SaaS unit economics

LTV to CAC calculator

A useful LTV:CAC model derives lifetime value from gross profit and churn, then reads the ratio beside CAC payback instead of treating one benchmark as a verdict.

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Assumptions

template: ltv_cac

average_revenue_per_customer_monthly = 320 in usd
gross_margin = 82%
monthly_churn_rate = 3%
customer_acquisition_cost = 900 in usd

Inputs

What the model needs

Monthly revenue per customer: Average recurring revenue for the modeled segment.
Gross margin: Revenue remaining after the direct cost of delivering the service.
Monthly churn: The share of customers lost in a typical month.
CAC: Fully loaded acquisition cost for the same customer segment.

Method

Formulas stay visible

monthly_gross_profit = monthly_revenue × gross_marginestimated_lifetime_months = 1 / monthly_churnltv = monthly_gross_profit / monthly_churnltv_cac_ratio = ltv / cacpayback_months = cac / monthly_gross_profit

The inputs and source use the same model. Open it in Continuum for a document you can keep and revisit.

Worked example

A subscription customer segment

$320 monthly revenue
82% gross margin
3% monthly churn
$900 CAC

ResultModeled LTV is about $8,747, the LTV:CAC ratio is about 9.7×, and payback is about 3.4 months.

The result looks strong, but its credibility depends on whether churn, margin, and CAC are measured consistently for the same cohort.

Stress-test it

Increase churn before changing revenue.
Use fully loaded acquisition cost, including people and tooling when appropriate.
Model materially different customer segments separately.

Use it when

Checking SaaS acquisition efficiency
Comparing customer segments or channels
Understanding whether payback creates a cash constraint

Know the boundary

The simple inverse-churn lifetime is an approximation.
Expansion revenue, discounting, cohort maturity, and retention shape may require a richer model.
A high ratio can coexist with weak growth or unreliable data.

Questions

What is a good LTV:CAC ratio?

Benchmarks vary by market, maturity, growth strategy, and measurement method. Read the ratio beside payback, retention quality, and cash availability.

Should LTV use revenue or gross profit?

Gross-profit LTV is usually more informative because it accounts for the direct cost of serving the customer.

Why calculate CAC payback too?

The ratio describes estimated value relative to cost; payback describes how long cash remains tied up before gross profit recovers acquisition spend.

Keep the reasoning

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The full template opens as a local Continuum document. Edit every assumption, explore the result breakdown, and keep the source.

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LTV to CAC calculator

What the model needs

Formulas stay visible

Stress-test it

Use it when

Know the boundary

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