LTV:CAC Payback Period Estimator
Calculate customer lifetime value, acquisition cost ratio, and payback period. Enter values for instant results with step-by-step formulas.
Worked Examples
Example 1: B2B SaaS Company
Problem:SaaS with $200 ARPU, 80% gross margin, 2% monthly churn. Spends $15,000/month marketing to acquire 20 customers.
Solution:LTV = ($200 × 0.8) / 0.02 = $8,000. CAC = $15,000 / 20 = $750. LTV:CAC = $8,000 / $750 = 10.7x. Payback = $750 / $160 = 4.7 months. Excellent unit economics—may be under-investing in growth.
Result:10.7x LTV:CAC | 4.7 month payback | Consider scaling marketing spend
Example 2: Consumer Subscription
Problem:Consumer app: $15/month ARPU, 60% margin, 8% monthly churn. CAC is $30 per user.
Solution:LTV = ($15 × 0.6) / 0.08 = $112.50. CAC = $30. LTV:CAC = $112.50 / $30 = 3.75x. Payback = $30 / $9 = 3.3 months. Healthy economics with quick payback despite high churn.
Result:3.75x LTV:CAC | 3.3 month payback | Good but work on churn
Example 3: Struggling Startup
Problem:Startup: $50 ARPU, 70% margin, 10% monthly churn. CAC is $400.
Solution:LTV = ($50 × 0.7) / 0.10 = $350. CAC = $400. LTV:CAC = $350 / $400 = 0.875x. Payback = $400 / $35 = 11.4 months BUT customers churn before payback. Losing money on every customer.
Result:0.875x LTV:CAC | UNSUSTAINABLE | Must reduce churn or CAC immediately
Frequently Asked Questions
What is LTV (Customer Lifetime Value)?
LTV is the total gross profit a customer generates over their relationship with your business. Formula: (ARPU × Gross Margin) / Monthly Churn Rate. It represents the upper limit you should spend to acquire a customer.
What is a good LTV:CAC ratio?
3:1 is the standard benchmark—each customer generates 3x what you spent to acquire them. Below 1:1 means you lose money on each customer. Above 5:1 may indicate under-investment in growth.
What is CAC payback period?
Payback period is how long until a customer's gross profit covers their acquisition cost. Formula: CAC / Monthly Gross Profit. Target 12 months or less for healthy cash flow.
How does churn affect LTV?
Churn has exponential impact on LTV. At 2% monthly churn, average lifetime is 50 months. At 5%, it's 20 months. Reducing churn from 5% to 4% increases LTV by 25%.