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CAC & LTV Calculator

Everything spent winning customers in the period: ads, tools, agency fees, and the cost of sales/marketing staff time.

How many genuinely new paying customers that spend brought in over the same period.

Typical revenue one customer pays you per month (ex-VAT). For one-off sales, use the sale value and set lifespan to 1.

Share of revenue left after the direct cost of delivering it (hosting, support, fulfilment). 70 means 70%.

How many months an average customer stays before churning. Roughly 1 ÷ monthly churn rate if you track churn.

Try a scenario:
— Customer acquisition cost (CAC)
— LTV : CAC ratio
Customer lifetime value (LTV) — Gross-profit value of an average customer over their whole lifespan.
CAC payback period (months) — Months of gross profit from one customer needed to earn back what they cost to acquire.

Enable JavaScript to calculate instantly. The full method is explained below, so the page is useful either way.

Almost every growing business spends money to win customers — on ads, content, sales effort, agencies and tools — and earns it back slowly, one invoice at a time. CAC (customer acquisition cost) is what it costs you, on average, to win one new customer. LTV (customer lifetime value) is the gross profit an average customer generates before they leave. The relationship between the two decides whether growth makes you richer or simply burns cash faster: if you spend more acquiring a customer than they will ever be worth, scaling marketing only deepens the hole.

This calculator turns five plain inputs into the four numbers investors and operators actually look at: CAC, LTV, the LTV:CAC ratio, and the CAC payback period — the number of months before an acquired customer has paid back their own acquisition cost. It uses a gross-margin-based LTV (not raw revenue), because a pound of revenue you spend most of delivering is not a pound you can reinvest in growth. Prices are treated as ex-VAT and revenue as a steady monthly figure; each formula is set out below with a worked example.

How this calculator works

Four formulas, all transparent:

CAC = total sales & marketing spend ÷ new customers acquired (over the same period). If no customers were acquired, CAC is undefined and the calculator says so rather than dividing by zero.

LTV = average monthly revenue per customer × gross margin × average lifespan in months. Multiplying by gross margin is deliberate: it values the profit a customer brings, not the turnover, so the comparison with CAC is honest.

LTV:CAC ratio = LTV ÷ CAC. A common rule of thumb is that healthy SaaS-style businesses aim for roughly 3:1 — but treat that as a heuristic, not a law: it ignores your growth stage, margins, payback speed and how the figure was measured.

CAC payback (months) = CAC ÷ monthly gross profit per customer (monthly revenue × gross margin). It answers a cash-flow question the ratio hides: how long your money is tied up before a customer becomes self-funding.

Worked example

Suppose you spent £5,000 on sales and marketing last quarter and acquired 50 customers. CAC = £5,000 ÷ 50 = £100. An average customer pays £40/month at a 75% gross margin and stays 18 months. Monthly gross profit per customer = £40 × 75% = £30. LTV = £30 × 18 = £540. LTV:CAC = £540 ÷ £100 = 5.4 — comfortably above the 3:1 rule of thumb. CAC payback = £100 ÷ £30 = 3.33 months, so each customer funds their own acquisition in about a quarter and is pure contribution after that.

Assumptions & limits

  • Revenue is treated as a steady monthly figure — no expansion, discounting or seasonality is modelled. For one-off sales, enter the sale value and set lifespan to 1 month.
  • LTV is gross-margin-based, not revenue-based, and ignores ongoing service/retention costs beyond gross margin and the time value of money — so it is a planning estimate, not a discounted valuation.
  • The 3:1 LTV:CAC benchmark is an industry heuristic, not a rule. Early-stage, high-margin or fast-payback businesses can rationally run lower; it should never override your own cash-flow judgement.

Frequently asked questions

Is a 3:1 LTV:CAC ratio actually good?
It is a widely cited rule of thumb for subscription businesses — roughly, below 1:1 you lose money on every customer, around 3:1 is often considered healthy, and very high ratios can signal underinvestment in growth. But it is a heuristic, not a target you must hit: it ignores payback speed, margin profile and growth stage. Use it as a sanity check alongside CAC payback, not as a verdict.
What should I include in marketing spend?
Everything spent to acquire customers in the period: ad budget, content and SEO costs, software, agency or freelancer fees, and a fair share of the salaries of people doing sales and marketing. Leaving out staff time flatters CAC and makes growth look cheaper than it is.
Why does LTV use gross margin instead of revenue?
A pound of revenue you spend most of delivering is not a pound you can reinvest in winning the next customer. Multiplying by gross margin values the profit a customer actually frees up, so comparing it against CAC is an honest comparison rather than a flattering one.
Why does CAC payback matter if the ratio looks healthy?
The ratio can look great while cash is tied up for a long time. A 6:1 ratio with an 18-month payback can starve a small business of cash long before the lifetime value arrives. Payback months tell you how long your acquisition money is locked up — often the more urgent number for an owner-funded business.