CAC LTV Calculator — Methodology

Step-by-step calculation

Find your customer acquisition cost, lifetime value, and the ratio that determines unit-economics health.

1. 1

   Enter sales & marketing spend

   All-in: ads, sales salaries, tools, content production for the measurement period.

2. 2

   Enter new customers acquired

   Net new — exclude expansions or re-activations.

3. 3

   Add average monthly revenue per customer (ARPU)

   Recurring revenue, not one-off fees.

4. 4

   Set gross margin and customer lifespan

   Lifespan = 1 / monthly churn rate. SaaS averages 24-36 months.

5. 5

   Read the ratio and payback period

   Aim for LTV/CAC ≥ 3 and payback under 12-18 months.

Assumptions and overrides

LTV calculated as ARPU × gross margin × lifespan (simple linear model). For high-churn cohorts the more accurate formula is ARPU × gross margin / monthly churn rate — converges to the linear form when churn is low. CAC includes labour allocation in the spend input; cohort-based CAC analysis (separating channels and segments) is recommended for businesses past $1M ARR.

Every region default on the calculator is editable. If your effective rate, fee, or threshold differs from the headline figure shown, type your own number into the field — the calculator recomputes instantly without leaving this page.

Review cadence and corrections

This methodology and the underlying rate defaults are reviewed at least annually, and immediately following any change to the headline rate from IRS, HMRC, or SARS. Every substantive update is recorded on the public changelog. Spotted an error? See the corrections policy for how to report it.

See the full editorial policy for the standards every page on BusCalcTools is held to.