LTV:CAC Ratio Calculator
Is each customer worth more than it costs to acquire them? Enter ARPA, gross margin, churn and CAC to get lifetime value, your LTV:CAC ratio and a verdict against the 3:1 benchmark.
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The LTV:CAC formula
LTV = (monthly ARPA × gross margin) ÷ monthly churn rate, and LTV:CAC = LTV ÷ CAC. Churn sets the average customer lifetime (lifetime ≈ 1 ÷ churn), so a 2% monthly churn implies a ~50-month life. Using gross-margin LTV (not raw revenue) keeps the ratio honest, you keep the margin, not the whole invoice.
The rule of thumb is 3:1 or better: a customer should return at least three times their acquisition cost over their life. Below 1:1 you lose money on every sale. Well above 5:1 usually means the opposite problem, you're under-investing in growth and could spend more to acquire faster, as long as CAC payback stays reasonable.
The biggest lever on the ratio is retention: because churn is in the denominator of LTV, small improvements in churn move LTV a lot. See LTV:CAC explained and the churn calculator, and model the whole picture in unit economics.
Plan the whole picture in Adlega
Adlega turns these one-off numbers into a live financial model for your SaaS, projections, scenarios, dashboards.