See whether your unit economics work. Compare what a customer is worth against what you spend to win them — using margin, not just revenue.
Average revenue per user per month.
Share of revenue left after cost of service.
Percentage of customers lost each month.
Fully-loaded cost to acquire one customer.
How churn moves your ratio, holding ARPU, margin, and CAC fixed at your inputs.
| Monthly Churn | Avg Lifetime | Customer LTV | LTV:CAC | Status |
|---|
CAC exceeds LTV
thin margins
the target zone
room to scale spend
LTV:CAC compares the lifetime value of a customer against the cost to acquire them. It's the headline measure of whether your growth engine makes money. A 3:1 ratio means each customer returns three times their acquisition cost.
The honest version uses gross margin, not raw revenue. Serving a customer costs something — hosting, support, payment fees. By baking margin into LTV, the ratio reflects the money you actually keep, not the money that flows through.
LTV = (ARPU × Margin%) / Churn% LTV:CAC = LTV / CAC Payback = CAC / (ARPU × Margin%) Example: $100 ARPU, 80% margin, 3% churn, $900 CAC:
3:1 is the standard benchmark. One-third covers acquisition, the rest funds the business and leaves profit. Below it, margins are thin. Below 1:1, you lose money on every customer you sign.
Above 5:1 looks great but often means you're under-spending on growth. If customers return 5x and you're not acquiring more, a more aggressive competitor can take the market while you sit on healthy economics.
3:1 is the widely used target. It means each customer is worth three times what you spend to acquire them, leaving room for overhead, R&D, and profit. Below 3:1 is tight. Below 1:1 you lose money on every customer. Above 5:1 you're profitable but may be leaving growth on the table by under-spending.
Yes. Revenue-based LTV overstates a customer's true value because serving them has a cost. This calculator multiplies ARPU by your gross margin before dividing by churn, so the LTV reflects the margin you actually keep. A 3:1 margin-based ratio is far healthier than a 3:1 revenue-based one.
LTV is inversely proportional to churn. At 2% monthly churn the average customer lasts 50 months; at 5% they last 20 months. Halving churn roughly doubles LTV with no change to price or cost. It's usually the highest-leverage input in the whole calculation.
LTV:CAC measures total return per customer over their lifetime. CAC payback measures how fast you recover the acquisition cost in months. You can have a strong 4:1 ratio with a slow 18-month payback if customers stay for years. Use the CAC Payback Calculator alongside this for the full cash-flow picture.
A ratio above 5:1 often means you're under-investing in growth. If every customer returns 5x and you're not spending more to acquire them, a competitor with more aggressive economics may take the market. High ratios can signal caution where there's room to scale acquisition.
Three levers. Raise LTV by reducing churn or increasing ARPU and margin. Lower CAC through better targeting and conversion. Or shift spend toward channels with stronger payback. Reducing churn usually moves the ratio the most because it compounds across the customer's lifetime.
Stop pulling ARPU, churn, and CAC into a spreadsheet. Mowt connects to Stripe and tracks your LTV:CAC and payback in real time.
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