Startup metrics
LTV to CAC calculator
Unit economics in three numbers: what a customer is worth, how that compares with the cost to win them, and how long it takes to earn the cost back.
Simple model with constant monthly churn and no expansion revenue. Expansion makes LTV higher; discounting makes it lower.
How it works
Lifetime value is the gross profit a customer brings over its life: monthly revenue times gross margin, divided by monthly churn. CAC is sales and marketing cost per new customer.
Investors like an LTV to CAC ratio of 3 or more and a CAC payback under 12 to 18 months for most B2B businesses.
The formula
- Monthly gross profit per customerRevenue per customer x gross margin.
- LTVMonthly gross profit / monthly churn.
- Ratio and paybackLTV / CAC; payback = CAC / monthly gross profit.
Worked example
$500 a month per customer at 75% margin with 2% monthly churn gives an LTV of $18,750. With a $6,000 CAC, the ratio is 3.1x and payback is 16 months.
Put the numbers in your data room
Show CAC by channel and cohort churn in the data room. A blended number hides channels that lose money, and investors will ask.
LTV to CAC calculator FAQ
What is a good LTV to CAC ratio?
3x or more is a common benchmark; much higher may mean you are under-investing in growth.
What should CAC include?
All sales and marketing costs, including salaries, divided by new customers in the period.
Why use gross margin?
Revenue overstates value; gross margin shows what is left to pay back acquisition cost.