. Ratio = LTV ÷ CAC = $11,250 ÷ $3,000 = 3.8:1 4. Payback = CAC ÷ monthly margin per customer = $3,000 ÷ $225 = 13.3 months ## Share the result The link carries all your assumptions. It is only created when you click. Summary preview ``` LTV:CAC (subscription) LTV: $11,250 of gross margin per customer CAC: $3,000 LTV:CAC ratio: 3.8:1 CAC payback: 13.3 months Verdict: A healthy ratio Details and assumptions: … ``` **Lower the prospecting side of your CAC.** Sales time weighs heavily in CAC. Skipcall dials up to four numbers in parallel and chains calls without dead time: more conversations in the same hour. [Create an account](https://app.skipcall.io/signup) [First, work out my cost per meeting](https://skipcall.io/en/tools/cost-per-meeting) Your numbers never leave your browser. The tool sends nothing and stores nothing. How to check ## LTV, CAC and the LTV:CAC ratio: what they mean LTV (customer lifetime value) is what a customer brings the business over the whole relationship. To judge profitability, calculate it in gross margin rather than revenue: a customer who pays $300 a month but costs $75 to serve leaves only $225 to pay back their acquisition and fund the rest of the company. CAC (customer acquisition cost) is what you spent to sign a new customer: advertising, sales and marketing salaries, tools and agencies, divided by the number of new customers in the same period. The LTV:CAC ratio puts the two side by side: how much lifetime margin each dollar of acquisition spend returns. At 3:1, a customer who cost $1,000 brings in $3,000 of margin. Below 1:1, the business loses money on every customer, and growing faster means losing faster. ## The formulas, model by model For subscriptions, the usual formula is LTV = ARPA × gross margin ÷ monthly churn. The idea is simple: with 2% monthly churn, a customer stays 1 ÷ 0.02 = 50 months on average. With a $300 ARPA and a 75% margin, LTV is $225 × 50 = $11,250. The calculator does exactly this, as the sum of monthly margins weighted by the probability that the customer is still there. For repeat purchases, there is no subscription but orders: LTV = average order value × margin × purchases per year × lifetime in years. An $80 order at 50% margin, four times a year for three years, gives $480 of margin per customer. Churn can be entered monthly or annually, and converting is not dividing by 12. With 5% monthly churn, 95% of customers remain each month, so 0.95 to the power of 12 = 54% remain after a year: annual churn is 46%, not 60%. The other way round, 20% a year is 1.84% a month, not 1.67%. The calculator shows the equivalent next to your input. Two options make LTV more conservative. The lifetime cap stops the calculation at a set horizon: useful when churn is low and the formula promises customers for twenty years. Discounting reflects that margin collected three years from now is worth less than today: an annual rate is applied, converted into a compounded monthly rate. ## CAC payback, the other half of the answer The ratio tells you whether a customer is profitable; payback tells you when. It is the CAC divided by a customer’s monthly gross margin: with a $3,000 CAC and $225 of margin a month, it takes a little over 13 months to break even. Meanwhile, the business has advanced the cash. That is why a great ratio can hide a cash problem: a customer who returns five times their cost, but over five years, means funding every new signature for years. The faster you grow, the more cash you need. The calculator adds two readings the simple formula ignores. The first accounts for churn: some customers leave before paying back their CAC, so the cohort takes longer to break even, or never does. The second shows the share of customers already gone by the payback month. ## Reading the ratio: benchmarks, not laws The most cited benchmarks come from SaaS: an LTV:CAC ratio of at least 3:1 and a payback period under 12 months. They were proposed by David Skok in “SaaS Metrics 2.0” and have been widely repeated since. A ratio above 5:1 is often read as a sign you could invest more in acquisition: a common rule of thumb with no single source. These thresholds are not market averages and do not apply as-is to every model. A business funded by debt or equity can accept a longer payback; a repeat-purchase business often recovers part of the CAC on the first order. The most useful figure remains your own ratio, tracked quarter after quarter and by acquisition channel. ## How to measure each input The output is only as good as the inputs. Use consistent periods, ideally a quarter, and the same customers for every figure. 1. 1 ### ARPA or average order value For subscriptions, divide monthly recurring revenue by the number of paying customers, excluding free trials. For repeat purchases, divide revenue excluding tax by the number of orders, then count how many orders a customer places per year. 2. 2 ### Gross margin Subtract the costs directly tied to delivering the service: hosting, support, shipping, payment fees, resold third-party licences. Leave out sales and marketing: they are already in the CAC. 3. 3 ### Churn Divide customers lost during the month by customers at the start of the month. Do it over several months and by cohort: churn in the first months is often higher than for established customers. If you lose customers but the others buy more, this calculator does not count that expansion: your real LTV will be higher. 4. 4 ### CAC Add up all acquisition spend for the period: media, fully loaded sales and marketing salaries, tools, agencies, commissions. Divide by new customers in the same period. If your sales cycle is long, shift the spend period back by the length of the cycle. ## How to improve each input The tool’s lever table shows which one matters most for you. Here is what you actually pull behind each one. - ### Reduce churn The strongest lever for subscriptions, because it extends lifetime. Qualify better upfront (a poorly targeted customer leaves fast), nail the first weeks of use, spot accounts that drift before they cancel. - ### Increase revenue per customer Review pricing, offer a higher tier, bill annually, sell add-ons. With repeat purchases, work on order value (bundles, free-shipping thresholds) and frequency (replenishment, well-timed reminders). - ### Improve gross margin Renegotiate hosting or logistics, automate first-line support, stop serving the most expensive customers at a loss. - ### Lower CAC Cut channels that cost more than they return, improve conversion at every funnel stage, and make sales time more productive. In cold calling, cost per meeting is a direct building block of CAC: more conversations in the same hour lowers it without touching salaries. ## Mistakes that skew the ratio - ### Calculating LTV on revenue A ratio built on revenue is inflated by however thin the margin is. At 40% margin, it looks 2.5 times better than it is. Always compare a margin to a cost. - ### Dividing annual churn by 12 Customer loss compounds month after month. Dividing by 12 understates monthly churn when you start from an annual figure, and overstates it the other way round. - ### Counting only paid media in CAC Paid media CAC is the most flattering. Sales and marketing salaries are often the biggest part. The calculator shows both so the gap is visible. - ### Extrapolating churn measured over three months On a young customer base, measured churn is unreliable, and a very low churn promises an absurd LTV. Cap the lifetime until you have a year or two of history. - ### Blending channels A blended ratio can hide one very profitable channel and one losing money. Calculate it per channel too: a referral customer’s CAC has nothing in common with an ad-acquired one. - ### Ignoring payback A 4:1 ratio with a 30-month payback can strain your cash. Always read the two figures together. ## Go further Tools and articles that detail one building block of CAC or LTV. - [Cost per Meeting Calculator One building block of CAC: what each meeting booked by your prospecting team costs.](https://skipcall.io/en/tools/cost-per-meeting) - [How many calls does your target take? Start from the customers you need to sign and get the calls, hours and reps required.](https://skipcall.io/en/tools/prospecting-calculator) - [Discount Calculator What a discount takes from your margin, and so from your LTV, and the volume needed to make up for it.](https://skipcall.io/en/tools/discount-margin-calculator) - [Reduce cost per meeting Five levers and the math that turns a leaky funnel into a profitable one.](https://skipcall.io/en/blog/reduce-cost-per-meeting-sdr) - [SDR metrics and KPIs The metrics that link prospecting activity to pipeline.](https://skipcall.io/en/blog/sdr-metrics-kpis) - [SDR commission plan templates Variable pay, an often forgotten part of CAC.](https://skipcall.io/en/blog/sdr-commission-plan-templates) - [All free tools Phone number validator, calling windows, VoIP test and more.](https://skipcall.io/en/tools) ## How to check that your numbers never leave your browser The calculation runs in code inside your browser: your revenue, margin and spend are sent neither to Skipcall nor to anyone else. The tool stores nothing, not even in the browser’s local storage. The page address stays clean while you type: the share link is only built when you click “copy link”. The simplest test: once the page has loaded, turn off your connection and change a value. The results keep updating. In your browser’s Network tab you will see the site’s analytics tools, as on all our pages. None of them receives what you type: the tool area is excluded from session recording and only clicks on “copy” are counted, without their content. ## A calendar full of meetings starts with a call. [Get started now](https://app.skipcall.io/signup) [Book a demo](https://skipcall.io/en/demo) **No commitment** · Number live in 2 minutes ## Frequently asked questions **How do you calculate the LTV to CAC ratio?** First calculate LTV in gross margin: for subscriptions, monthly revenue per customer × gross margin ÷ monthly churn; for repeat purchases, order value × margin × purchases per year × lifetime. Then divide it by CAC, which is acquisition spend for a period divided by new customers in the same period. A $9,000 LTV for a $3,000 CAC gives a 3:1 ratio. **What is a good LTV:CAC ratio?** The most cited benchmark is 3:1, proposed by David Skok for SaaS and widely repeated since. Below 1:1, every customer loses money. Above 5:1, a common rule of thumb suggests you could invest more in acquisition. These are benchmarks, not market averages: track how your own ratio moves. **How do you calculate CAC payback?** Divide CAC by a customer’s monthly gross margin. With a $3,000 CAC and a customer bringing $225 of margin a month, payback is about 13 months. The commonly cited SaaS benchmark is under 12 months. The calculator also gives the payback accounting for churn, which is longer. **How do you convert annual churn into monthly churn?** Not by dividing by 12: monthly churn = 1 − (1 − annual churn) to the power of 1/12. A 20% annual churn is 1.84% a month. The other way round, annual churn = 1 − (1 − monthly churn) to the power of 12: 5% a month is 46% a year, not 60%. **Should LTV be calculated on revenue or margin?** On gross margin, to compare it with CAC. Revenue does not tell you what is left once the customer is served: comparing revenue with a cost inflates the ratio by however thin the margin is. The calculator shows revenue LTV for reference, but the ratio always uses margin. **What happens with 0% churn?** The formula gives an infinite lifetime, so an infinite LTV, which makes no sense in practice. Turn on the lifetime cap, for example 36 or 60 months, or discounting: the calculator then returns a finite, usable figure. **What is the difference between fully loaded CAC and paid media CAC?** Paid media CAC only counts ad spend. Fully loaded CAC adds sales and marketing salaries, tools and agencies. The first helps steer a campaign, the second judges company profitability. Read the LTV:CAC ratio on fully loaded CAC. **Why discount LTV?** Because margin collected years from now is worth less than margin collected today: money has a cost and a risk. Discounting applies an annual rate, often close to the company’s cost of capital, and reduces LTV more the longer the lifetime.