Do your unit economics actually work?
Enter five numbers and see your customer acquisition cost, lifetime value, LTV:CAC ratio, and payback period in months. Plus a plain-English read on whether you can scale paid acquisition without bleeding money.
Fill the fields to see your unit economics.
What each metric actually means.
Unit economics tell you whether your business can grow profitably. Four ratios matter: how much each customer costs to acquire, how much they pay back, the multiple between the two, and how fast you recoup the cost. Here are the formulas and the benchmarks.
CAC Cost
= monthly acquisition spend ÷ new customers
Customer Acquisition Cost. The total amount you spend to acquire one new paying customer. Includes paid ads, marketing salaries, agency fees, content production, sales commissions, and tools that touch the funnel. Fully-loaded CAC is the number that matters for strategy.
LTV Value
= ARPU × gross margin × avg lifetime
Lifetime Value. Total gross profit you expect from one customer over their entire relationship. ARPU is average revenue per user per month. Average lifetime is the inverse of monthly churn rate (5% churn = 20-month lifetime). Capped at 60 months in this tool.
LTV : CAC Ratio
Aim for 3:1 or higher
The multiple between value and cost. Under 1:1 you lose money on every customer. 1:1 to 3:1 you survive but cannot scale. 3:1 to 5:1 is healthy and you have room to scale paid acquisition. Above 5:1 usually means you are underspending on growth.
Payback period Cash flow
= CAC ÷ (ARPU × gross margin)
How many months until a customer's gross profit pays back the CAC. Under 6 months is excellent. 6-12 is healthy. 12-24 is stretched. Over 24 is unsustainable for most businesses; customers churn out before you recoup the cost.
Average customer lifetime Derived
= 1 ÷ monthly churn rate
How long the average customer stays before canceling. 2% monthly churn = 50 months. 5% = 20 months. 10% = 10 months. Lower churn dramatically extends LTV. Cutting churn from 6% to 3% doubles your LTV without spending another dollar on acquisition.
Gross margin Input
= (revenue − cost of goods) ÷ revenue
The percent of revenue you keep after paying the direct cost of delivering. Software typically runs 70-90%. Online courses 80-95%. Physical products 30-60%. Margin is the multiplier that turns subscription revenue into LTV; a 70% margin product needs 30% more customers than a 90% margin one to hit the same LTV.
Industry benchmarks worth knowing
Sources: David Skok / forEntrepreneurs SaaS metrics framework, Recurly Subscription Benchmark Report 2024, OpenView SaaS Benchmarks 2024.
Honest answers.
CAC (Customer Acquisition Cost) is the total amount you spend to acquire one new paying customer. Formula: total acquisition spend in a period divided by new paying customers acquired in that period. Acquisition spend includes paid ads, marketing salaries, agency fees, sales commissions, and any tool that touches the funnel. The shorter the period, the more sensitive CAC is to single campaigns; most teams measure it monthly or quarterly.
LTV (Lifetime Value) is the total gross profit you expect from one customer over their entire relationship with you. Standard formula: average monthly revenue per customer multiplied by gross margin (as a decimal) multiplied by average customer lifetime in months. Average lifetime is the inverse of monthly churn rate. If 5 percent of customers churn each month, the average lifetime is 1 divided by 0.05, or 20 months.
Three to one is the widely accepted benchmark for healthy SaaS and online businesses. Below one to one means you lose money on every customer. One to three is thin; you can survive but you cannot scale paid acquisition. Three to five is healthy; you have margin to scale. Above five usually means you are underspending on growth; you could afford to acquire more customers per month even if it raises CAC.
Twelve months or less for most online businesses. Under six months is excellent. Six to twelve months is healthy for SaaS and subscription products. Twelve to twenty-four months is stretched; you need very low churn for it to work. Over twenty-four months is unsustainable for most businesses because customers churn out before you recoup the acquisition cost. The faster the payback, the less working capital you need to grow.
The 3:1 rule was popularized by David Skok (Matrix Partners) in 2010 based on hundreds of B2B SaaS company analyses. It survives because it accounts for the gap between LTV (a forecast) and CAC (a known cost): you need a 3x cushion to absorb the inevitable forecast error, the cost of capital, and the fact that some customers churn faster than expected. For very predictable subscription businesses with low churn, 2.5:1 can be fine. For volatile markets, aim for 4:1 or higher.
Yes. Fully-loaded CAC includes paid ads, marketing team salaries, agency retainers, content production, tools (analytics, CRM, email), and any sales commissions tied to closing new customers. Most teams quote two numbers internally: 'paid CAC' (just ad spend) for media optimization, and 'fully-loaded CAC' for board reports and strategic planning. The fully-loaded number is what matters for LTV:CAC because LTV is also fully-loaded.
With near-zero churn, the LTV formula returns a huge or infinite number, which is misleading. This tool caps the calculated lifetime at 60 months (five years) to keep LTV grounded in reality. Customer behavior beyond five years is too uncertain to plan around, regardless of how sticky your product feels today. Use the 5-year-capped LTV for planning; revisit annually as you get real long-term retention data.
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