CAC, LTV & Payback Calculator
What a customer costs to win, what they are worth, and how long you wait to get the money back.
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How it works
Lifetime value is gross-margin revenue divided by churn — the margin matters, because revenue you spend delivering the service was never yours. Using revenue instead of gross profit is the most common way LTV gets overstated, often by a factor of three or more.
The ratio of LTV to CAC is the headline, with 3:1 the usual benchmark. But payback period is the number that governs whether you can fund growth: a business with an excellent ratio and an eighteen-month payback still needs enormous working capital to grow, because every new customer is a hole in the bank account for a year and a half.
CAC = spend ÷ new customers · LTV = ARPU × gross margin ÷ churn rate
- CAC — fully loaded cost of acquiring one customer, including sales salaries
- ARPU — average revenue per user per month
- Churn — the share of customers lost each month
- Payback — months of gross profit needed to recover the CAC
Worked example
1,800,000 of monthly spend winning 120 customers at 4,500 ARPU, 78% margin, 2.5% monthly churn
Inputs
Results
A 9.4:1 ratio with a five-month payback is exceptionally healthy — the usual signal to spend more on acquisition, not less.
Frequently asked questions
What should be included in CAC?
Everything spent to win the customer: advertising, sales salaries and commission, marketing tools, agency fees and events. Excluding salaries — the most common shortcut — can understate CAC by half.
Is a 3:1 LTV:CAC ratio really the target?
It is a rule of thumb, not a law. Below 3:1 usually means acquisition is too expensive to scale. Far above it often means you are under-investing in growth and leaving market share on the table.
Why does payback period matter if the ratio is good?
Because it determines how much cash growth consumes. A long payback with a strong ratio means the business is valuable but hungry — every new customer must be funded for months before returning anything.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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