SaaS LTV/CAC Calculator — Unit Economics That Survive
Calculate customer lifetime value, LTV:CAC ratio and CAC payback months from ARPU, margin, churn and acquisition cost.
Last reviewed 2026-10-01. Rates change — verify against the official sources linked below before relying on these figures.
What this is based on
- Simple LTV model: (ARPU × gross margin) ÷ monthly churn. Assumes constant churn and no expansion revenue.
- CAC should include all sales & marketing cost — ads, salaries, tools, commissions — divided by new customers in the same period.
- Discounting future revenue (present value) is not applied; for long lifetimes real LTV is somewhat lower.
The ratio that decides whether you can spend
LTV:CAC answers one question: how many dollars of lifetime gross profit does each dollar of acquisition buy? Below 3:1 the machine loses efficiency — you're paying so much for customers relative to their value that growth burns cash instead of generating it. At 5:1+ you may actually be under-investing in growth.
The classic failure mode: founders celebrate a growing MRR while CAC quietly doubles and LTV stays flat. A ratio drifting from 4:1 toward 2:1 is a business getting worse while looking better.
Churn is the square on the chessboard
Small churn changes compound brutally. At $49 ARPU and 80% margin, 5% monthly churn gives an LTV of $784. Cut churn to 2.5% and LTV doubles to $1,568 — no new customers, no price increase. Retention is the highest-leverage number in the whole equation.
This is also why monthly-churn products die young: at 10% monthly churn the average customer lives 10 months, so LTV can never exceed ~10 months of margin. You cannot acquire your way out of a leaky bucket.
Payback period: the cash-flow reality check
LTV:CAC measures eventual value; payback measures when you stop funding it. A 5:1 ratio with a 30-month payback still means every customer is underwater for two and a half years — which is why many profitable-on-paper SaaS companies still run out of cash.
Bootstrap rule of thumb: keep payback under 12 months. Funded companies tolerate more because capital substitutes for cash flow, but the discipline is the same — long paybacks break the moment acquisition slows.
Frequently asked questions
- What is a good LTV:CAC ratio?
- The industry benchmark is ≥3:1 — each dollar of acquisition should return three dollars of lifetime gross profit. Under 3:1 economics are fragile; over 5:1 you may be under-spending on growth.
- How is SaaS LTV calculated?
- LTV = (ARPU × gross margin) ÷ churn rate. With annual churn use the annual form; just keep the period consistent.
- What is a good CAC payback period?
- Under 12 months for bootstrapped companies; venture-backed SaaS often tolerates 12–18. Beyond that, growth consumes more cash than it creates.
- Does LTV include expansion revenue?
- This model doesn't — it's conservative. Products with strong seat/usage expansion have higher real LTV, which is why net revenue retention above 100% is such a prized metric.
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