Method
How to calculate estimated ltv:cac ratio
This simplified model uses the inverse of monthly churn as expected lifetime. Cohort retention or contracted revenue may require a different model.
FORMULAEstimated LTV = ARPU × gross margin ÷ churn; ratio = LTV ÷ CAC
Worked example
LTV to CAC ratio calculator example
$120 monthly revenue, 75% gross margin and 3% churn imply $3,000 estimated LTV before comparing it with CAC.
Change one assumption at a time to see what drives the result. The output is an estimate, not a quote, forecast or recommendation.
FAQ
LTV to CAC ratio calculator FAQ
Why does small churn change LTV so much?
The simplified lifetime estimate is inversely related to churn, so small churn changes compound into large lifetime differences.
Should LTV use revenue or gross profit?
Gross-profit LTV is more informative for acquisition economics because fulfilment cost is removed.
Is this suitable for annual contracts?
It can be directional, but renewal cohorts and contract timing provide a stronger model.