Free calculator · Venture & Startup Finance
Unit Economics, CAC · LTV · LTV:CAC · Payback
Calculates customer acquisition cost, customer lifetime value, the LTV:CAC ratio, and the CAC payback period for a subscription business. Inputs are monthly revenue per customer, gross margin, monthly churn, sales and marketing spend, and new customers per month.
By Devon Coombs, CPA, MBA · Assistant Teaching Professor of Finance, Santa Clara University · Reviewed October 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
Finance questions & answers · Student career guide · AI training for finance teams · Consulting · The 10 Laws of Finance
How do you calculate CAC, LTV, and CAC payback?
Customer acquisition cost (CAC) is acquisition spending divided by new customers. In this simplified subscription model, lifetime value (LTV) is monthly revenue per customer × gross margin ÷ monthly customer churn. Payback is CAC divided by monthly gross profit per customer.
Interactive Tool
Unit Economics, CAC · LTV · LTV:CAC · Payback
CAC
$2,000
cost to win one customer
Avg lifespan
35.7 mo
1 ÷ monthly churn
LTV
$5,714
ARPU × margin × lifespan
CAC payback
12.5 mo
< 12 mo strong · > 18 risky
LTV : CAC
2.86 : 1
Below the 3:1 SaaS benchmark
Churn is the silent killer: nudge monthly churn from 2.8% to 6% and watch lifespan roughly halve, dragging LTV:CAC toward break-even while price, margin, and CAC never move.
Understand the numbers
A worked example, step by step
Enter $100 monthly revenue per customer, 80% gross margin, 2% monthly churn, $100,000 monthly sales and marketing spending, and 100 new customers.
This fixed teaching example is separate from your saved calculator inputs. Enter the assumptions above to reproduce it.
- CAC = $100,000 ÷ 100 = $1,000 per new customer.
- Monthly gross profit = $100 × 80% = $80. Expected customer lifetime = 1 ÷ 2% = 50 months.
- LTV = $80 × 50 = $4,000. LTV:CAC = 4:1. CAC payback = $1,000 ÷ $80 = 12.5 months.
$4,000 LTV · $1,000 CAC · 12.5-month payback
What the result tells you
This example earns four modeled dollars of lifetime gross profit for each dollar spent acquiring a customer. It still needs cash to fund the payback period and cover overhead.
Assumptions to check
Use matching time periods and consistent acquisition-cost definitions. This shortcut assumes constant churn and margin, no expansion revenue, and no discounting. It is not a forecast of company profit; a 3:1 ratio is not a universal pass mark.
Try one change
Raise monthly churn to 4%. LTV falls to $2,000 and LTV:CAC to 2:1, while the simple payback estimate stays at 12.5 months. Explain why retention changes lifetime value even when acquisition cost stays fixed.
Test it in the calculator ↑Learn the concept
This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.
When to use this measure
Embed this calculator on your site
Free to embed on any site; the widget includes an attribution link back to this page.
One useful finance email a week
A tool, a number worth knowing, and what it means for your money or your business. From Devon Coombs, CPA, MBA. No spam, unsubscribe anytime.
Built by Devon Coombs, CPA, MBA, Assistant Teaching Professor of Finance at Santa Clara University.