SaaS LTV to CAC Ratio Calculator

Decoding Your SaaS Unit Economics

The LTV to CAC ratio is the single most important metric for understanding the long-term profitability and scalability of a SaaS business. It answers the question: "Is the value a customer brings over their lifetime greater than the cost to acquire them?"

What is LTV (Customer Lifetime Value)?

LTV is the total revenue you can expect to generate from a single customer before they churn. Our calculator uses the formula: (ARPA * Gross Margin %) / Churn %. A high LTV indicates a sticky product that customers value.

What is CAC (Customer Acquisition Cost)?

CAC is the total sales and marketing cost required to acquire one new customer. It's calculated as: Total S&M Spend / New Customers. An efficient marketing engine results in a low CAC.

Interpreting the LTV:CAC Ratio

• Less than 1:1: A critical problem. You are losing money on every customer you acquire.
• 1:1 to 3:1: Needs improvement. Your business model may not be profitable or scalable.
• 3:1 or higher: A healthy business model. This is the benchmark most VCs look for.
• 5:1 or higher: Excellent. You may be underinvesting in marketing and could be growing faster.