CAC vs LTV Ratio

LTV / CAC ratio. Healthy SaaS: 3:1+; under 1:1 burns money.

Inputs

SaaS norms: 1-2% best-in-class, 3-5% mid, 7%+ concerning.

Result

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How to use this calculator

  • Enter CAC (total marketing+sales / new customers).
  • Enter ARPU (monthly).
  • Gross margin and churn from financials.

About this calculator

LTV / CAC ratio is the SaaS profitability holy grail. 3:1 is healthy (David Skok benchmark). Below 1:1 = unsustainable. Above 5:1 may indicate under-investment in growth (could spend more to acquire). LTV = ARPU × gross margin × average customer lifetime (= 1 / monthly churn). Payback period (CAC / monthly contribution margin) under 12 months is target; under 6 is best-in-class.

Frequently asked

What's "good" churn?+
Annual: <5% best-in-class consumer SaaS, 5-10% standard, 15%+ concerning. Monthly: divide annual by 12 (approx).
Should fixed costs be in CAC?+
Fully-loaded CAC includes marketing, sales salaries, software, overhead. Blended CAC: marketing-only. Use fully-loaded for honest LTV/CAC.
LTV time horizon?+
Theoretical infinite (1/churn). Practically discount by required return — most use 3-year LTV cap.
Negative ratio?+
CAC > LTV = lose money on every customer. Common at startup. Fix by improving conversion, reducing CAC, or raising prices.
Industry differences?+
B2B SaaS: target 3-5:1, payback 12-18mo. Consumer: 1.5-3:1, payback 6-12. Marketplace: harder, varies.

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