Customer Lifetime Value Calculator
LTV, CAC Ratio, and Payback Simulator
Enter your revenue and cost data to find your gross-margin-adjusted LTV, the CAC that would produce a 3:1 ratio, and how your ratio compares against current 2026 SaaS reference points. Then use the simulator below to see the real, churn-adjusted payback month instead of a one-line formula.
What is Customer Lifetime Value (LTV)?
Customer Lifetime Value estimates the economic value a customer generates over their relationship with your business. This calculator reports a gross-margin-adjusted LTV, applying your gross margin to lifetime revenue so the figure is comparable to CAC on a like-for-like basis, rather than the raw lifetime revenue figure some simpler tools return.
Why it determines acquisition spend:
- If your gross-profit LTV is $1,530 and your CAC is $600, your ratio is 2.55:1, below the 3:1 floor commonly cited for sustainable growth.
- Knowing your LTV is the only way to tell a sales team what deals are worth closing and a marketing team which channels are worth funding.
This calculator uses your numbers directly – nothing is hardcoded. The benchmark ranges further down the page are commonly cited 2026 reference points, not fixed rules, and published sources disagree with each other by a wide margin on CAC payback specifically. Your own churn, margin, and CAC are what determine your actual result.
How to Use This Customer Lifetime Value Calculator
Enter revenue inputs
Average order value, purchase frequency, and lifespan – your actual numbers, not guesses.
Add gross margin
This converts lifetime revenue into gross-profit LTV – the number that should drive decisions.
Enter your CAC
Total acquisition spend divided by new customers in the same period – see your LTV:CAC ratio instantly.
Run the payback simulator
See the actual, churn-adjusted month your CAC gets repaid, not just a one-line estimate.
Gross-Profit LTV
The simple payback formula above, CAC divided by monthly gross profit, assumes every customer sticks around long enough to fully repay it. In reality, some customers churn before that point. This simulator applies your monthly churn rate to a starting cohort of customers and adds up their gross profit month by month, showing you the month payback actually crosses over, plus a 24-month chart.
Bars turn dark once cumulative gross profit per acquired customer passes your CAC. At this churn rate, if it held constant indefinitely, the steady-state gross-profit LTV per customer would be approximately $1,517 (monthly gross profit divided by monthly churn rate) – useful context, but the finite chart above is the more realistic near-term view.
What Each Calculator Field Means
Every field maps to a real line item in your business model. Enter your actual numbers, not guesses, and the results update in real time.
- Average Order Value: The revenue per transaction or billing period. For SaaS, use average revenue per customer or account per billing period. For e-commerce, use your average cart value.
- Purchases Per Year: A monthly subscriber buys 12 times. A quarterly contract buys 4. An annual plan buys 1. This number sets your revenue frequency.
- Customer Lifespan: The average number of years a customer stays before churning, as a simplified constant-churn estimate. If you track monthly churn, divide 1 by that rate to get lifespan in months, then divide by 12.
- Gross Profit Margin: Revenue minus direct production costs (COGS), expressed as a percentage. Use your actual figure from your financial records.
- CAC: Total sales and marketing spend in a period divided by the number of new customers acquired in the same window. Include ad spend, sales salaries, agency fees, and tools, and keep the definition consistent with whatever cohort and period you used for your LTV inputs.
LTV:CAC Benchmark Ranges
The LTV:CAC ratio is one of the most cited metrics for evaluating whether a business can grow efficiently, and Bessemer Venture Partners is one of the most widely referenced voices recommending a 3:1 floor for CLTV to CAC. Owner-operators and e-commerce businesses use the same ratio logic, even where the gross margin inputs differ materially.
Published CAC payback benchmarks disagree with each other substantially, sometimes by a factor of two or three, because there is no single industry-wide agreed CAC definition, cohort window, or company mix behind each figure. The table below reflects segment-level patterns that show up consistently across current 2026 sources; treat the numbers as reference points, not a verdict on your specific business.
| Segment | Typical LTV:CAC | Typical CAC Payback |
|---|---|---|
| SMB SaaS (under $15K ACV) | ~2.5:1 | 8-12 months |
| Mid-market ($15K-$100K ACV) | ~3:1-4:1 | 14-18 months |
| Enterprise SaaS (above $100K ACV) | ~4.5:1 | 18-24 months |
| All B2B SaaS median (2026) | ~3.2:1 | ~16 months |
Within that median, the spread matters more than the single number: the 2026 Aleph x Benchmarkit report puts top-quartile B2B SaaS companies at 6 months or less and bottom-quartile companies at 24 months or more for CAC payback specifically. A ratio above 6:1 is not automatically better than 4:1; it can also signal a company holding back growth spend it could profitably deploy.
How to Improve Your LTV
When acquisition costs are fixed, improving your LTV is the main lever that widens the ratio.
Harvard Business Review cites research attributed to Frederick Reichheld of Bain and Company suggesting that a 5% improvement in customer retention can increase profits by 25% to 95%, depending on industry. Two areas produce the fastest return.
Retention and Churn Reduction
Churn is one of the dominant variables in the LTV formula. A customer lifespan of two years versus three years changes LTV by 50%, with no change in price or margin.
Structured onboarding sequences, in-app health scoring, and proactive check-in cadences directly extend average lifespan. Shopify’s customer lifetime value guide uses the same base formula, average order value times purchase frequency times lifespan, and notes that more advanced versions of the formula can incorporate profit margin or a discount rate.
Pricing and AOV Optimization
A higher Average Order Value on the initial purchase improves LTV immediately without touching retention rates. Seat-based pricing tiers, usage-based add-ons, and professional services packages are the main SaaS levers.
For e-commerce, post-purchase upsells and subscription bundles move the same number. If your churn is stable and your CAC is fixed, increasing your monthly fee is one of the highest-leverage LTV moves available.
LTV vs. ARPU, What the Difference Means
ARPU (Average Revenue Per User) is a short-term cash-flow metric, useful for MRR forecasting and pricing analysis. LTV, as calculated here, is a longer-term profitability metric, the number that helps set how much you can spend acquiring a customer before you are destroying margin.
A subscription business with $50/mo ARPU, 85% gross margin, and a three-year average lifespan has a gross-profit LTV of $1,530, not $50 and not $600. Using ARPU as a proxy for acquisition budget decisions leads to under-investment in channels that would have been profitable at the full lifetime view.