HOW TO USE OUR LTV:CAC RATIO CALCULATOR
Finding your SaaS company’s LTV:CAC ratio isn’t that difficult (especially when you use the calculator above). We’ve setup all of the mathematical formulas to work behind the scenes, so all you need to do is enter your SaaS business metrics (such as your churn rate and MRR (Monthly Recurring Revenue), and then our calculator will do the rest.
WHAT IS THE FORMULA TO CALCULATE LTV:CAC?
In fact, to arrive at an accurate LTV:CAC ratio, we fist must solve for a couple of unknown numbers. For example, we need to know how many months, on average, a user stays onboard as a customer. We need to know this number, because without it, we can’t figure out what our LTV (Customer Lifetime Value) is. However, coming up with this calculation is easy and we cover it in more detail here. Once we’ve figured out LTV, the rest is pretty straightforward. The formula is:
LTV / CAC
For example, imagine our LTV was $1000. This means, on average, every user who signs up will be worth $1000 to us over their lifetime as a customer. If our cost to acquire that cost to acquire each customer is $1000 then our LTV to CAC ratio would be 1:1. Essentially, we’re spending the same amount of money acquiring a customer as they contribute to our bottom line. Therefore, with a 1:1 ratio, we’d only be breaking even. Our goal is to try to surpass the 3:1 LTV to CAC benchmark. For example, if our LTV was $3000 and our CAC was $1000 we’d be at a 3:1 ratio, which is generally considered acceptable in the world of SaaS.
Hi There! 👋
Thanks for using our real-time SaaS LTV to CAC calculator!
When we look at LTV (Customer Lifetime Value) and we compare to our CAC (Customer Acquisition Cost), we can get a sense of how cheap or expensive it is for us to onboard new users into our SaaS.
Knowing your LTV:CAC ratio allows you to how effective your marketing budget is being spent. .
Are you’re looking to grow 🚀 your SaaS company?
At WhalePages, we specialize in helping SaaS companies grow through the use of our aggressive SEO and content marketing campaigns.
For example, we’ll create cool tools (like the calculator on this page) 👈 to help you earn backlinks and bring your traffic levels to new heights.
If you’re interested in learning more about how we can help, please visit our homepage here.