About the LTV Calculator
This LTV calculator estimates customer lifetime value — the total gross profit an average subscriber generates before they cancel. Enter average monthly revenue per customer, monthly churn and gross margin, and it returns revenue LTV, gross-margin LTV and a discounted LTV that accounts for the time value of money.
It is aimed at SaaS and subscription founders, marketers setting acquisition budgets and investors checking unit economics. Add your customer acquisition cost to see the LTV:CAC ratio and CAC payback period, the two numbers most often used to decide whether it is safe to spend more on growth.
The model assumes a constant monthly churn rate and flat revenue per customer, which makes average lifetime equal to 1 ÷ churn. If customers expand over time or early churn is much higher than later churn, treat the result as a baseline and refine it with cohort data.
With the default inputs, the lifetime value (gross margin) is $2,640.00. Change any value above to recalculate instantly.
How to use the ltv calculator
- 1Enter the average monthly revenue per paying customer.
- 2Enter your monthly customer churn rate (use the churn rate calculator if needed).
- 3Enter gross margin after hosting, support and payment costs.
- 4Set an annual discount rate for the discounted LTV, or leave 10% as a default.
- 5Add CAC to see the LTV:CAC ratio and how long payback takes.
Formula and method
With a constant monthly churn rate, the expected customer lifetime is 1 ÷ churn months, so lifetime revenue is ARPU ÷ churn. Multiplying by gross margin gives the lifetime gross profit, which is the version to compare with CAC because it excludes the cost of serving the customer.
Discounted LTV sums each month’s expected gross profit — ARPU × margin × (1 − churn)^(m−1) — discounted back at the monthly equivalent of your annual cost of capital. That geometric series simplifies to ARPU × margin ÷ (churn + d). LTV:CAC divides gross-margin LTV by CAC, and payback is CAC ÷ monthly gross profit.
- ARPU
- Average monthly revenue per customer
- Churn
- Share of customers lost each month (decimal)
- d
- Monthly discount rate derived from the annual rate
Worked examples
$99/month plan, 3% churn, 80% margin
A customer paying $99 a month who churns at 3% stays about 33 months, generating $3,300 of revenue and $2,640 of gross profit. Discounted at 10% a year the value is about $2,086. Against a $500 CAC the LTV:CAC ratio is 5.3:1.
Mid-market B2B, $500/month, 1.5% churn
Low churn gives a long lifetime of about 67 months and a gross-margin LTV of $23,333, but discounting at 12% a year cuts that to about $14,292 because so much value arrives years later. The ratio of 3.9:1 is healthy, though a 17-month payback ties up cash.
Consumer app, $15/month, 8% churn
At 8% monthly churn the average subscriber stays 12.5 months and produces $159 of gross profit. With a $60 CAC the ratio is about 2.7:1 — below the 3:1 target, so reducing churn is the biggest lever.
Frequently asked questions
How do you calculate customer lifetime value?+
The standard SaaS formula is average monthly revenue per customer × gross margin ÷ monthly churn rate. For example, $99 × 80% ÷ 3% = $2,640 of lifetime gross profit per customer.
What is a good LTV:CAC ratio?+
A ratio of about 3:1 is the widely used benchmark for SaaS. Below 1:1 you lose money on every customer; well above 5:1 can mean you are under-investing in growth and could acquire customers faster.
Should LTV use revenue or gross margin?+
Use gross margin when comparing with CAC. Revenue-based LTV ignores the cost of hosting, support and payment processing, so it overstates how much you can afford to spend acquiring a customer.
Why calculate a discounted LTV?+
Money received years from now is worth less than money today. Discounting at your cost of capital gives a more conservative value, which matters most when churn is low and the customer lifetime is long.
What if my churn rate is very low?+
Very low churn produces very long lifetimes and huge LTVs. Many teams cap the lifetime at 3–5 years or use discounted LTV so the figure stays realistic for budgeting.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.