maratoolHow to calculate CAC, LTV, and payback period
Know what each customer costs to acquire and what they're worth over their lifetime — the two numbers that govern growth.
You can run profitable campaigns and still grow yourself into bankruptcy if it costs more to acquire a customer than they're worth. CAC (Customer Acquisition Cost) and LTV (Lifetime Value) are the core unit-economics pair. The CAC / LTV Calculator computes both, plus the ratio and payback period.
How it works
- Enter marketing spend and new customers — total ad/marketing cost for the period and how many customers you acquired.
- Enter revenue per customer — average monthly revenue per customer and expected lifespan in months.
- Set gross margin — defaults to 80%. LTV is calculated on margin-adjusted revenue, not top-line.
- Read the output — CAC, LTV, LTV:CAC ratio, and months to pay back acquisition cost.
The formulas
CAC = Marketing Spend ÷ New Customers
LTV = Monthly Revenue × Gross Margin × Lifespan (months)
LTV:CAC ratio = LTV ÷ CAC
Payback = CAC ÷ (Monthly Revenue × Gross Margin)
What the ratio tells you
- Below 1:1 — you lose money on every customer. Unsustainable.
- 1:1 to 3:1 — marginal. Might work with fast payback and low churn.
- 3:1 or above — healthy for most businesses. The standard benchmark VCs look for.
- Above 5:1 — great economics, but you might be under-investing in growth.
Payback period
Even with a strong LTV:CAC ratio, cash flow matters. If payback takes 24 months but you only have 6 months of runway, you have a problem. SaaS companies typically target under 12 months; e-commerce often pays back on the first order.
Related tools
For campaign-level profitability, use the Campaign ROI Calculator. For testing whether conversion improvements are real, try the A/B Test Calculator.