Unit economics calculator: lifetime value, LTV:CAC, and payback

Level

Foundational

Reading time

2 minutes

Updated

November 3, 2026

Sources

Editorial analysis

Useful for

All business types

Before you spend more on marketing, check whether each customer is worth more than it costs to win. You'll need four numbers. Rough estimates are fine for a first pass, but write down how you got each one.

• Average revenue per customer per month: your monthly revenue from customers divided by the number of active customers.
• Gross margin %: the share of revenue left after the direct costs of delivering, such as materials, payment fees, hosting, and the labor to serve each customer.
• Customer acquisition cost (CAC): sales and marketing spend in a period divided by the new customers you won in that period.
• Monthly churn %: the share of customers at the start of a month who stop buying during it.

How to read the results

Monthly contribution per customer is revenue × gross margin. It's what each customer adds toward your fixed costs and profit every month. If it's close to zero, look at price and direct costs before anything else.

Expected customer lifetime is 1 ÷ monthly churn, in months. At 5% churn, the average customer stays 20 months. If your churn is very low, the lifetime can come out unrealistically long, so sanity-check it against how long your oldest customers have actually stayed.

Lifetime value (LTV) is monthly contribution × expected lifetime. It's a forecast of what a typical customer contributes over their whole time with you, not money you already have.

LTV:CAC is LTV ÷ CAC. Below 1, each customer loses money no matter how long they stay. Above 1, each customer eventually pays back their acquisition cost and then some.

CAC payback is CAC ÷ monthly contribution, in months. It tells you how long you have to fund each new customer before they've paid you back. If cash is tight, this is often the number to watch most closely.

If you don't sell subscriptions

Enter your customers' average monthly spend in place of a monthly fee. For churn, estimate how many months customers typically keep buying, then enter 1 ÷ that number as a percentage. For example, a 10-month typical lifetime is 10% monthly churn.

For the full method, a worked example, adaptations by business type, and commonly cited rules of thumb, read unit economics, explained. To see why a healthy LTV can still leave you short of money this month, read why profitable businesses still run out of cash.