LTV to CAC & Payback Period Calculator
Calculate LTV/CAC marketing efficiency ratios, Customer Lifetime Value pools, and ad budget payback timelines instantly.
orders/yr
Excellent
| Evaluation Parameter | Calculated Values |
|---|---|
| Customer Lifespan | 4.0 years |
| Gross Lifetime Value (LTV) | $960.00 |
| Net Lifetime Profit (LTV × Margin) | $672.00 |
| LTV to CAC Ratio | 5.6x |
| Months to Recover CAC (Payback) | 8.6 months |
What is LTV/CAC and Payback Period?
LTV to CAC ratio and CAC Payback Period are two fundamental unit economic indicators used by venture capitalists, financial officers, and startup founders to audit company marketing efficiency. LTV measures the net lifetime profit value of a customer, while CAC is the advertising cost spent to acquire them. Payback Period measures how many months of active client billing are needed to recover your CAC marketing costs.
Calculating LTV/CAC and Payback Period
To evaluate customer value cycles, audit using three core formulas:
1. Customer Lifespan
Lifespan (Years) = 1 / ( Annual Churn Rate % / 100 )
2. Net Lifetime Value (LTV)
Net LTV = Average Purchase Value × Yearly Purchase Frequency × Lifespan × Gross Margin %
3. CAC Payback Period (Months)
CAC Payback Months = ( Customer Acquisition Cost / Annual Net Profit per Customer ) × 12
Venture Capital Target Benchmarks
Software-as-a-Service (SaaS) startups and direct-to-consumer (DTC) brands seek to hit standard market efficiency targets:
- LTV to CAC Ratio > 3.0x: Indicates the customer pays back three times their acquisition cost over their lifespan, leaving cash to cover product development and staffing.
- Payback Period < 12 Months: Ensures the business recovers ad spend quickly, minimizing capital requirements and raising cash liquidity.