Free tool

LTV:CAC ratio calculator.

What a customer is worth against what they cost to acquire. The ratio is easy arithmetic and the reading is the hard part, so this tells you what your number means, including the case nobody mentions: a ratio that is too high usually means you are not spending enough.

Your numbers

$

Everything you spend to acquire customers.

Paying customers, not signups.

$

Your blended monthly price.

%

What is left after the cost of serving them.

%

Share of customers who cancel each month.

LTV to CAC

4.1 : 1 Healthy

A scale from zero to six or more, marking where this ratio falls. 0 1 3 5 6+

0 to 1

Losing money

1 to 3

Fragile

3 to 5

Healthy

5+

Underspending

Lifetime value

$410.83

Acquisition cost

$100.00

Average lifetime

16.7 mo

What that means

A customer is worth $410.83 and costs $100.00 to acquire, a ratio of 4.1 to 1. That is the healthy band: the economics work and there is room to spend more. At this rate the acquisition cost is repaid around month 4.5.

The ratio says whether a customer is worth more than they cost. It does not say how long you wait to find out, which is what payback period is for.

Reading it

The 3:1 rule, and the half of it nobody quotes.

Below 1:1

You lose money on every customer you buy. Nothing about scale fixes this: more spend means more loss. Acquisition has to get cheaper or retention has to improve.

1:1 to 3:1

The business works but there is no margin for error. A price rise, a churn improvement, or a cheaper channel all move you out of this band, and any of them is a better use of a week than a new feature.

3:1 to 5:1

The healthy band, and where most sustainable software sits. Worth checking that it holds per channel and not just on the blended average.

Above 5:1

Usually a sign of underspending rather than a triumph. You have bought only the cheapest customers. Spending more will lower the ratio and grow the business faster, and that is normally the right trade.

All four of those readings assume the ratio is real. Blended across every channel it usually is not: one channel at 12:1 and one at 0.4:1 average to something that looks like 3:1 and tells you to keep doing both.

Questions

LTV and CAC, asked plainly.

What is a good LTV:CAC ratio?
The usual answer is 3:1, and it is a reasonable target. Below 1:1 you lose money on every customer. Between 1:1 and 3:1 the business works but has little room for error. Above 5:1 the economics are excellent, but it often means you are underspending on acquisition and leaving growth on the table.
How do you calculate LTV:CAC?
Lifetime value divided by customer acquisition cost. LTV is monthly gross profit per customer divided by monthly churn rate. CAC is marketing spend divided by the number of paying customers it produced. Use gross profit rather than revenue for LTV, or the ratio flatters you by whatever your cost of service is.
Why can a high LTV:CAC ratio be a bad sign?
Because acquisition cost usually rises as you scale a channel, so an unusually high ratio often means you have only bought the cheapest, easiest customers. A founder sitting at 10:1 can normally spend considerably more, accept a lower ratio, and grow much faster with the same unit economics intact.
What is the difference between LTV:CAC and payback period?
LTV:CAC tells you whether a customer is worth more than they cost. Payback period tells you how long you wait to find out. Both matter, and payback matters more when you are funding growth out of revenue, because a 5:1 ratio that takes 20 months to materialise can still bankrupt you.
Should LTV use revenue or gross profit?
Gross profit. Hosting, payment processing, support and third-party APIs all come out before the money is yours. For most software gross margin sits between 70 and 90 percent, so using revenue overstates LTV by roughly a fifth.

A blended LTV:CAC hides the two channels that matter: the one at 12:1 you should be spending more on, and the one at 0.4:1 you should stop. That is what Ripples does. One script tag, your billing provider and your Google Ads account, and these numbers are computed from real data instead of typed in from memory.

See how that works

Other free tools

UTM builder CAC payback period calculator ROAS calculator Retention curve calculator

The same ratio, per channel, from real data.

One script tag and a billing connection. Free until $1K MRR.