LTV:CAC Ratio & Payback Calculator
LTV:CAC measures whether you make money on each customer; CAC payback measures how long the cash is at risk. A healthy business needs both.
The two ratios
LTV:CAC is the eventual return on each customer dollar; payback is when that dollar comes home. The two metrics can disagree: a business with high lifetime value but slow monthly revenue may show a great LTV:CAC and a brutal payback. The slow payback consumes cash even when the unit economics are sound.
What ratios are healthy
Common rules of thumb for SaaS: LTV:CAC above 3× is acceptable, above 5× is strong, and above 10× usually indicates underinvestment in growth. CAC payback under 12 months is venture-grade for SMB, under 18 months for mid-market, and under 24 months for enterprise. These bands are heuristics — they vary by retention quality, gross margin, and capital availability.
How payback differs from break-even
CAC payback is per-customer break-even, not company break-even. A business can be paying back individual customers in nine months while losing money overall, if growth requires acquiring more customers each month than the existing base is paying back. This is why payback period and gross burn must be planned together.
Worked example
A B2B SaaS company has an LTV of $24,000, a blended CAC of $5,500, ARPU of $850/month, and 76% gross margin. LTV:CAC = 4.4× (healthy). Monthly gross profit per customer = $646. Payback = 5,500 / 646 = 8.5 months (excellent). They can confidently scale paid acquisition because both metrics are inside the safe band.
What these ratios don't account for
- LTV is forecast, not realized. Both the LTV and the ratio are only as accurate as the churn assumption inside LTV. A business with three months of data has no real LTV.
- Payback ignores capital structure. A 12-month payback is one thing if you're funded; another if you're bootstrapped without a credit line.
- Both are blended. Per-channel and per-segment ratios usually vary 3–10×. Use blended for company-level decisions, segmented for spend allocation.