Free STAOS Tool
LTV & LTV:CAC Ratio Calculator
Customer lifetime value is what justifies what you can spend to win a customer. Get LTV, the LTV:CAC ratio vs the 3:1 rule, and your CAC payback in months — fast, no signup.
Estimate, not a quote. For planning only.
The benchmarks behind this
| Healthy LTV : CAC | ≥ 3 : 1 |
| "You're under-investing in growth" | > 5 : 1 |
| SaaS healthy CAC payback | < 12 months |
| LTV formula | ARPU × margin × lifespan |
Sources: David Skok / Bessemer SaaS Index; OpenView. See STAOS benchmarks dataset.
LTV:CAC under 3:1 isn't always an "acquisition problem" — it's often a retention + expansion gap. Better discovery, qualification, and onboarding move LTV more than another ad test.
Built by STAOS — sales coaching & fractional sales management for agencies.
01 How it works
Two modes, because most people do not know their lifespan.
Lifetime value is what licenses your acquisition spend. Get the ratio right and you know what you can afford to pay for a customer; get it wrong and you either starve growth or fund it into a hole.
Average monthly revenue per customer — your retainer or subscription — and gross margin as the percentage of revenue left after the cost of delivery. Margin matters more than people expect: a $10K retainer at 30% margin is a different business from the same retainer at 65%.
If you know your average customer lifespan in months, use it. If you only know monthly churn, switch modes and the tool derives lifespan as one divided by churn. Most agencies have never calculated either, and the churn route is usually the easier one to get honestly.
You get lifetime gross profit, the LTV:CAC ratio and CAC payback in months. Three to one is the rule of thumb, but read the payback number next to it — a healthy ratio with a long payback is still a cash-flow problem.
02 Questions
Using the ratio without fooling yourself.
Three to one or better is the standard target — you make three dollars of lifetime gross profit for every dollar spent acquiring the customer. Below that and acquisition is eating the business. Above five to one, the usual reading is that you are under-investing in growth: you could afford to spend more to win customers and you are leaving the market to someone else.
Gross profit. Revenue-based LTV is the single most common way this ratio gets inflated, and for a services business it is badly misleading, because the cost of delivering a retainer is substantial and ongoing. This tool multiplies by your margin for exactly that reason.
Use churn. Take the customers you lost over the last twelve months, divide by the average number of customers you had, and divide that by twelve for a monthly rate. One divided by that is your lifespan in months. It is rough, but it is directionally right, and it is a far better input than the number you would otherwise guess.
Usually not. A weak ratio is more often a retention and expansion gap than a cost-per-lead problem, and it is easier to fix at that end. Extending average lifespan from ten months to sixteen does more for the ratio than shaving twenty percent off CAC, and it comes from better qualification, cleaner onboarding and a first ninety days that delivers what the sale promised.
Payback is how many months of gross profit it takes to earn back the acquisition cost. Under twelve months is healthy; under six is best in class. It matters because the ratio ignores time — you can have an excellent LTV:CAC and still run out of cash waiting for it, especially if you pay commission up front on a contract that pays monthly.
Yes, and agency retainers behave much like subscriptions for this purpose. The differences worth watching: your gross margin is lower and more variable than software, and your churn tends to cluster around contract anniversaries rather than spreading evenly. Run the numbers quarterly rather than monthly and the trend is more readable.
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