SaaS founders obsess over one ratio: LTV:CAC. If you're spending $200 to acquire a customer but they only generate $400 in lifetime value, your business is fundamentally broken. This calculator reveals your unit economics—the true health of your business beyond vanity metrics like growth rate. Input your customer acquisition cost, monthly churn, and customer lifetime value to see if you're running a profitable machine or just generating expensive users that quickly leave.
Churn is the silent killer that tanks LTV. A 5% monthly churn rate sounds manageable until you realize it means your customer lifetime is just 20 months. Improve churn to 2%, and lifetime extends to 50 months—suddenly your LTV doubles and your business becomes infinitely more valuable. This tool shows how small retention improvements have outsized impact. Many founders obsess over acquisition when retention improvements would move the needle faster and cheaper.
The golden metric: 3:1 LTV:CAC ratio means you generate $3 of customer value for every $1 spent acquiring them. Below 1:1 and you're losing money per customer. Run scenarios: What if you improve retention by 1%? What if marketing costs drop 20%? This calculator proves that retention beats acquisition—reducing churn by 2% often impacts LTV more than cutting CAC in half. Use it to guide strategy: should you hire more sales or invest in product improvements?
CAC: What Does It Cost to Acquire a Customer?
CAC = Marketing spend / Customers acquired. Example: $20,000/month marketing ÷ 200 new customers = $100 CAC. Includes: ads, sales team, tools, content. Track monthly to optimize spend and identify efficient channels.
LTV: What Is a Customer Worth?
LTV = (Monthly value × Gross margin %) / Monthly churn rate. Example: $100/month × 70% margin ÷ 5% churn = $1,400 LTV. Higher LTV (lower churn, higher value) = business is more valuable. Reduces CAC payback time.
LTV:CAC Ratio: The Golden Metric
3:1 is healthy (you make $3 for every $1 spent acquiring). 1:1 is breakeven (marginal). <1:1 is unsustainable (losing money per customer). Most VCs want 3:1 or better; successful SaaS often achieve 5–10:1 at scale.
CAC Payback Period: How Long Until ROI?
CAC payback = CAC / (monthly value × margin). Example: $100 CAC ÷ $70 monthly margin = 1.4 months payback. Shorter is better (cash flow positive faster). Most SaaS targets <12 months; consumer products <6 months.
Churn: The Silent Killer of LTV
Churn directly impacts LTV. 2% monthly churn = 50-month lifetime. 5% churn = 20-month lifetime. 10% churn = 10-month lifetime. Even small churn reductions dramatically improve LTV. Example: 5% → 3% churn increases LTV 67%.