Sales Funnel LTV to CAC Ratio Calculator
Estimate customer lifetime value, customer acquisition cost, and the LTV to CAC ratio using your conversion, revenue, retention, and marketing inputs.
Overview
This calculator estimates your sales funnel LTV to CAC ratio using lead volume, conversion rate, monthly revenue per customer, gross margin, churn, and sales and marketing spend. It can help you quickly assess whether your customer acquisition costs are supported by expected customer value.
How it works
The calculator first estimates how many customers you acquire from your monthly lead volume and lead-to-customer conversion rate. It then estimates average customer lifetime from monthly churn using a simple reciprocal formula. Lifetime value is calculated from average monthly revenue multiplied by gross margin and expected customer lifetime. Customer acquisition cost is your monthly sales and marketing spend divided by estimated new customers. The LTV to CAC ratio compares those two figures to show how much value you generate for each unit of acquisition cost.
How to use this calculator
- 1Enter your typical monthly lead volume.
- 2Add the percentage of leads that become paying customers.
- 3Enter the average monthly revenue per customer.
- 4Input your gross margin percentage.
- 5Add your monthly churn rate and total monthly sales and marketing spend.
- 6Review your estimated LTV, CAC, customer lifetime, and LTV to CAC ratio.
Example Calculation
Monthly leads
1000
Lead-to-customer conversion rate
5%
Average monthly revenue per customer
$100
Gross margin
80%
Monthly churn rate
4%
Monthly sales and marketing spend
$5,000
LTV to CAC ratio
20.00 :1
With 1000 monthly leads and a 5% conversion rate, you acquire about 50 customers. At $100 monthly revenue, 80% gross margin, and 4% monthly churn, estimated LTV is about $2000. With $5000 in monthly acquisition spend, CAC is about $100, producing an LTV to CAC ratio of about 20.00:1.
Frequently asked questions
What does the LTV to CAC ratio show?
It shows how much estimated customer lifetime value you generate for each unit of customer acquisition cost. Higher ratios generally indicate stronger unit economics.
How is customer lifetime estimated here?
This calculator uses a simple estimate of customer lifetime equal to 1 divided by monthly churn rate. It is a common shortcut for recurring revenue businesses.
Why does the calculator ask for gross margin?
Gross margin helps estimate contribution-based lifetime value rather than using revenue alone. This usually gives a more realistic view of value created per customer.
What is a good LTV to CAC ratio?
Many businesses look for a ratio above 3:1, but what is considered healthy depends on your market, payback period, growth strategy, and operating model.
Can I use this calculator for one-time purchase businesses?
It is best suited to recurring revenue or repeat purchase models. For one-time purchase businesses, customer lifetime and repeat behavior may need a different approach.
Why might my ratio look misleading?
The result can be distorted if your sales cycle is long, revenue is delayed, churn changes quickly, or your monthly spend is not closely matched to the customers acquired in that period.
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Assumptions and warnings
Assumptions
- Customer lifetime is estimated as 1 divided by monthly churn rate.
- Lifetime value is based on gross profit contribution rather than top-line revenue alone.
- Sales and marketing spend is assumed to be tied to the new customers acquired in the same month.
- Results are estimates and work best when your inputs reflect a typical month.
- The model assumes average revenue, margin, churn, and conversion remain reasonably stable over time.
Warnings
- This calculator provides an estimate only and is not financial advice.
- Use caution when interpreting results if your sales cycle is long or acquisition costs and revenue are recognized in different periods.