Free tool
Is a customer worth what you paid for them
Lifetime value divided by acquisition cost tells you whether growth creates value or destroys it. A ratio around three is the usual benchmark for B2B SaaS. Much lower and you are buying customers at a loss. Much higher often means you are underspending and leaving growth on the table.
Last reviewed 27 August 2026
Result
Average customer lifetime
33.3 months
At 3.0% monthly churn
Lifetime value
$8,000
On gross profit
LTV to CAC ratio
8.00 to 1
Unusually high. That often means you are underspending on acquisition rather than that the business is exceptional.
How this works
What the numbers mean.
- 01Average customer lifetime is one divided by your monthly churn rate. At three percent monthly churn the average customer stays about 33 months.
- 02Lifetime value multiplies that lifetime by monthly gross profit, not monthly revenue. Using revenue inflates the number by your cost of service.
- 03The ratio compares that value against what you paid to acquire the customer. Three to one is the convention, but the direction of travel matters more than the absolute figure.
Assumptions and limits
- The one-over-churn formula assumes a constant churn rate, which is rarely true. Real churn is front-loaded, so this tends to overstate lifetime value for young companies.
- If you have less than a year of data, treat the output as a rough indicator rather than a measurement.
- The three-to-one benchmark is a widely used convention rather than a researched threshold.
Questions about this tool
Why is my ratio so high?
Usually one of three reasons: churn is understated because the company is too young to have seen it, lifetime value is calculated on revenue rather than gross profit, or you are genuinely underspending on acquisition. The third is a good problem and the first two are measurement errors.
Is three to one really the right target?
It is a convention that spread through SaaS investing rather than a researched threshold. It is a reasonable starting point, but a company with long contracts and very low churn can operate happily below it, and a company with high churn needs more headroom than three.
How does churn assumption affect this?
Enormously, and it is the most fragile input. Going from three percent to five percent monthly churn cuts lifetime from 33 months to 20, which cuts lifetime value by roughly 40 percent. Small errors in churn produce large errors in the ratio.
This tool is free and there is nothing to sign up for. If you would rather have the work done than calculate it, that is what Zway does.