When to use this formula
Use this formula when your inputs match the variables and units shown below. It is most useful for checking a calculator result, recreating the calculation in a spreadsheet or understanding which input has the biggest effect.
Quick use
Define the cohort and time period first, then calculate acquisition, retention and revenue metrics consistently.
Formula
CAC = acquisition cost / new customers; LTV = average revenue x gross margin x customer lifetime; LTV:CAC = LTV / CAC; ROAS = revenue from ads / ad spend; CTR = clicks / impressions; conversion rate = conversions / visitors; churn rate = lost customers / starting customers.
Variables
Costs, revenue, customers, impressions, clicks, conversions and churned accounts must refer to the same period or cohort.
Method notes
- Separate blended CAC from paid CAC.
- Use gross margin in LTV when judging unit economics.
- MRR should normalize recurring revenue and exclude one-time fees.
Example
If ad spend is 2,000 and attributed revenue is 8,000, ROAS is 4.0. If the same campaign brings 100 new customers, paid CAC is 20.
Assumptions and limitations
Attribution, refunds, trials, discounts, sales cycles, expansion revenue and gross margin can change interpretation. SaaS metrics should be cohort-aware when possible.
When the formula is not enough
- If the result depends on live prices, rates or official thresholds, check the latest value from the named source before relying on it.
- If the topic is medical, tax, legal, lending or safety related, use the result as a learning aid and check primary guidance before acting.
- If units or time periods differ, convert them before comparing results.
- If rounding affects the decision, keep extra precision until the final step.
Common mistakes
- Mixing monthly CAC with annual LTV without noting timing.
- Counting revenue that is not attributable to the campaign.
- Ignoring churn quality and expansion revenue.
FAQ
Why look at the formula instead of only the answer?
The formula shows which inputs actually drive the result. That makes it easier to spot a wrong unit, compare two scenarios or explain the answer to someone else.
Can different calculators use different formulas for the same topic?
Yes. Some topics have multiple accepted methods or simplified variants. When that matters, the calculator should say which method it uses and what is excluded.
Are formula pages updated?
Stable math formulas need occasional review. Formulas that depend on changing rules, prices or thresholds need a dated source before the page can make stronger claims.