Free ForeverNo SignupGross Margin LTV IncludedUpdated 2026

Customer Lifetime Value (LTV) Calculator

Calculate how much total revenue a customer generates over their entire relationship with your business — then see how it stacks up.

Customer Lifetime Value (LTV) is the total net revenue a customer generates from their first payment until they cancel. A customer paying $200/month with a 2% monthly churn rate has an LTV of $10,000. LTV is the ceiling on how much you can profitably spend to acquire that customer — and the #1 metric for validating your business model.

Average Revenue Per Customer (Monthly)

Average monthly payment per paying customer (MRR ÷ paying customers)

Monthly Churn Rate

Percentage of customers who cancel each month

Gross Margin

Revenue minus COGS (hosting, support, third-party tools). SaaS target: 70–80%

LTV Model

Simple: ARPU ÷ Churn. Gross margin: accounts for delivery cost

The Formula

LTV = (ARPU ÷ Monthly Churn Rate) × Gross Margin %

In plain English

Divide your average monthly revenue per customer by your monthly churn rate to get average customer lifespan. Multiply by gross margin to get the portion that actually contributes to the business.

Worked Example

ARPU: $150/month. Churn: 2.5%/month. Avg lifespan = 1 ÷ 0.025 = 40 months. Simple LTV = $150 × 40 = $6,000. Gross Margin LTV (75%) = $4,500

What Is Customer Lifetime Value? (Beginner's Guide)

LTV answers one question: how much is a customer actually worth to your business over their entire relationship with you? Not just their first payment — every payment, until the day they cancel.

LTV is the ceiling on everything else. It caps how much you can profitably spend on acquisition (CAC). It determines how aggressive your growth investment can be. And it's the primary metric investors use to evaluate whether your business model is healthy at scale.

Why Churn Is the LTV Multiplier

Halving your churn rate doubles your LTV — without touching your pricing, product, or costs. A company with $200 ARPU and 5% monthly churn has $4,000 LTV. Cut churn to 2.5% and LTV doubles to $8,000. That's why retention is almost always more valuable than acquisition at scale.

Gross Margin LTV vs Simple LTV — Which Should You Use?

Simple LTV = ARPU ÷ Churn. It measures the total revenue a customer generates. It's easy to calculate and useful for quick comparisons.

Gross Margin LTV multiplies simple LTV by your gross margin percentage. It shows the actual value delivered to the business after the cost of servicing that customer (hosting, support, third-party APIs). Gross Margin LTV is what most investors and financial models use because it reflects real profitability.

SaaS companies typically have 70–80% gross margins, so Gross Margin LTV is usually 70–80% of Simple LTV.

3:1

Minimum LTV:CAC ratio VCs expect

2×

LTV impact of halving your churn rate

70–80%

Target SaaS gross margin (affects LTV)

36 mo

Typical LTV calculation horizon used by VCs

How Churn Rate Destroys LTV

The relationship between churn and LTV is not linear — it's compounding. The difference between 5% and 2% monthly churn is not a 3% improvement. It's a 150% increase in LTV (from 20 months average lifespan to 50 months).

This is why the most successful SaaS companies obsess over retention. Reducing churn from 4% to 2% monthly is the equivalent of doubling your pricing — except it also improves every other metric simultaneously.

SaaS LTV Benchmarks by Segment (2026)

Segment	Typical ARPU	Typical LTV	Implied Max CAC (3:1)	Status
Self-serve / PLG	$15–$50/mo	$300–$2,000	$100–$665	Low CAC budget
SMB SaaS	$50–$300/mo	$1,500–$12,000	$500–$4,000	Inside sales OK
Mid-market SaaS	$300–$2K/mo	$12K–$80K	$4K–$26K	Full sales team
Enterprise SaaS	$2K–$20K/mo	$80K–$800K+	$26K–$266K+	Enterprise AEs

Source: OpenView SaaS Benchmarks 2025 · KeyBanc Capital Markets SaaS Survey 2025

Common Mistakes

⚠️

Using revenue LTV instead of gross margin LTV

Revenue LTV ignores the cost to deliver your service. If hosting and support eat 30% of revenue, your true LTV is 30% lower. Investors model gross margin LTV — match their expectations.

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Using average ARPU across all tiers without segmenting

If your enterprise customers pay $2,000/month and your self-serve customers pay $30/month, a blended $200 ARPU is misleading. Calculate LTV separately by segment — the differences will dictate your go-to-market decisions.

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Ignoring expansion revenue in ARPU

If your customers upgrade over time, your effective ARPU increases after acquisition. A simple ARPU calculation using starting plan price understates LTV. Include expansion in your average or model the upsell trajectory separately.