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Unit economics, honestly.
Acquisition cost, lifetime value, the ratio between them, and how many months until a customer has actually paid for themselves. Margin and churn included — because LTV without either is a fairy tale.
Your economics
Acquisition
Per period
Salaries, commission, tools
In the same period
Value
LTV should be gross profit, not revenue
Implies a 33-month average lifetime
Upsell and price rises over the lifetime
CAC
$1,500
to acquire one customer
LTV
$10,667
gross profit per customer
LTV : CAC ratio
Healthy7.1 : 1
Where CAC goes
The results above are free and ungated, always. An account just saves them.
Your economics are strong — spend more
A 7.1:1 ratio with a 4.7-month payback means you are underspending on growth. You can afford to acquire far more aggressively.
All figures are illustrative estimates generated on-device for general guidance — not forecasts, financial advice, or guarantees. Nothing you enter is transmitted or stored unless you choose to save a report. Quotarider and XDQ Labs Private Limited make no representation as to accuracy for any individual circumstance.
Unit economics change every month. Most people check once a year.
Quotarider tracks CAC by channel continuously and flags the moment a channel's economics turn — before you've spent another quarter's budget on it.
Most LTV numbers are fiction
Lifetime value is the most abused metric in business. It's abused because it's easy to inflate, hard to disprove, and enormously convenient when you need to justify a marketing budget.
The two ways LTV gets inflated
Using revenue instead of gross profit. A customer paying $400 a month is not worth $400 a month to you. They're worth $400 × your gross margin. At 80% margin that's $320. At 40% margin it's $160 — and your LTV just halved. Any LTV figure quoted without a margin attached is a marketing number, not a finance number.
Optimistic churn. LTV is inversely proportional to churn, which means small errors in churn produce enormous errors in LTV. At 2% monthly churn, average lifetime is 50 months. At 4%, it's 25. Double the churn, halve the LTV. And churn is almost always measured optimistically in the early years, because you haven't been around long enough to see the cohorts that quietly die in year three.
The formula that's actually honest
LTV = (ARPA × gross margin) ÷ monthly churn rate
That's it. Average revenue per account, converted to gross profit, divided by the rate at which customers leave. If your churn is 3% monthly, the average customer stays 1/0.03 ≈ 33 months, and their lifetime gross profit is 33 × monthly gross profit.
CAC is also usually understated
The number most teams call CAC is really "paid media spend divided by customers," which excludes almost everything that actually costs money: the sales team's salaries, their commission, the SDRs, the marketing team's salaries, the content, the tooling, the events, the agency.
Fully-loaded CAC — the version a CFO would recognise — is typically two to four times the paid-media-only number. This is why the calculator above asks for sales cost separately, and why the honest version of your CAC is probably a lot higher than the one on your deck.
The 3:1 rule, and why it's incomplete
The received wisdom is that LTV:CAC should be at least 3:1. Below that, you're spending too much to acquire customers relative to what they're worth. That's sound as far as it goes.
What's less discussed: a ratio far above 5:1 is usually a problem too. It means you're underspending on growth — leaving customers on the table that you could profitably acquire, and probably losing them to a competitor who is willing to spend more. A 10:1 ratio isn't excellence; it's timidity with good margins.
Payback period is the number that kills companies
LTV:CAC tells you whether the business works eventually. Payback period tells you whether you survive long enough to find out.
A 24-month payback with a beautiful 5:1 ratio means every customer you acquire makes you poorer for two years before they make you richer. Grow fast enough with that structure and you run out of cash while technically having excellent unit economics. This is a real and common way to die.
Under 12 months is comfortable. Twelve to eighteen is manageable if you're funded. Over eighteen months and growth is actively consuming your balance sheet.
The number that changes everything: expansion
If your existing customers spend more over time — upsells, seat growth, price rises — your effective LTV rises substantially and your effective churn can even go negative. Net revenue retention above 100% means your existing base grows without you acquiring anyone, which is the single most valuable property a business can have.
Quotarider's Revenue Suite tracks these by cohort and by channel continuously, so you find out that a channel's CAC has doubled in month two rather than month eleven.
Frequently asked
Should sales salaries count in CAC?
Yes, if they're acquiring new customers. Fully-loaded CAC includes marketing spend, sales salaries and commission, SDR costs, sales tooling and any agency fees. Exclude account management and customer success time spent on existing customers — that's a retention cost, not an acquisition cost. Splitting these correctly is where most CAC calculations go wrong.
What churn rate should I use if I'm new?
Be pessimistic. Early cohorts always look better than they are, because your first customers are usually your most engaged and you haven't been around long enough to see the slow deaths. If your observed monthly churn is 2%, model with 3–4% until you have eighteen months of cohort data. Optimistic churn is how companies convince themselves of an LTV that never arrives.
Does this work for non-subscription businesses?
Partially. For a business with repeat purchases rather than subscriptions, treat ARPA as average purchase value × purchase frequency per month, and treat churn as your repeat-purchase drop-off rate. It's less precise but the shape of the answer is the same. For genuinely one-off purchases, LTV is simply the gross profit on that one sale, and your CAC must sit below it.
Does this store my financial data?
No. Everything runs in your browser. Nothing is transmitted, logged or stored anywhere.