SaaS LTV:CAC & Payback Calculator

A ratio of at least 3 to 1 is the common benchmark for a healthy subscription business. Below 1 to 1 means you lose money on each customer, while a very high ratio can signal underinvestment in growth.

Always use gross-margin dollars, not raw revenue. Using revenue ignores hosting, support, and delivery costs and badly overstates lifetime value.

Under 12 months is generally healthy for most subscription businesses, and under 6 months is excellent because it frees up cash to reinvest in growth.

ARPA stands for average revenue per account per month. You calculate it by dividing total monthly recurring revenue (MRR) by the number of active accounts. It is the foundation of the LTV calculation.

CAC payback measures the time (in months) for cumulative gross margin to equal CAC. The LTV:CAC ratio compares total lifetime profit to acquisition cost. The two metrics are complementary: you can have a healthy LTV:CAC ratio but a long payback if the monthly margin is low.

Divide the number of customers who cancelled in a month by the number of customers at the start of that month. For a more precise measure, use revenue churn (MRR lost divided by MRR at the start of the month), which better reflects the economic impact, especially if you have customers of very different sizes.

Include all sales and marketing costs directly tied to acquiring new customers: sales and marketing team salaries, commissions, paid advertising, CRM tools, events, and any overhead reasonably attributable to acquisition. Do not include retention or customer support costs.