Customer LTV Calculator
Compute Customer Lifetime Value (LTV / CLV) using ARPU × Gross Margin ÷ Churn, plus a cohort-weighted DCF variant. Free, no signup.
Customer LTV Calculator
Compute customer lifetime value two ways. The simple formula is ARPU × Gross Margin ÷ Monthly Churn — the standard SaaS-canon LTV. The cohort-weighted variant is a 60-month DCF that discounts future margin by your cost of capital — closer to what investors use for valuation.
How to Use the LTV Calculator
Compute ARPU (Average Revenue Per User)
Take total MRR (from the MRR Calculator) and divide by active paying customers. If MRR is USD 100,000 and you have 1,200 paying customers, ARPU is USD 83.33/month.
Pull gross margin from your P&L
Gross margin = (revenue − cost of revenue) ÷ revenue. For SaaS, cost of revenue is hosting + payment processing + customer support + cost of goods (for hardware-included SaaS). Typical pure SaaS: 70-85%. Bessemer's benchmark median is 78%.
Calculate monthly churn rate
Churn = customers lost this month ÷ customers at start of month. If you started the month with 1,000 customers and lost 35, monthly churn is 3.5%. Annual churn ≈ monthly × 12, but the compound math is (1 − (1 − monthly)^12) so 3.5% monthly ≈ 35% annual.
Compare LTV against CAC
The LTV:CAC ratio is the unit-economics benchmark. Bessemer says 3:1 is healthy, 5:1 is excellent, below 1:1 means you lose money on every customer. Compute CAC separately with our CAC & Payback Period Calculator.
Customer Lifetime Value — The Number That Unlocks Acquisition Budget
Why LTV Is the SaaS Founder's Most-Used Number
Customer Lifetime Value (LTV, sometimes CLV) is the predicted gross profit a customer generates before they churn. It's the ceiling on what you can profitably spend to acquire that customer — if LTV is USD 1,500, spending USD 1,500 on acquisition breaks even and spending USD 500 produces a 3:1 LTV:CAC ratio (the venture-canon healthy benchmark). The Stripe Atlas SaaS Metrics Guide places LTV at the center of unit economics; ProfitWell's Recur publication treats it as the single number that determines whether a SaaS company can scale profitably.
The simple formula — ARPU × Gross Margin ÷ Monthly Churn — comes from a closed-form solution to a geometric series. If your monthly churn is 5%, the expected number of months a customer stays is 1 ÷ 5% = 20 months. Multiply by the monthly gross-margin contribution (ARPU × margin) and you get the lifetime gross-margin contribution: that's LTV. The formula assumes constant churn rate, constant ARPU, and constant gross margin over the customer's lifetime — useful approximations for back-of-envelope work, but they break down for businesses with strong cohort effects.
Cohort-Weighted LTV: Why the Simple Formula Overstates
The simple LTV formula treats a dollar of margin received 10 years from now as equivalent to a dollar today. In practice, future cash is worth less — both because of inflation and because future cash is more uncertain. The cohort-weighted LTV variant our tool computes is a discounted cash flow (DCF) over a 60-month horizon: for each month, the probability the customer is still around (= (1 − churn) ^ month), multiplied by the monthly gross-margin contribution, discounted back to today at your cost of capital.
For a typical SaaS with 3.5% monthly churn, 75% gross margin, USD 85 ARPU, and 10% annual discount rate, the simple formula gives LTV = USD 1,821; the cohort-weighted variant gives roughly USD 1,520 — about 17% lower. The gap widens for businesses with lower churn (the simple formula assumes infinite future cash flow). For acquisition budgeting at venture-stage SaaS, the simple formula is the working number; for valuation discussions with investors, the cohort-weighted variant is closer to what gets used in financial modelling.
"At 3.5% monthly churn, the average customer stays 29 months. At 1.0% monthly churn (enterprise SaaS territory), the average customer stays 100 months — 8.3 years. Lower churn is multiplicatively more valuable than higher ARPU."
How LTV Drives Every Major Marketing Decision
The first downstream use of LTV is setting an acquisition budget ceiling. If LTV is USD 1,500 and you want a 3:1 LTV:CAC ratio, your CAC ceiling is USD 500 per customer. That ceiling drives bid caps in performance marketing (Google Ads, Meta Ads), the maximum first-year compensation for outbound SDRs, the affiliate commission cap, and the partnership economics. Without LTV, every acquisition channel runs on hope; with LTV, channels compete head-to-head on payback period.
The second use is product investment prioritisation. A retention feature that drops monthly churn from 4% to 3% increases LTV by 33% — that's a 33% increase in marketing-spend ceiling, plus a 33% increase in business valuation (which is roughly proportional to LTV in SaaS comparables). For a USD 50M ARR business, that's the difference between a USD 300M and a USD 400M valuation. Retention is structurally the highest-leverage investment in mature SaaS, which is why companies with USD 10M+ ARR routinely spend 8-15% of revenue on customer success.
10 Facts About Customer LTV
The classic SaaS LTV formula ARPU × Margin ÷ Churn is a closed-form solution to a geometric series — it assumes constant churn, ARPU, and margin.
Average customer lifetime in months equals 1 ÷ monthly churn rate. 3.5% monthly churn → 29 months average tenure.
Bessemer's healthy LTV:CAC ratio is 3:1. Below 1:1 means you lose money on every customer. Above 5:1 often signals under-investment in growth.
Enterprise SaaS typically posts 0.5-1.5% monthly churn; SMB SaaS sees 3-7%. The difference is multiplicative on LTV.
SaaS gross margins typically run 70-85%, with Bessemer's benchmark median at 78%. Hardware-included SaaS runs lower (50-65%).
The cohort-weighted LTV (DCF variant) is typically 15-25% lower than the simple formula — investors prefer this for valuation work.
A 1 percentage point reduction in monthly churn can increase LTV by 30-50% — retention compounds.
ProfitWell's Recur publishes SaaS retention benchmarks by segment — the most-cited private-market dataset for churn comparisons.
Cost of capital (discount rate) for established SaaS is 8-12%; early-stage venture-backed SaaS uses 15-20% due to higher uncertainty.
LTV:CAC ratio of 3:1 typically requires CAC payback under 12 months — a separate metric covered by our CAC Payback Calculator.
Frequently Asked Questions
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LTV = ARPU × Gross Margin ÷ Monthly Churn. Multiply average monthly revenue per customer by your gross margin percentage, then divide by monthly churn rate. The math comes from a geometric series: if a customer has a 3.5% chance of leaving each month, their expected lifetime is 1 ÷ 0.035 = 28.6 months. Times monthly gross-margin contribution gives total lifetime gross-margin contribution. This is the formula every Stripe Atlas guide, Bessemer report, and a16z SaaS post uses.
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The simple formula treats USD 100 of margin in month 60 as worth the same as USD 100 today. The cohort-weighted variant applies a discount rate (typically 8-15% annualised) to future cash flows — reflecting that future money is worth less due to inflation and uncertainty. The cohort variant also limits the time horizon to 60 months, while the simple formula technically integrates to infinity. For a typical SaaS, the cohort LTV is 15-25% lower than the simple LTV. Investors use the cohort variant for valuation; founders use the simple variant for acquisition budgeting.
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The SaaS canon uses gross margin — revenue minus cost of revenue (hosting, payment fees, support, COGS). Contribution margin (which deducts variable sales + marketing per customer) is sometimes used for unit-economics analysis but is non-standard for LTV. The Stripe Atlas guide is explicit: LTV uses gross margin. If you use contribution margin, label it explicitly to avoid confusion with industry comparables.
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Bessemer's canonical threshold is 3:1 — every dollar of CAC produces three dollars of LTV in gross margin. 5:1 is excellent but often signals under-investment in growth (you could spend more on acquisition profitably). Below 1:1 means you lose money on every customer — fix this before scaling. The ratio is typically computed on a fully-loaded CAC basis: total sales + marketing spend ÷ net new customers (not paid acquisition only). Use our CAC Payback Calculator to compute the matching CAC number.
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Cohort LTV breaks customers into acquisition cohorts (by signup month or quarter) and tracks retention, ARPU, and margin contribution per cohort. This matters because product-market fit shifts over time — the cohort acquired in 2022 may behave very differently from the cohort acquired in 2026. Tools like ProfitWell Retain, Mixpanel, and Amplitude offer cohort views built-in. For a back-of-envelope, segment by acquisition channel (paid Google Ads cohort vs organic cohort vs partner referral cohort) — paid cohorts typically have 30-50% lower LTV than organic.
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The simple formula uses fixed ARPU and doesn't model expansion. For SaaS with significant land-and-expand motion (typical enterprise SaaS with NRR above 110%), the formula understates true LTV. A common adjustment: multiply simple LTV by (NRR / 100) to bake in expected expansion. So if simple LTV is USD 1,500 and NRR is 115%, expansion-adjusted LTV is USD 1,725. This is informal — for rigorous expansion modelling, build a cohort spreadsheet that tracks revenue per cohort by month.
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Three levers, in order of typical impact: (1) reduce churn — a 1pp drop in monthly churn typically lifts LTV 30-50%; (2) raise ARPU — better pricing tiers, upsells, expansion revenue. Each 10% ARPU lift is a 10% LTV lift; (3) raise gross margin — typically incremental, since SaaS margins are mostly hosting + payment + support which scale with revenue. Retention is the highest-leverage investment for mature SaaS; pricing is second. Customer success teams typically pay back in 6-12 months on enterprise SaaS.
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Compute LTV on paying customers only. Free users contribute zero margin (and often negative gross margin once support costs are factored in), so including them would mathematically depress LTV. Track free-to-paid conversion rate as a separate metric, and use that to derive blended unit economics: blended LTV = paid LTV × (free→paid conversion rate) − cost of supporting free tier. Most SaaS founders track LTV strictly on the paid cohort to keep the number comparable to industry benchmarks.
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US SaaS typically commands 2-3× higher ARPU than ASEAN SaaS for equivalent products — both because of higher willingness-to-pay and stronger USD currency. A USD 99/month SaaS in the US is roughly SGD 130 / MYR 470 / IDR 1.5M — and Asian customers often resist the absolute number even when the math works locally. So ASEAN SaaS founders typically run lower ARPU but with similar gross margins (hosting is global) and similar or slightly higher churn. Net effect: ASEAN LTV typically lands at 30-50% of equivalent US LTV. Singapore and Australia are exceptions — premium B2B markets where SaaS pricing often matches US benchmarks.
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For LTV reporting and investor decks, yes — always normalise to USD. For end-user pricing, segment by market: USD pricing in the US/UK/CA/AU/SG, local currency in markets where USD pricing causes friction (Indonesia, Philippines, Vietnam). Both Stripe and Chargebee support multi-currency pricing automatically. The LTV math is identical regardless of which currency the customer pays in, but reporting in USD makes you comparable to global SaaS benchmarks and keeps board-deck math clean. Most ASEAN-founded SaaS that target global markets (Carousell-era pattern) price USD-first and offer local currency only when conversion data justifies the operational complexity.
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