SaaS & Retention

LTV to CAC Ratio Calculator

The LTV to CAC ratio is the single quickest read on whether a growth model works. Under 1 you are destroying value, around 3 is healthy, and far above 3 usually means you are underinvesting rather than winning.

Your numbers

Result

LTV to CAC ratio3.44x
CAC payback7.3 months
Maximum CAC at a 3x ratio$550Headroom before the model stops being healthy.
Lifetime profit per customer$1,170

FormulaLTV to CAC ratio = lifetime value ÷ customer acquisition cost

Worked example

An LTV of $1,650 against a $480 CAC is a 3.44x ratio, with $1,170 of lifetime profit per customer. At $66 of monthly gross profit, payback takes 7.3 months. You could pay up to $550 per customer and still sit at 3x, so there is roughly $70 per customer of unused headroom to buy more growth.

What to watch for

A ratio far above 3, say 6x or higher, is usually a signal to spend more rather than a trophy. It normally means you are only harvesting the cheapest demand and leaving growth on the table for a competitor to take.

The ratio is only as honest as the LTV inside it. If LTV was calculated on revenue rather than gross profit, or projected over an implausible horizon, a 3x ratio can easily be a real 1.2x.

Payback period matters more than the ratio for anyone who is not sitting on plenty of cash. A 4x ratio with a 20-month payback will run a business out of money long before the value arrives.

Frequently asked questions

What is a good LTV to CAC ratio?

Around 3 to 1 is the common health benchmark. Below 1 means each customer costs more than they return, between 1 and 3 is workable but tight, and well above 3 usually means you should be spending more aggressively.

What is a good CAC payback period?

Under 12 months is generally considered healthy for subscription businesses, and under 6 months is strong. Longer paybacks demand more working capital, so the acceptable figure is partly a question of how you are funded.

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