Cold Email ROI Calculator
Model a cheaper acquisition channel — see whether cold outbound lowers your blended CAC.
LTV:CAC Ratio Calculator
See whether your unit economics actually work — your CAC, lifetime value, LTV:CAC ratio, and payback period, with the benchmarks that matter.
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Editorial note: This tool is for informational and educational purposes only and is not financial advice. It uses a simplified LTV model (gross-margin revenue times average lifetime); more advanced models discount future cash flows and account for expansion revenue. Use it to sanity-check your economics, not as a precise valuation.
What the LTV:CAC ratio tells you
LTV:CAC is the single clearest test of whether a business can grow profitably. It compares the lifetime gross profit of a customer (LTV) to what you spent to acquire them (CAC). If a customer is worth far more than they cost to win, you have a machine worth feeding. If not, spending more on growth just loses money faster.
The headline number pairs with a second one that matters just as much: CAC payback period, the number of months it takes to earn back acquisition cost. A great ratio with a three-year payback still starves a business of cash.
The benchmarks
| LTV:CAC | What it means |
|---|---|
| Below 1:1 | Losing money on every customer — fix economics before scaling spend. |
| 1:1 – 3:1 | Profitable but thin. Growth is expensive; watch cash closely. |
| 3:1 – 5:1 | The healthy target zone for most SaaS and subscription businesses. |
| Above 5:1 | Excellent — but often a sign you're underinvesting and could grow faster. |
On payback: under 12 months is generally healthy, 12–18 is workable with capital, and beyond 18 months you're financing growth for a long time before it pays off.
How to improve the ratio
- Cut churn. Retention is the highest-leverage lever — a customer who stays twice as long is worth twice as much, at no extra acquisition cost.
- Raise LTV. Higher pricing, expansion revenue (upsells, seats), and better gross margin all lift the top of the ratio.
- Lower CAC. Shift spend toward cheaper channels. Outbound cold email, referrals, and content typically acquire customers for a fraction of paid-ad cost.
If paid channels are pushing your CAC up, a cheap outbound motion is often the fastest fix — model it with our Cold Email ROI Calculator, or weigh a dedicated hire with the SDR ROI Calculator.
Frequently asked questions
What is a good LTV:CAC ratio?
Around 3:1 is the classic benchmark. Below 1:1 loses money; above 5:1 is excellent but may mean you're underinvesting in growth.
How do you calculate LTV and CAC?
CAC = sales & marketing spend ÷ new customers. LTV = monthly revenue per customer × gross margin × average lifetime in months (1 ÷ monthly churn). Ratio = LTV ÷ CAC.
What is CAC payback period?
Months of gross profit needed to recover CAC: CAC ÷ (monthly revenue × gross margin). Under 12 months is healthy for most SaaS.
How can I improve it?
Lower churn, raise prices or expansion revenue, improve margin, and shift acquisition toward cheaper channels like outbound.
Methodology. CAC = spend ÷ new customers. Monthly gross profit per customer = ARPU × gross margin. Average customer lifetime (months) = 1 ÷ monthly churn rate. LTV = monthly gross profit × lifetime. Ratio = LTV ÷ CAC. CAC payback (months) = CAC ÷ monthly gross profit. This is a simplified, undiscounted model.