CAC (Customer Acquisition Cost) is the average cost to acquire one new customer, including marketing and sales expenses. LTV (Lifetime Value) is the total revenue a customer generates over their relationship with your company. Healthy SaaS businesses have LTV:CAC ratio of 3:1 or higher.

How is CAC calculated?

CAC = Total Sales & Marketing Expenses / Number of New Customers Acquired. Include all customer acquisition costs: advertising, sales team salaries, commissions, marketing tools, and content creation. Exclude one-time costs like unrelated overhead or product development.

Free CAC/LTV Unit Economics Calculator

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Step 1

Enter CAC (e.g., $500) and ARPA ($50/month)

Step 2

Input churn rate and gross margin

Step 3

See LTV, payback period, and benchmarks

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Customer Acquisition Cost (CAC)

Marketing Spend / Month ($)

Sales Team Cost / Month ($)

Other Acquisition Costs ($)

Tools, agency fees, etc.

New Customers / Month

Your CAC

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Lifetime Value (LTV)

ARPU / Month ($)

Average Revenue Per User per month

Gross Margin (%)

Monthly Churn (%)

Avg. Customer Lifespan

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Your LTV

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Saved Scenarios

Pro Tips

LTV:CAC Ratio: A ratio of 3:1 or higher is healthy for SaaS. Below 2:1 means you're losing money on each customer.

Payback Period: Under 12 months is ideal. Above 18 months means you're tying up cash too long.

Gross Margin Matters: Use gross margin, not revenue. High revenue with low margins has poor LTV.

CAC by Cohort: Your first customers usually cost more to acquire than later ones. Track CAC by acquisition channel.

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CAC

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LTV

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LTV:CAC Ratio

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Payback Period

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CAC Breakdown

Where your acquisition spend goes

LTV vs CAC

With 3:1 benchmark line

Cumulative Value vs Cost per Customer

Watch customer value accumulate vs acquisition cost. Breakeven happens when the green line crosses the red.

SaaS Benchmarks

How your unit economics compare to industry standards

LTV:CAC Ratio

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Bad <1:1 | OK 1-3:1 | Good 3-5:1 | Great 5:1+

CAC Payback

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Great <6mo | Good <12mo | OK 12-18mo | Bad 18mo+

Gross Margin

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Bad <50% | OK 50-70% | Good 70-80% | Great 80%+

Cohort Value Breakdown

Month-by-month cumulative value and cost for a customer cohort.

How are CAC and LTV calculated?

CAC (Customer Acquisition Cost) is the average cost to acquire one new customer. LTV (Lifetime Value) is the total revenue a customer generates over their relationship with your company. The formulas:

CAC = Total Sales & Marketing Expenses / Number of New Customers
LTV = (ARPA × Gross Margin) / Churn Rate

LTV:CAC ratio measures unit economics health. A ratio of 3:1 means each customer generates 3x more revenue than acquisition cost — sustainable for growth. Below 3:1 suggests poor unit economics. Above 5:1 may indicate under-investment in growth.

Payback period shows how many months it takes to recover CAC from revenue. Healthy SaaS targets <18 months for early-stage, <12 months for later-stage. Longer payback increases cash flow pressure and capital requirements.

Worked example: You spend $50K/month on sales & marketing and acquire 100 new customers/month. CAC = $50,000 / 100 = $500. ARPA is $100/month, gross margin is 80%, churn is 5% monthly. LTV = ($100 × 0.80) / 0.05 = $1,600. LTV:CAC = 3.2:1 (healthy). Payback = $500 / ($100 × 0.80) = 6.25 months (excellent).

Frequently Asked Questions

What is a good LTV to CAC ratio?

A healthy LTV:CAC ratio is 3:1 or higher — each customer generates 3x more revenue than acquisition cost. Below 3:1 indicates unsustainable unit economics. Above 5:1 may mean you're under-investing in growth. Payback period should be under 18 months for early-stage SaaS.

How do you improve unit economics?

Improve unit economics by increasing LTV (raise prices, reduce churn, expand revenue per customer via upsells) or decreasing CAC (optimize marketing spend, improve conversion rates, leverage organic/content channels). Focus on retention — reducing churn from 5% to 3% can increase LTV by 67%.

What expenses should be included in CAC?

Include all customer acquisition costs: paid advertising, marketing team salaries, sales commissions, marketing software/tools, content creation, and lead generation. Exclude product costs, general overhead, and unrelated expenses. CAC should reflect the marginal cost to add one more customer.

How does churn affect LTV?

Churn directly reduces LTV — the formula divides by churn rate, so higher churn means lower lifetime value. Reducing monthly churn from 5% to 3% increases LTV by 67%. High churn also increases pressure on CAC — you need more customers to replace those leaving, raising acquisition costs.

CAC/LTV Unit Economics

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CAC Breakdown

LTV vs CAC

Cumulative Value vs Cost per Customer

SaaS Benchmarks

Cohort Value Breakdown

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How are CAC and LTV calculated?

Frequently Asked Questions

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