LTV, CAC & Payback Calculator

How to use it

Enter what an account pays you monthly, your gross margin, how much revenue you lose and gain within the existing base each month, and what you spend to win new customers. The result is the cost of a customer, the gross profit one produces over their life, and how long before the second exceeds the first.

Where the number comes from

• CAC is total sales and marketing spend divided by new customers won in the same period.
• Gross profit per account is monthly revenue times gross margin. Lifetime value built on revenue rather than gross profit overstates by whatever your cost of delivery is.
• Net churn is churn minus expansion. Where it is positive, average lifetime is 1 divided by it — a 2% net monthly churn implies 50 months.
• Lifetime value is monthly gross profit divided by net churn, which is the sum of a decaying series rather than a simple multiplication.
• Payback is CAC divided by monthly gross profit — how many months of one customer’s contribution it takes to repay the cost of winning them.
• The table decays a cohort at the net churn rate and tracks cumulative gross profit against CAC, so the month it turns positive is the real payback point.

What goes wrong

The part most calculators leave out.

• The formula assumes churn is constant forever. It never is — churn is highest in the first months and falls as cohorts mature, so a single blended rate understates the value of customers who survive the first year and overstates the average.
• Where expansion exceeds churn, lifetime value is mathematically infinite. That is a limitation of the formula, not a fact about your business. Companies quoting enormous LTV figures are usually reporting this artefact.
• CAC is only honest if the spend figure is complete. Excluding sales salaries, commissions, or the founder’s time is the most common way the number gets flattered.
• Matching this month’s spend to this month’s customers assumes no sales cycle. With a three-month cycle, today’s customers came from spend three months ago, and in a growing company that understates CAC.
• The 3:1 benchmark is a convention from a particular era of software investing, not a rule. It says nothing about whether your specific business can fund its own growth — payback period usually answers that better.

Questions

Should LTV use revenue or gross profit?

Gross profit. Revenue-based LTV counts money that goes straight back out as hosting, support and payment fees. If your margin is 70%, a revenue-based figure overstates value by roughly 43%.

What is a good CAC payback period?

Twelve months or less is the commonly cited target for software, because it means acquisition roughly self-funds inside a year. Beyond about eighteen months, growth generally has to be financed from outside the business.

Why is my LTV showing as not bounded?

Your expansion revenue equals or exceeds your churn, so the average cohort grows instead of shrinking and the series never converges. It is a good position to be in, but the LTV formula stops producing a meaningful number — use payback period instead.

What is net revenue retention?

One hundred percent minus net churn, expressed monthly here. Above 100% means the existing customer base grows on its own, without a single new customer.

Does anything I type get sent anywhere?

No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.