Free Tool
Customer LTV Calculator
Calculate customer lifetime value from your ARPU, gross margin, and churn rate. Add CAC to check your unit economics. Add customer count to project total portfolio value.
What one customer pays you per month
Defaults to 80% if left empty
Percentage of customers who cancel each month
Optional
For LTV:CAC ratio and payback period
For total portfolio value projection
About this tool
The LTV Calculator computes customer lifetime value -- how much total revenue you can expect from a single customer over their entire relationship with your business. For SaaS, this is the number that determines whether your growth is sustainable or a money pit.
Enter your average revenue per user (ARPU), gross margin, and monthly churn rate, and it calculates your LTV. Add your customer acquisition cost (CAC) and it shows your LTV:CAC ratio -- the single most important metric in SaaS economics. Below 3:1 means you're spending too much to acquire customers. Above 5:1 means you could afford to spend more on growth.
It also calculates your CAC payback period -- how many months until a new customer has paid back what it cost to acquire them. Investors look at this number. Under 12 months is healthy. Over 18 months is a red flag. Over 24 months means your unit economics need fixing before you scale.
FAQ
Frequently asked questions
The basic formula: LTV = (ARPU x Gross margin) / Monthly churn rate. If your average customer pays $100/month, your gross margin is 80%, and 5% of customers churn each month, your LTV is ($100 x 0.80) / 0.05 = $1,600.
3:1 is the standard benchmark -- your customer should be worth at least 3x what it costs to acquire them. Below 3:1 means acquisition is too expensive relative to customer value. Above 5:1 is great but might mean you're under-investing in growth.
Churn is the denominator, so small changes have big effects. At 5% monthly churn, average customer lifetime is 20 months. At 3% churn, it's 33 months. Reducing churn from 5% to 3% increases LTV by 67%. Retention work often has higher ROI than acquisition work.
CAC payback period = CAC / (ARPU x Gross margin). It tells you how many months until a new customer has 'paid back' the cost of acquiring them. Under 12 months is healthy for SaaS. Under 6 months is excellent. Over 18 months means you're funding customer acquisition out of runway.
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