LTV calculator
Find out how much gross profit an average customer brings over their lifetime, and whether your acquisition cost is worth it.
Results
The LTV formula
LTV = ARPU × gross margin ÷ monthly churn. LTV:CAC = LTV ÷ customer acquisition cost.
Average lifetime is 1 ÷ churn: at 5% monthly churn, a customer stays 20 months on average.
Example
ARPU $29, gross margin 80%, churn 5%: LTV = $464. With a $120 CAC, the LTV:CAC ratio is 3.9 : 1, healthy.
How LTV changes with churn
| Monthly churn | Average lifetime | LTV (ARPU $29, 80% margin) |
|---|---|---|
| 2% | 50 months | $1,160 |
| 5% | 20 months | $464 |
| 10% | 10 months | $232 |
Halving churn doubles lifetime value. That's why buyers of a SaaS look at retention before growth. Measure yours with the churn calculator and your acquisition cost with the CAC calculator.
Frequently asked questions
How do you calculate customer lifetime value?
LTV = ARPU × gross margin ÷ monthly churn rate. A customer paying $29 a month at an 80% gross margin with 5% monthly churn is worth $29 × 0.8 ÷ 0.05 = $464 in gross profit.
What is a good LTV:CAC ratio?
3:1 or better is the usual benchmark: each customer brings at least three times what it cost to acquire. Below 1:1 you lose money on every customer; far above 5:1 you are probably under-investing in growth.
Why use gross margin in LTV?
Revenue overstates what a customer is worth. Multiplying by gross margin gives the profit a customer generates after hosting, APIs and payment fees, which is what you can spend to acquire them.