LTV / CAC
The SaaS health check, on one screen.
LTV, CAC ratio, and payback period — from four inputs.
Built and reviewed by LeadAfrik Research
Data-grounded analysis on African economies
Inputs
Customer economics
Verdict
5.5× LTV/CAC
Possibly underspending on growth — you could scale acquisition faster.
The 3:1 rule is heuristic, not law. Mature SaaS aims for 3–5×. Capital-light DTC can sustain 1.5–3×. Burn-fueled growth (early-stage venture) often runs sub-1× temporarily — that's a deliberate bet, not a healthy steady state.
Result
The numbers that matter
LTV
$ 2.5K
Gross profit over customer life
CAC
$ 450
LTV/CAC ratio
5.5×
CAC payback
7.2 months
Customer lifetime
40 months
At constant churn
Monthly contribution
$ 62
ARPU × Gross margin
Reference benchmarks
What's typical
- SaaS (mid-market): LTV/CAC 3-5×, payback 12-18 months
- SaaS (enterprise): LTV/CAC 4-7×, payback 18-24 months
- DTC e-commerce: LTV/CAC 2-3×, payback 6-12 months
- Marketplaces: LTV/CAC 3-5×, but cohort-dependent
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Common questions
What is LTV/CAC?
LTV (lifetime value) ÷ CAC (customer acquisition cost). It's the SaaS health-check number — how many dollars of profit does each customer return for every dollar spent acquiring them?
What's a 'good' LTV/CAC?
3:1 is the canonical target — for every $1 of acquisition spend, you get $3 of lifetime margin. Above 3 means underspending on growth (you can scale faster). Below 1.5 means the unit economics don't work and growth burns more cash than it generates.
What is CAC payback period?
Months until a new customer's gross margin pays back what you spent acquiring them. <12 months = strong, 12-18 = acceptable, 18+ = capital-intensive growth that needs deep funding.
How is LTV calculated?
Standard formula: ARPU × Gross Margin % ÷ Monthly Churn %. So if a customer pays $100/mo at 80% margin and churns at 2% monthly: LTV = 100 × 0.8 ÷ 0.02 = $4,000. The math assumes constant churn, which is a simplification.