What LTV/CAC is and how to calculate it

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Lifetime value (LTV) is the total gross margin a customer generates while staying with you. To calculate, multiply the monthly revenue per customer by the gross margin and divide by the monthly churn. Then divide the LTV by the CAC to see how many times each customer pays for what it cost to earn.

Customer Acquisition Cost (CAC)

1,500 means 1500. For 1.50, type 1.5.

Monthly revenue per customer (average monthly ticket)

If you charge a monthly fee, use the average amount paid per month. 1,500 is worth 1,500. For 1.50, type 1.5 or 1.5.

Margin bruta

Monthly customer churn

Monthly churn is the percentage of customers who cancel per month. If 5 out of every 100 customers leave in a month, the churn is 5%.

Resultado

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Formula

LTV = monthly revenue per customer × gross margin ÷ monthly churn

LTV/CAC = LTV ÷ CAC

This is the simple LTV model, which considers constant churn and does not include revenue expansion or discounting money over time.It serves as a first reading.

Example

CAC of $600, monthly revenue per customer of $200, gross margin of 60% and monthly churn of 5%.

Monthly margin per customer: $200 × 0.60 = $120.

Average customer time: 1 ÷ 0.05 = 20 months.

LTV: $120 ÷ 0.05 = $2,400.

LTV/CAC: $2,400 ÷ $600 = 4.0x.

Glossary

CAC: how much you spend, on average, on marketing and sales to acquire a new customer.

LTV: the total gross margin a customer generates over the entire time they buy from you.

Margin bruta: the portion of revenue that remains after the direct costs of delivering the product or service.

Churn: the percentage of customers who cancel in a period. Here, per month.

CAC payback: the number of months until a customer's margin covers the CAC.

Frequently asked questions

What is LTV?

It is the total gross margin a customer generates while staying with you.It is also called lifetime value or customer lifetime value.

How to calculate LTV?

Multiply monthly revenue per customer by gross margin and divide by monthly churn. For example, revenue of $200, margin of 60% and churn of 5% give an LTV of $2,400.

What is the LTV/CAC ratio?

It is the LTV divided by the CAC.It shows how many times a customer's margin pays what you spent to win them over.With LTV of $2,400 and CAC of $600, the ratio is 4.0x.

What is a good LTV/CAC ratio?

A frequently cited benchmark in the SaaS market is 3x or more. It is not a rule: what makes sense for you depends on your cash, your business model and the time it takes to recover CAC.

What if my churn is zero?

With zero churn, the account would give an infinite LTV, which does not happen in practice. Use your actual churn, however small, or a conservative estimate based on the past few months.

Are my data saved anywhere?

I don't save the values you type. The calculation happens in your browser. If you click "Copy link", the values are in the URL of that link, so share only if you want the other person to see the same numbers.

Want to know where your growth stalls?

The LTV/CAC is a number. The Growth Maturity Diagnostic shows what is behind it: acquisition, retention, data and process. It's free and only takes a few minutes.

Make the diagnosis

If the diagnosis points the way, Growth Blueprint I work with you in 4 weekly meetings to turn this into an experimental plan.