Include the full acquisition cost
Consider media, tools, agencies, sales compensation, and relevant team cost rather than ad spend alone.
Unit economics tool
CAC and LTV calculator
Estimate acquisition efficiency and customer value using one consistent cohort, margin definition, and time period.
- Free to use
- Runs in your browser
- No details saved
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Enter your assumptions
Compare cohorts and channels separately; blended averages can hide expensive or low-retention segments.
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Compare cohorts and channels separately; blended averages can hide expensive or low-retention segments.
How to use this tool
Use the output as a decision prompt
CAC divides acquisition-related sales and marketing cost by new paying customers. This simplified LTV model divides monthly gross profit per customer by monthly customer churn. The LTV:CAC ratio compares estimated gross profit over the customer life with acquisition cost.
The result can be misleading when cohorts are young, churn is unstable, expansion matters, acquisition attribution is incomplete, or service costs are excluded. Use the same definitions over time and compare actual cohorts by channel and segment.
Method and interpretation
What the calculation is designed to show
Use gross profit in LTV
Revenue is not customer value to the company. Deduct direct cost through the gross-margin input.
Prefer observed cohorts
Track retention and contribution over time. A formula is a shortcut until enough customer history exists.
Useful applications
When this tool can help
Revisit the calculation when assumptions or evidence change. Keep the inputs with the result so another founder or adviser can understand the reasoning.
- Compare acquisition channels
- Assess pricing and margin
- Monitor payback period
- Plan growth budgets
- Review cohort quality
- Discuss sustainable growth
Questions and limitations
Understand what the result cannot decide
What is a good LTV:CAC ratio?
Benchmarks vary by business model, stage, capital cost, payback, and data quality. A higher ratio can indicate room to invest or underinvestment, while a low ratio can signal weak retention, margin, pricing, or acquisition efficiency.
Should founder salaries be included in CAC?
For a complete economic view, allocate relevant sales and marketing labour even when founders initially take little salary. Otherwise early CAC may look artificially low.
What if churn is zero?
A perpetual LTV result is not credible. Use a conservative minimum churn assumption or a finite observed customer lifetime until enough history exists.
Does this work for non-subscription businesses?
It can provide a rough repeat-purchase estimate if ARPU and churn represent customer behaviour, but a cohort contribution model is usually more appropriate for transactional businesses.
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