LTV:CAC Ratio + Payback Calculator 2026
Calculate your Customer Lifetime Value to Customer Acquisition Cost ratio (LTV:CAC) and payback period — the two most important unit economics metrics for SaaS and subscription businesses. A healthy LTV:CAC of 3× or above with payback under 18 months is the benchmark for growth-stage funding.
Key Inputs
- Average Revenue Per User per month (ARPU) (£)
- Gross margin %
- Monthly churn rate % (for LTV calculation)
- Customer Acquisition Cost (CAC) (£)
What You'll Get
- Customer Lifetime Value (LTV) = ARPU × Gross Margin % ÷ Monthly Churn Rate
- LTV:CAC ratio
- CAC payback period in months = CAC ÷ (ARPU × Gross Margin %)
- Benchmark rating against SaaS standards
Important Notes & UK Benchmarks
LTV = (ARPU × Gross Margin %) ÷ Monthly Churn Rate. CAC Payback = CAC ÷ (ARPU × Gross Margin %). Target benchmarks: LTV:CAC ≥ 3× (acceptable), ≥ 5× (good), ≥ 8× (excellent). CAC payback: < 12 months (excellent), 12–18 months (good), 18–24 months (acceptable for enterprise). Above 3 years payback is typically unsustainable without low churn and external capital. LTV calculations assume constant churn — cohort-based LTV analysis is more accurate for real-world modelling.
Frequently Asked Questions
What is a healthy LTV:CAC ratio?
A ratio of 3× or above is the standard benchmark. Below 1× means you lose money on each customer — unsustainable. 1–3× means marginal unit economics that constrain growth. 3–5× is solid for growth-stage companies. Above 5× suggests you may be underspending on customer acquisition relative to the opportunity. For SaaS fundraising in 2025, investors typically want to see LTV:CAC of 3–5× with a payback period under 18–24 months.
How is customer LTV calculated?
LTV = (Average Revenue Per User per month × Gross Margin %) ÷ Monthly Churn Rate. This is the simplified perpetuity formula, which assumes constant churn and ARPU. More sophisticated models use cohort-level data and discount future cash flows using a discount rate (WACC). The simple formula is sufficient for benchmarking and early-stage planning. Example: ARPU £100, gross margin 70%, monthly churn 2% → LTV = £100 × 0.70 ÷ 0.02 = £3,500.
What is the difference between LTV:CAC ratio and CAC payback period?
LTV:CAC is a total return multiple over the customer's lifetime — it tells you the ultimate profitability of customer acquisition. CAC payback period is a cash flow metric — it tells you how long until you recover the acquisition investment. A company can have a great LTV:CAC ratio but poor cash flow if the payback is 3+ years. Both metrics matter: LTV:CAC for long-term profitability and fundraising narratives; CAC payback for short-term cash management and capital efficiency.
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