Do the numbers work per customer?
Payback first, because that is what decides whether growth is survivable — and LTV over a horizon you can observe, beside the textbook one.
An estimate from the numbers you enter. Not accounting or financial advice, and nothing leaves your browser.
A ratio that ignores when the money arrives
There is a standard way to calculate unit economics and almost every calculator does it. Take monthly revenue per customer, multiply by gross margin, divide by churn, compare the result with what a customer costs to win, and check whether the ratio clears three to one. The arithmetic is correct. The trouble is that the two halves of it are each quietly optimistic, and they are optimistic in ways that compound.
The first is the division by churn. It converts a rate you measured last quarter into a claim about how long customers stay, forever. At two percent monthly churn the formula books fifty months of revenue per customer. If the company is three years old, no such customer has ever existed. Worse, early churn flatters: the customers who were going to leave quickly have already gone, so the rate you can measure is taken from survivors, and cohorts have a habit of maturing all at once.
The second is that the ratio is a profitability measure being used to answer a solvency question. It compares a sum collected across years with a cost paid this month, and says nothing about the distance between the two. A business with excellent economics and a long payback period is a business that gets poorer every time it wins a customer, right up until the cohort matures. Founders describe this as growing too fast. It is more accurate to say they were reading the wrong number.
So the useful version leads with payback — how many months of gross profit it takes to get the acquisition cost back — and shows the lifetime value twice, once over a horizon you could plausibly observe and once on the textbook formula. The gap between those two figures is the size of what you are assuming. It is worth looking at before you decide to spend more.
What this tool does not do
It takes one blended customer, one churn rate and one margin, and every real business has several of each. Cohorts behave differently, a churn rate measured on a young book is measured on survivors, and the observable-horizon figure is only as honest as the horizon you set - stretch it to 120 months and you have recreated the number the tool exists to question. The CAC honesty questions are answered by you and cannot be checked.
- Segment or cohort analysis - one set of numbers is one average customer, and the average is often nobody
- Expansion revenue, upsells or price rises over the customer's life, which for some businesses is most of the value
- Whether your gross margin is calculated correctly - support, hosting, onboarding and payment fees are the usual omissions
- Discount rates or the time value of money, which matter over the horizons this is describing
- Whether the acquisition channel you are measuring will hold its cost as you spend more into it - it usually will not
- Your actual cash position - it says how long payback takes, not whether you can survive it
Frequently asked questions
Why does this lead with payback instead of LTV:CAC?
Because LTV:CAC is blind to solvency. It compares money collected over years against money spent today, so a business with a 3:1 ratio and an eighteen-month payback still needs eighteen months of working capital for every customer it adds — selling more makes the cash position worse before it makes it better. If somebody else is funding that gap, the ratio is the right lens. If nobody is, payback is the constraint and everything else is context.
Why show two different LTV numbers?
Because the difference between them is an assumption, and putting them side by side is the only way to make that assumption something you look at rather than something you inherit. Dividing contribution by churn books value for every month into the indefinite future. Computing it over twenty-four months books only what falls inside a window you might actually be able to observe. The gap is what the formula is guessing.
My churn is 2%, so my customers last 50 months. Is that wrong?
It is not wrong arithmetically and it may well be wrong about your business. One divided by churn is the average life implied if that rate holds forever. If the company is three years old, nobody has ever observed a fifty-month customer. And a young company's churn is measured on survivors: the people who were going to leave quickly already have, so the rate you can see is the flattering part of the curve.
What should be in my CAC?
Everything spent to win a customer, not just the ad bill. Salaries of whoever sells, the tools they sell with, and the founder's own time if the founder is closing deals. For most small businesses those exceed media spend, and leaving them out improves every number on the page — which is precisely why it happens.
Is blended CAC a problem?
It answers a question you are not asking. Averaging paid acquisition with customers who arrived by word of mouth gives a figure that is true and not decision-useful, because the decision is always about the next customer, and the next one comes from the channel you are about to spend in. That channel is always more expensive than the blend.