What is a healthy LTV:CAC ratio?

The benchmark for SaaS is 3:1 or higher. If it costs $1,000 to acquire a customer (CAC) and their LTV is $3,000, the ratio is 3:1. Below 3:1 means you're overspending on acquisition relative to value. Above 5:1 may mean you're underinvesting in growth.

What is CAC payback period?

CAC payback period = CAC / (ARPU × gross margin). It is the number of months to recover the cost of acquiring a customer. Best-in-class SaaS targets under 12 months payback. Above 18 months is a concern for cash-constrained companies.

How can I increase LTV?

LTV increases by reducing churn (biggest lever), increasing ARPU through upsells and price increases, and expanding usage-based revenue. A 20% churn reduction increases LTV by 25%. Cross-selling to existing customers is 5–25× cheaper than acquiring new ones.

What is negative churn?

Negative net revenue churn occurs when expansion revenue (upsells, seat additions) from existing customers exceeds revenue lost from churned customers. This means existing customers grow faster than you lose them — a hallmark of elite SaaS businesses.

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Free Customer LTV Calculator — SaaS Lifetime Value & LTV:CAC Ratio

Customer Lifetime Value (LTV or CLV) is the total revenue a business expects from a single customer over their entire relationship. For SaaS, LTV = ARPU / Monthly Churn Rate. This calculator computes LTV, the LTV:CAC ratio (target: 3:1 or higher), and CAC payback period.

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How It Works

How to use Customer LTV Calculator

Enter ARPU and churn rate

Input your average revenue per user (monthly) and monthly churn rate percentage.

Enter CAC (optional)

Add your customer acquisition cost to see the LTV:CAC ratio and payback period.

See LTV metrics

The calculator shows LTV, LTV:CAC ratio, payback period, and whether the ratio indicates a healthy business.

FAQ

Frequently asked questions

Customer Lifetime Value (LTV) is the total revenue expected from a customer before they churn. For SaaS with monthly billing: LTV = ARPU / Monthly Churn Rate. If ARPU is $100/month and churn is 2%, LTV = $5,000.

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References

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Free Customer LTV Calculator — SaaS Lifetime Value & LTV:CAC Ratio

How to use Customer LTV Calculator

Frequently asked questions

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