Tool
Customer LTV & LTV:CAC Calculator
Estimate lifetime value from revenue, margin, and churn — then check it against your acquisition cost.
Results
- Avg customer lifetime
- 20.0 months
- Lifetime value (LTV)
- $1,600
- LTV : CAC ratio
- 3.2 : 1
LTV = (monthly revenue × gross margin) ÷ monthly churn. A 3:1 LTV:CAC ratio or better is the common benchmark.
A worked example — your numbers
At 5.0% monthly churn, the average customer stays 1 ÷ 5.0% = 20.0 months.
They generate $100 × 80.0% = $80 of gross profit a month, so LTV = $80 ÷ 5.0% = $1,600.
Against a $500 CAC, that's an LTV:CAC of $1,600 ÷ $500 = 3.2 : 1.
How to read your result
You earn about $3.2 in lifetime gross profit for every $1 spent to acquire a customer. That's at or above the 3:1 benchmark — healthy acquisition economics.
Churn is the biggest lever here: because lifetime is 1 ÷ churn, trimming it even a point lengthens lifetimes and lifts LTV more than most CAC cuts would.
This calculator provides directional estimates for informational purposes only and is not tax, legal, or financial advice. Results depend on the inputs you provide. For advice specific to your situation, book a Discovery Meet.
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.
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
How is customer lifetime calculated?+
As 1 divided by your monthly churn rate. If 5% of customers leave each month, the average customer stays 1 ÷ 0.05 = 20 months. Lower churn means longer lifetimes and higher LTV.
What's a good LTV:CAC ratio?+
Around 3:1 or higher is the widely cited healthy benchmark — three dollars of lifetime gross profit for every dollar of acquisition cost. Near 1:1 is unsustainable; very high ratios may mean you're under-spending on growth.
Why does churn matter so much?+
Because LTV is inversely proportional to churn. Cutting churn from 5% to 4% raises average lifetime from 20 to 25 months and lifts LTV by 25% — often a bigger win than reducing CAC.
Does this work for non-subscription businesses?+
It's designed for recurring revenue. For one-time or repeat-purchase businesses, LTV is better modeled from average order value and purchase frequency — a CPA or analyst can help adapt it.
Want a real answer, not just a calculator?
A calculator gives you a directional number. A free Discovery Meet gives you a CPA who reviews your actual books, structure, and goals.
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