SaaS LTV:CAC Ratio Calculator — Unit Economics & Payback Period

The Formula

These four formulas form the backbone of SaaS financial modeling. LTVThe total revenue a business can expect from a single customer over their entire relationship. LTV > 3× CAC is considered healthy. measures how much revenue a customer generates over their lifetime. CACTotal cost of acquiring a new customer, including marketing and sales expenses. CAC = total acquisition costs ÷ new customers. measures how much it costs to acquire them. The LTVThe total revenue a business can expect from a single customer over their entire relationship. LTV > 3× CAC is considered healthy.:CACTotal cost of acquiring a new customer, including marketing and sales expenses. CAC = total acquisition costs ÷ new customers. ratio tells you if your unit economics are healthy.

Variable Definitions

How to Use This Calculator

1. 1

   Enter your monthly ARPU (Average Revenue Per User).

2. 2

   Enter your monthly churn rate (percentage of customers who cancel each month).

3. 3

   Enter your total marketing and sales spend for the period.

4. 4

   Enter the number of new customers acquired in the same period.

5. 5

   The calculator will compute LTV, CAC, ratio, payback period, and the SaaS Magic Number.

6. 6

   A healthy SaaS business has LTV:CAC > 3:1 and payback under 12 months.

Common Applications

• Evaluating SaaS business unit economics by comparing customer lifetime value to customer acquisition cost
• Determining how many months it takes to recoup customer acquisition costs through monthly recurring revenue and gross margin
• Assessing the impact of churn rate changes on customer lifetime value and overall business sustainability
• Calculating the SaaS Magic Number to measure sales and marketing efficiency quarter over quarter

LTV:CAC Ratio — healthy SaaS businesses target 3:1 or higher

Understanding the Concept

The LTVThe total revenue a business can expect from a single customer over their entire relationship. LTV > 3× CAC is considered healthy.:CACTotal cost of acquiring a new customer, including marketing and sales expenses. CAC = total acquisition costs ÷ new customers. ratio is the single most important metric in SaaS. It tells you whether your customer acquisition engine is efficient. The golden standard is 3:1 — you generate $3 of lifetime value for every $1 spent acquiring a customer. Below 1:1 means you are losing money on every customer. Between 1:1 and 3:1 is workable but has room for improvement. Above 3:1 indicates a healthy, scalable business. The payback period — how long it takes to recoup your CACTotal cost of acquiring a new customer, including marketing and sales expenses. CAC = total acquisition costs ÷ new customers. from a customer's gross margin — should ideally be under 12 months. The SaaS Magic Number (new revenue / marketing spend) measures sales efficiency: above 1.0x is excellent, 0.5-1.0x is good, below 0.5x needs improvement.

Frequently Asked Questions

Sources & References