Customer Lifetime Value (LTV) Calculator
Calculate LTV, expected customer lifetime, and the LTV : CAC ratio investors care about.
Best-in-class SaaS: 0.5–1% monthly.
Customer Lifetime Value (LTV) is the gross-margin-adjusted revenue you expect from a customer over their entire relationship with you. The classic SaaS formula divides by churn to estimate that lifetime.
LTV = (ARPU ÷ 12) × Gross margin × (1 ÷ Monthly churn)
Use gross-margin-adjusted LTV — revenue alone overstates value because it ignores the cost to serve.
LTV anchors how much you can afford to spend acquiring a customer. The classic benchmark is LTV : CAC ≥ 3×. Above 3× you should consider spending more to grow. Below it, you have a leaky bucket — fix retention before pouring in more acquisition.
Worked examples
$1,200 ARPU, 80% GM, 2% monthly churn. LTV = $4,000. CAC = $900 → 4.4× ratio.
Same revenue but 6% monthly churn. LTV drops to $1,333. Same $900 CAC → 1.5× ratio. Stop scaling acquisition, fix retention.
- Using revenue instead of gross profit (overstates by 20–40%).
- Using customer-count churn when revenue churn is what matters for LTV.
- Applying 1/churn to early-stage data — churn estimates are noisy under ~12 months of data.
- Ignoring expansion revenue (net revenue retention >100% multiplies LTV materially).
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