CAC & LTV Calculator
CAC (customer acquisition cost) is what you spend to win one customer; LTV (lifetime value) is the gross profit that customer generates over their lifetime. The LTV:CAC ratio compares the two and is the core measure of whether growth is sustainable. A widely used benchmark is a 3:1 ratio, with CAC ideally recovered within twelve months.
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Healthy — a 3:1 LTV:CAC and under-12-month payback are common health benchmarks.
Lower CAC with GigdeSimplified model. LTV can also be estimated as ARPA × margin ÷ churn rate.
The formula
CAC = (Sales + Marketing spend) ÷ New customers. LTV = ARPA × Gross margin × Average lifespan. LTV:CAC = LTV ÷ CAC. CAC payback (months) = CAC ÷ (ARPA × Gross margin).
CAC and LTV together tell you whether your growth engine builds value or burns cash. CAC is total sales and marketing cost divided by the new customers it produced. LTV is the average revenue per account multiplied by your gross margin and the average number of months a customer stays. Dividing LTV by CAC gives the ratio that investors and operators watch most closely, because it shows how many dollars of lifetime profit each acquisition dollar returns.
A 3:1 LTV:CAC ratio is the common health benchmark — below 1:1 you lose money on every customer, while a very high ratio (say 5:1+) can signal you are under-investing in growth and could spend more to grow faster. CAC payback period, the months it takes to earn back acquisition cost, matters just as much for cash flow, with under twelve months considered healthy for most subscription businesses. Gigde optimizes programs for payback and LTV:CAC, not just lead volume.
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CAC & LTV Calculator FAQs
How do you calculate CAC and LTV?
CAC is your total sales and marketing spend divided by the number of new customers it acquired in the same period. LTV is your average revenue per account multiplied by gross margin and by the average customer lifespan in months. This calculator computes both, plus the LTV:CAC ratio and CAC payback period.
What is a good LTV:CAC ratio?
A 3:1 LTV:CAC ratio is the widely cited benchmark for a healthy business — you earn three dollars of lifetime gross profit for every dollar spent acquiring a customer. Below 1:1 is unprofitable; far above 3:1 can mean you are under-spending on growth and leaving expansion on the table.
What is CAC payback period?
CAC payback period is the number of months it takes to recover the cost of acquiring a customer from the gross profit they generate. It is CAC divided by monthly revenue per account times gross margin. Under twelve months is generally considered healthy, especially for subscription and SaaS businesses.
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