Customer LTV & LTV:CAC Calculator

What this calculator does

This tool estimates how much a customer is worth over their entire relationship with you (lifetime value), then compares it to what you spent to acquire them. Enter average monthly revenue per customer, gross margin, monthly churn, and your CAC. It's built for subscription and recurring-revenue businesses that need to know whether their customer economics actually work.

How it works

Average customer lifetime (in months) is 1 ÷ monthly churn rate. A 5% monthly churn implies an average lifetime of 20 months.

LTV = (monthly revenue × gross margin) ÷ monthly churn — the total gross profit you expect from a customer before they leave.

The LTV:CAC ratio divides that by your acquisition cost. It's the single clearest test of whether growth creates or destroys value.

A worked example

For a customer paying $100/month at 80% gross margin, 5% monthly churn, and a $500 CAC:

You earn about $3.20 in lifetime gross profit for every $1 spent to acquire — right around the healthy benchmark.

How to read your result

The LTV:CAC ratio is the headline. A ratio around 3:1 or higher is commonly considered healthy; closer to 1:1 means you're barely recovering acquisition cost; very high (say 5:1+) can actually signal you're under-investing in growth. Churn is the most sensitive input — small reductions in churn lengthen lifetime and lift LTV dramatically, which is why retention usually beats acquisition as a growth lever.

Common mistakes

• ·Using revenue instead of gross-margin profit. LTV should be built on the profit a customer brings, not their gross payments.
• ·Underestimating churn. Optimistic churn assumptions inflate lifetime and LTV; use your actual measured rate.
• ·Ignoring expansion and contraction. If customers upgrade or downgrade over time, a flat monthly revenue figure understates or overstates LTV.

Frequently asked questions