CAC & LTV calculator

The four numbers behind the ratio

Five inputs drive the whole card. Acquisition cost is your monthly sales and marketing spend divided by the new customers that spend won, so both boxes have to describe the same month or the result means nothing.

Average customer lifespan is derived rather than entered: it is one divided by your monthly churn rate, which puts four percent monthly churn at twenty-five months. The churn field is clamped between 0.1 and 100 percent so an empty box cannot divide by zero and hand you an infinite lifetime.

Payback is worked out separately from the ratio — acquisition cost divided by the gross margin one customer produces per month. It answers the cash question the ratio ignores: how long your money stays tied up before that customer has repaid what you spent to win them.

Why this lifetime value is margin-based

Lifetime value here is revenue per customer multiplied by gross margin and then by that derived lifespan. The margin step is the one home-made spreadsheets usually skip, and skipping it is why so many models read healthier than the bank balance.

Revenue lifetime value counts money you never keep. Hosting, support, payment fees and delivery labour all come out before a customer contributes anything, so modelling on raw revenue at a sixty percent margin overstates lifetime value by two-thirds and the ratio along with it. Put whatever survives cost of delivery into the margin field rather than leaving it near a hundred.

Where each verdict band leaves you

The label beside the ratio is a long-standing rule of thumb rather than a measured benchmark, and this calculator bands on exactly the values below.

3.0 and above — Healthy

The conventional target. A customer returns at least three times what they cost to win, which leaves room for the overheads this ratio does not include. From here, work on shortening payback rather than pushing the multiple higher.

1.0 to 3.0 — Break-even zone

Acquisition cost comes back and not much else. Usually one lever is at fault rather than all three, so check churn and margin before you reach for a spend cut.

Under 1.0 — Unprofitable

Each new customer costs more than they will ever return, so growth deepens the hole. This is the one band where spending less genuinely helps.

Input mistakes that quietly break the maths

Mixing time windows is the most common. A quarter of spend against a single month of new customers triples the acquisition cost, because the tool assumes both fields cover the same period.

Counting only ad budget is the next. Acquisition cost includes salaries, commissions, tooling and agency fees for everyone whose job is winning customers; leave those out and you optimise against a figure nobody else in the business recognises.

The third is an annual churn rate typed into a monthly field, which stretches lifespan roughly twelvefold and inflates lifetime value by the same factor. Set the toggle to whichever of USD or INR your books use, then read payback before you read the ratio.