Customer Lifetime Value (LTV) Calculator
Customer Lifetime Value quantifies the total gross profit a single customer generates across their entire relationship with your product, and it is the number that justifies every dollar you spend acquiring them. In a subscription business, LTV is driven by three levers: how much a customer pays each month (ARPU), how much of that revenue survives as gross margin, and how long they stay before churning. Because a lower churn rate means a longer average lifespan, small improvements in retention compound into dramatic LTV gains. Investors treat LTV as the ceiling on sustainable acquisition spend and a proxy for product-market fit. Enter your ARPU, margin, and churn to calculate lifetime value and understand the real economic worth of your customer base.
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Results update live as you type. Estimates only — not financial, tax, or investment advice.
The Formula
LTV = (ARPU × Gross Margin %) ÷ Monthly Churn Rate
Understanding the Customer Lifetime Value (LTV) Calculator
The most common LTV formula divides gross-margin-adjusted ARPU by your churn rate, because the inverse of churn is the average customer lifespan. A 5% monthly churn implies an average customer stays 20 months; a 2% churn implies 50 months. This is why retention is the single highest-leverage input — halving churn roughly doubles lifetime value without spending a cent more on acquisition or raising a single price.
Always apply gross margin, not raw revenue. A customer paying $100 per month at an 80% gross margin contributes $80 of actual profit, and that is what you can reinvest into acquiring the next customer. Skipping margin inflates LTV and leads founders to overspend on CAC. For longer horizons, sophisticated teams also discount future cash flows and segment LTV by plan or cohort, since enterprise customers often have radically different economics than self-serve users.
Frequently Asked Questions
What is a good LTV to CAC ratio?
The benchmark most SaaS investors look for is an LTV:CAC ratio of 3:1 or higher — each customer should return at least three times what they cost to acquire. A ratio below 1:1 means you lose money on every customer; well above 5:1 can signal you are underinvesting in growth.
How does churn affect lifetime value?
Churn is the biggest lever on LTV because average customer lifespan equals one divided by the churn rate. Reducing monthly churn from 5% to 2.5% roughly doubles the average lifespan and therefore doubles LTV — no pricing or acquisition change required. Retention improvements compound over time.
Should LTV use revenue or gross margin?
Always use gross margin. Lifetime value should reflect the actual profit a customer generates after the cost of delivering the service, not top-line revenue. A margin-adjusted LTV tells you how much you can genuinely afford to spend acquiring and serving each customer.