CAC and LTV:CAC ratio calculator

CAC (Customer Acquisition Cost) measures how much it costs, on average, to acquire one new paying customer. The basic calculation is simple: acquisition spend over a period, divided by new customers acquired over that same period.

Worked example: you spend $8,000 on acquisition in a month and sign 20 new customers. Your CAC is 8,000 / 20 = $400. On its own, that number doesn't mean much — a $400 CAC is excellent for a $200/month customer, disastrous for a $15/month one.

That's why the LTV:CAC ratio is the metric that actually matters: it compares what a customer costs you to what they bring in over their lifetime. With an LTV of $1,200 and a CAC of $400, the ratio is 3 — generally considered a good balance in SaaS. Below 1, you're literally losing money on every customer acquired. Above 5, the signal flips: you're probably being too cautious with acquisition spend.

The CAC payback period answers a different question: how many months of revenue does it take to recoup what this customer cost to acquire? It's calculated by dividing CAC by monthly ARPU. With a $400 CAC and a $59/month ARPU, payback is 400 / 59 ≈ 6.8 months. A short payback period matters for cash flow: it frees up capital faster to reinvest in the next round of acquisition.

Two common mistakes. The first: only counting paid advertising in acquisition spend, forgetting sales time, prospecting tools, or content built specifically to convert — an incomplete CAC always looks better than it really is. The second: comparing a CAC calculated over a month to one calculated over a quarter without stating which — acquisition spend often takes time to convert into customers, which can skew an isolated monthly calculation in either direction.

When the metric stops meaning much: with a very small number of new customers, CAC becomes extremely sensitive to a single customer acquired through an unusual channel — better to observe it over several months before drawing conclusions about channel efficiency.