What's the difference between the two lifespan methods?

You can estimate customer lifespan directly in years, or derive it from an annual churn rate using lifespan ≈ 100 ÷ churn%.

Does this LTV account for profit margin?

No — this uses the simple revenue-based formula. A margin-adjusted LTV would multiply by your gross margin % as well.

Why might a very high LTV:CAC ratio actually be a bad sign?

It can indicate under-investment in growth — if customers are worth much more than it costs to acquire them, spending more would likely still be profitable.

What should be included in 'sales & marketing spend' for CAC?

All costs tied to acquiring customers — ad spend, sales team salaries and commissions, marketing tools and agencies.

Is a 3:1 ratio the right target for every business?

No — it's a widely-cited SaaS/subscription benchmark, not a universal rule.

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CAC & LTV Calculator

Customer acquisition cost, lifetime value, and the LTV:CAC ratio investors look for.

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Last reviewed 2026-08-30

About the CAC & LTV Calculator

Computes Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and the LTV:CAC ratio — the standard SaaS/subscription-business health metric for whether it costs less to acquire a customer than that customer is worth over time.

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How to use it

Enter sales & marketing spend and the number of new customers acquired in the same period, to compute CAC.
Enter average purchase value and purchase frequency per year, then choose whether to estimate customer lifespan directly or derive it from an annual churn rate.
Read the LTV:CAC ratio, CAC, LTV, and a health read in the result panel.

Formula

CAC = sales & marketing spend ÷ new customers acquired. Customer lifespan (years) = either your direct estimate, or 100 ÷ annual churn rate (%). LTV = average purchase value × purchase frequency (per year) × customer lifespan (years). LTV:CAC ratio = LTV ÷ CAC.

Worked example

$20,000 in sales & marketing spend acquiring 100 new customers gives a CAC of $200. At a $50 average purchase, 4 purchases/year, and a 3-year average lifespan: LTV = $600 — an LTV:CAC ratio of 3:1, right at the 'healthy' threshold.

LTV:CAC ratio — common health benchmarks

LTV:CAC ratio — common health benchmarks
Ratio	Read
Below 1:1	Unprofitable — you're spending more to acquire a customer than they're worth
1:1 to 3:1	Marginal — acquisition is profitable but with thin margin for overhead/growth
3:1 or better	Healthy — the widely-cited SaaS/VC benchmark for a sustainable acquisition motion

Interpreting your result

This uses the simple revenue-based LTV formula, not a margin-adjusted or discounted-cash-flow LTV — real gross margin and discount rates aren't modeled, so treat the result as directional. The commonly-cited '3:1 or better' health benchmark comes from SaaS/VC circles, based on observing mature subscription businesses — a widely-used rule of thumb, not a universal law.

Recommendations

• A ratio far above 3:1 isn't always a good sign either — it can mean you're under-investing in growth.
• The churn-based lifespan method assumes constant churn every year — real churn often front-loads in a customer's first year.
• CAC should include all sales & marketing costs, not just ad spend alone, or you'll understate it.

Frequently asked questions

3:1 or better is the most commonly cited benchmark in SaaS/VC circles.