SaaS Churn, LTV & CAC Runway Calculator
Calculate customer lifetime value, LTV:CAC ratio, and payback period from your churn rate, ARPA, and acquisition cost inputs.
SaaS Business Health Metrics
Check whether your SaaS unit economics are sustainable
You are pitching investors next month and they will ask for your LTV:CAC ratio. Right now you are not sure what the number is. This calculator takes four inputs β average revenue per user, monthly churn rate, gross margin, and customer acquisition cost β and outputs the four metrics investors screen for: LTV, LTV:CAC ratio, CAC payback period, and annualised churn.
Step 1: Enter your average revenue per user (ARPU)
ARPU is the average monthly revenue you earn from one customer. If you charge $49 per month for your base plan and $99 for your pro plan, and 60% of customers are on the base plan, your blended ARPU is about $61. Enter the number your billing system reports β the calculator uses this to compute how much gross profit each customer generates.
Step 2: Set your monthly churn rate
Monthly churn is the percentage of customers who cancel each month. For SMB-focused SaaS, 3% to 5% is typical. Enterprise SaaS with annual contracts usually sees under 1%. If you only know your annual churn rate, divide by 12 to get an approximate monthly figure. Churn is the single most sensitive input β cutting churn from 5% to 3% can increase your LTV by 67%.
Step 3: Enter your gross margin
Gross margin is the percentage of revenue left after direct costs β hosting, payment processing, support, and infrastructure. Pure software companies typically run at 75% to 85% gross margin. If your margin is 80%, that means 80 cents of every dollar in revenue contributes to covering acquisition costs and generating profit. The calculator multiplies ARPU by this margin to get the gross profit per customer.
Step 4: Set your customer acquisition cost (CAC)
CAC is the total cost of acquiring one new customer β salaries, ad spend, tools, events, and agency fees divided by new customers acquired in the period. A startup spending $30,000 per month on sales and marketing to acquire 100 customers has a CAC of $300. If your CAC exceeds your LTV, you are losing money on every new customer and the business model does not work at scale.
Step 5: Read the results
The calculator shows four metrics: LTV (customer lifetime value), LTV:CAC ratio, CAC payback period in months, and annualised churn. The health bar visualises your LTV:CAC ratio β green at 3x or above, amber between 1x and 3x, red below 1x. Investors typically screen for LTV:CAC above 3x and payback under 12 months. If your numbers are below these benchmarks, adjust any input to see which lever β reducing churn, increasing margin, or lowering CAC β moves the needle the most.
How SaaS unit economics are calculated
The four metrics are interconnected: churn rate feeds directly into LTV, LTV feeds into the ratio, and the ratio determines whether your acquisition spend is sustainable. Understanding each formula helps you identify exactly which lever to pull.
Customer lifetime value (LTV)
LTV equals (ARPU multiplied by gross margin percentage) divided by monthly churn rate. This represents the average total gross profit you earn from a single customer over their entire lifetime. A SaaS company charging $60 per month with 80% gross margin and 4% monthly churn has an LTV of $1,200. This means each customer is worth $1,200 in gross profit before accounting for acquisition costs. If you raise ARPU from $60 to $70 without changing churn, LTV jumps to $1,400 β a $200 increase from a $10 monthly price change.
LTV:CAC ratio
The ratio is LTV divided by CAC. A company with $1,200 LTV and $400 CAC has a 3:1 ratio β the industry benchmark. Below 1:1 means you are spending more to acquire customers than they are worth, which burns cash. Above 5:1 may indicate you are under-investing in growth and could afford to spend more aggressively on acquisition. The ratio ties revenue, churn, margin, and acquisition cost into a single number that tells you whether the growth engine is sustainable.
CAC payback period
Payback equals CAC divided by (ARPU multiplied by gross margin percentage). This tells you how many months it takes to recover the cost of acquiring one customer. At $400 CAC, $60 ARPU, and 80% margin, payback is about 8 months. Best-in-class SaaS targets under 12 months. Longer payback means more cash tied up in growth, which increases funding requirements and reduces runway.
Annualised churn rate
The calculator converts monthly churn to annual using the formula 1 minus (1 minus monthly churn) raised to the 12th power. At 4% monthly churn, annual churn is about 39% β meaning you lose roughly 4 in 10 customers each year. This is why small monthly churn improvements have massive annual impact. Reducing monthly churn from 4% to 2% cuts annual churn from 39% to 21%, nearly doubling your customer retention.
Three levers to improve unit economics
There are only three ways to improve SaaS unit economics: increase revenue per customer (raise prices, upsell, cross-sell), reduce churn (better onboarding, product improvements, win-back campaigns), or lower acquisition cost (organic channels, referrals, product-led growth). The calculator lets you model the impact of each lever instantly. A $10 ARPU increase often has a larger impact on LTV than a 1% churn reduction, because revenue improvements compound across the entire customer lifetime.
Frequently Asked Questions
What is a good LTV:CAC ratio for SaaS?
A ratio of 3:1 or higher is generally considered healthy. Below 1:1 means you are spending more to acquire customers than they are worth, which is unsustainable without significant funding. Above 5:1 may indicate under-investment in growth and an opportunity to spend more aggressively on acquisition.
What is a good monthly churn rate?
For SMB-focused SaaS, monthly churn of 2 to 5 percent is typical. Enterprise SaaS with longer contracts often sees under 1 percent monthly churn. World-class SaaS products achieve negative net revenue churn, meaning expansion revenue from existing customers outpaces losses from churned ones.
How do I reduce CAC?
Improve conversion rates through better onboarding and free trials, invest in content marketing and SEO for lower-cost channels, build a referral programme, and optimise your sales funnel. Product-led growth models often achieve the lowest CAC by letting the product itself drive acquisition.
What should I include in CAC?
CAC should include all sales and marketing expenses: salaries, ad spend, tooling, events, and agency fees. Divide the total period cost by the number of new customers acquired in that period. Many companies calculate both blended CAC across all channels and paid CAC for paid channels separately.
How does gross margin affect LTV?
LTV is directly proportional to gross margin. A SaaS company with 80 percent gross margin will have an LTV roughly double that of one with 40 percent margin at the same churn rate. Improving margin through infrastructure optimisation or pricing adjustments therefore has a linear impact on customer lifetime value.
Should I use monthly or annual churn in the formula?
This calculator takes monthly churn as input because most SaaS businesses track churn on a monthly basis. The formula then annualises it automatically. If you only have annual churn figures, divide by 12 to get an approximate monthly rate, though this is a simplification that assumes even distribution across months.
What is the difference between logo churn and revenue churn?
Logo churn counts the number of customers who cancel. Revenue churn counts the dollar value of recurring revenue lost. A customer on a $49 plan cancelling has the same logo churn impact as a $499 customer cancelling, but the revenue impact is 10 times larger. For unit economics, revenue churn gives a more accurate picture of financial impact.
How do I calculate CAC for a bootstrapped startup with no ad spend?
Even bootstrapped startups have acquisition costs. Include the time founders spend on sales, content creation, community building, and support that drives word-of-mouth. Estimate the hourly cost of that time and divide by the number of customers acquired. Many bootstrapped SaaS companies have very low CAC because organic channels β SEO, referrals, product-led growth β are their primary acquisition drivers.