LTV:CAC calculator
LTV:CAC calculator
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How it is calculated
LTV = (ARPA × gross margin %) ÷ monthly churn rate
LTV:CAC = LTV ÷ CAC
Dividing by churn is a shortcut for customer lifetime: at 2% monthly churn the average customer stays 1 ÷ 0.02 = 50 months. Use a monthly churn rate with monthly revenue so the units match. David Skok’s 3× guideline assumes the simpler formula without the gross margin adjustment, which is why the calculator shows that version as well.
Worked example
ARPA is 200 a month, gross margin 80% and monthly churn 2%. LTV = (200 × 0.8) ÷ 0.02 = 8,000. With CAC of 2,000 the ratio is 4.0×.
Now suppose that 2% came from four months of data and the true rate is 1% or 3%. The ratio becomes 8× or 2.7×. One decimal point of churn you cannot yet measure moves the answer from “spend aggressively” to “stop”.
How to read your result
These bands are Mazo’s working thresholds, built on the 3:1 guideline in David Skok’s SaaS Metrics 2.0. They are not an industry statistic.
| Range | Reading | What it means |
|---|---|---|
| Under 1:1 | Losing money per customer | Pause scaling spend. |
| 1:1 to 3:1 | Below the guideline | Fix churn or CAC before adding spend. |
| 3:1 to 5:1 | Healthy | Skok notes the best SaaS companies run above 3. |
| Over 5:1 | Strong, check the inputs | Verify churn; consider investing more in growth. |
How to improve it
Work on churn first
Halving monthly churn doubles lifetime and doubles LTV. A price change or a CAC cut gives you far less for the same effort. Find the month where customers leave and fix onboarding before that month.
Raise price on new customers
LTV is linear in price. A 25% increase on new customers raises LTV by 25% and leaves CAC untouched, as long as win rate holds.
Segment by customer type
The blended ratio hides a segment with 8:1 and one with 1:1. Split by plan, size or channel and stop acquiring the weak segment.
Use CAC payback until you have cohorts
Payback needs a price and a cost, not a churn estimate. Skok pairs the ratio with payback for this reason.
Common mistakes
Trusting a churn rate from three months of data
Early churn is dominated by a few customers. Treat the output as a range, and recalculate with the churn at 0.5× and 2× your input.
Using revenue churn for customer lifetime
This tool expects customer (logo) churn. If expansion offsets losses, use net revenue retention to judge the account base instead.
Ignoring that the formula assumes churn stays constant
Real cohorts churn fast early and flatten later. The shortcut is a rough guide, not a forecast.
FAQ
What is a good LTV:CAC ratio?
How do I calculate LTV if I have no churn data yet?
Should LTV be based on revenue or gross profit?
Is a very high LTV:CAC ratio always good?
Turn the ratio into a plan
Mazo finds what is driving your churn and CAC, then builds the weekly plan to move them. €99 a month, 14 days free.
Start 14-day free trial See all free tools →Written by Madalena Rugeroni, founder of Mazo · Updated 10 November 2026. Benchmarks are credited to whoever published them; where a band is Mazo's own it is labelled as a working threshold. Results are a starting point, not financial advice. Mazo is not affiliated with or endorsed by the sources below.