Updated · Built and checked by the PlinzoTools team, formulas tested against published sources
Calculate the LTV to CAC ratio and see whether it's in the commonly cited healthy range.
4.00 : 1
Healthy (commonly cited 3:1-5:1 range)
The LTV:CAC ratio compares what a customer is worth (LTV) against what it costs to acquire them (CAC) -- one of the most-watched health metrics for subscription and SaaS businesses.
Enter your LTV and CAC (see the LTV Calculator and CAC Calculator if you need to compute them first). The ratio and a health assessment appear instantly.
LTV : CAC Ratio = LTV / CAC
A ratio below 1:1 means you're losing money on every customer. 3:1 to 5:1 is a commonly cited healthy range. Much higher can suggest under-investment in growth.
Take hypothetical figures: a customer lifetime value of 400 and a customer acquisition cost of 100. Dividing 400 by 100 gives a ratio of 4, which the tool displays as 4.00 : 1, together with a short health assessment. Those are the defaults preloaded in the calculator. If your acquisition cost rose to 200 with the same LTV, the ratio would fall to 2.00 : 1, and every new customer would return only twice what you spent to win them, before any operating costs.
400 / 100 = 4.00, shown as 4.00 : 1
The biggest accuracy question is what went into your LTV. The simple LTV formula multiplies purchase value, frequency, and lifespan, which is a revenue figure. CAC, however, is an actual cash cost. Comparing revenue against cash cost overstates how healthy the business is. Many finance teams instead use gross-margin-adjusted LTV, meaning revenue multiplied by gross margin percentage, so the ratio compares profit against cost. Neither approach is wrong, but you should know which one you used, and you should not compare your ratio against someone else's benchmark unless you both define LTV the same way.
The health message on the page relies on the commonly cited guidance that a ratio below 1:1 means losing money on each customer and 3:1 to 5:1 is often considered healthy. Treat these as conversation starters rather than verdicts. A high-growth company funded by investors may knowingly run a lower ratio to capture a market. A bootstrapped business with limited cash may need a higher ratio because it cannot wait for long payback periods. A ratio that looks excellent but comes with a very long lifespan assumption may also hide a cash problem, since you spend money today and recover it slowly.
The ratio says nothing about how quickly you earn back the acquisition cost. Two businesses can both sit at 4:1, but if one recovers its cost in three months and the other in three years, their cash needs are very different. After you calculate the ratio, look at how long it takes for a typical customer's gross profit to cover CAC. If that period is longer than your runway can support, a good-looking ratio can still lead to a cash crunch.
Recalculate whenever your inputs change materially, since both LTV and CAC drift as channels saturate and customer behavior shifts.
No -- it's a widely cited rule of thumb, not a universal standard. The right ratio varies by industry, growth stage, and capital strategy.
A commonly cited benchmark is 3:1 or higher. Below 1 means you spend more to acquire a customer than they are worth; the tool labels 1 to 3 as below the benchmark, 3 to 5 as healthy, and above 5 as possibly under-investing in growth.
Customer lifetime value divided by customer acquisition cost. An LTV of 900 and a CAC of 300 is a ratio of 3.0.
The 3:1 benchmark is normally quoted on a gross-margin basis. If you enter a revenue-based LTV, the ratio will look better than a profit-based one would.
A zero acquisition cost would make the ratio infinite and meaningless, so the tool asks for a CAC greater than zero.
Reference: Google Search Central