LTV Calculator
Calculate customer lifetime value, average lifespan, and LTV:CAC ratio. Understand exactly how much each customer is worth and whether your unit economics support scalable growth.
How It Works
1
Enter Your ARPU and Gross Margin
Input your average monthly revenue per customer and gross margin percentage
2
Set Your Monthly Churn Rate
The calculator automatically derives average customer lifespan from your churn rate (1 / churn rate)
3
See LTV, Lifespan, and LTV:CAC Ratio
Get your customer lifetime value, average lifespan, LTV:CAC ratio, and a visual chart of gross profit accumulation over time
Customer Value
Revenue and margin per customer
Avg Monthly Revenue per Customer — ARPU ($)
Gross Margin (%)
Retention
How long customers stay with you
Monthly Churn Rate (%)
LTV:CAC Ratio (Optional)
Enter your Customer Acquisition Cost (CAC) to see the ratio
Customer Acquisition Cost — CAC ($)
Key Insights
Halving churn doubles LTV — retention improvements have an outsized compounding effect
Target LTV:CAC of 3:1 or higher to fund scalable growth
Increasing gross margin by 5pp raises LTV proportionally — review your cost of goods sold (COGS) structure
Key Results
Your customer lifetime value metrics
Customer Lifetime Value (LTV)
—Avg Customer Lifespan
—LTV:CAC Ratio
—Cumulative Gross Profit per Customer
Revenue accumulated over the average customer lifespan
SaaS Benchmarks
How your LTV compares to industry standards
Your LTV
SMB: $500–$5k | Mid-market: $5k–$50k | Enterprise: $50k+—
Your LTV:CAC
Target: 3:1 to 5:1—
Avg Customer Lifespan
Enterprise: 36–60 mo | SMB: 12–24 mo—
Understanding Customer Lifetime Value
The metric that reveals the true worth of every customer you acquire
Customer Lifetime Value (LTV) is the total gross profit a business expects to earn from a single customer over the entire relationship. For SaaS companies, LTV is fundamental — it determines how much you can afford to spend on acquisition, how aggressively you can grow, and whether your business model is sustainable at scale.
How to Calculate LTV for SaaS
The standard SaaS LTV formula uses churn rate to derive average customer lifespan:
LTV = ARPU × Gross Margin % × (1 / Monthly Churn Rate)
This is equivalent to: LTV = Monthly Gross Profit per Customer / Monthly Churn Rate
Example: $200 ARPU × 75% gross margin / 3% monthly churn = $5,000 LTV. The implied average customer lifespan is 33.3 months (1 / 3%).
Always use gross profit (not revenue) in your LTV calculation. Revenue-based LTV overstates customer value by ignoring COGS — hosting, support, and infrastructure costs that must be covered before the business profits.
What Is a Good LTV for SaaS?
LTV benchmarks vary significantly by customer segment and sales model:
Self-serve / PLG: $200–$1,000
High-volume, low-touch model. Lower ARPU but profitable because CAC is also low — the model only works with a strong LTV:CAC ratio.
SMB SaaS: $500–$5,000
Mix of inside sales and self-serve. Higher churn than enterprise (3–7% monthly), but manageable with good onboarding and product stickiness.
Mid-market SaaS: $5,000–$50,000
Higher ACV, lower churn (1–2% monthly). Supports dedicated sales and customer success investment.
Enterprise SaaS: $50,000–$500,000+
Multi-year contracts, deep integrations, and very low churn (0.5–1% monthly). Justifies high field sales CAC.
LTV:CAC Ratio
LTV alone doesn't tell you whether your unit economics are healthy — you need to compare it to your Customer Acquisition Cost (CAC). The LTV:CAC ratio is the most important indicator of SaaS scalability:
Below 1:1: You lose money on every customer. Fundamental economics must be fixed before scaling.
1:1 to 3:1: Marginal. After accounting for overhead and R&D, profitability is difficult. Most investors require at least 3:1 before funding growth.
3:1 to 5:1: The sweet spot. Enough margin to reinvest in growth while maintaining healthy economics.
Above 5:1: You may be underinvesting in growth. Your economics support more aggressive acquisition spend.
How Churn Rate Affects LTV
Churn rate is the most powerful lever in the LTV formula. Because lifespan = 1 / churn rate, small improvements in retention produce outsized LTV gains:
From 4% to 2% monthly churn (same ARPU, same margin):
4% churn → 25 month lifespan → LTV = $200 × 75% × 25 = $3,750
2% churn → 50 month lifespan → LTV = $200 × 75% × 50 = $7,500
Halving churn doubled LTV — without changing pricing or margins.
This is why retention is the highest-ROI investment for most SaaS companies. A 1% reduction in monthly churn can be worth millions in lifetime value at scale.
How to Increase LTV
Reduce Churn
Improve onboarding: Get customers to the "aha moment" faster — most churn happens in the first 90 days
Invest in customer success: Use health scores and proactive outreach to catch at-risk accounts before they churn
Build sticky features: Integrations, data lock-in, and workflow automations raise switching costs
Offer annual contracts: Locking customers into 12-month contracts eliminates monthly churn and improves cash flow
Increase ARPU
Upsell higher tiers: Guide customers to plans with higher usage limits or premium features as they grow
Usage-based expansion: Align pricing with value delivered (seats, API calls, revenue) to capture more as customers grow
Cross-sell add-ons: Offer complementary products or services to existing customers who already trust your brand
Improve Gross Margin
Reduce hosting costs: Optimize infrastructure spend as you scale — moving from cloud to reserved instances or negotiating enterprise discounts
Automate support: Self-serve knowledge bases, in-app guidance, and AI deflection reduce the per-customer support cost
Common LTV Calculation Mistakes
Using revenue instead of gross profit: LTV based on revenue overstates value. Always apply gross margin to get the true economic value.
Ignoring discount rate: Future revenue is worth less than present revenue. For long customer lifespans, apply a discount rate (typically 8–12%) to get present-value LTV.
Blending segments: A single LTV number masks differences between customer types. SMB customers may have 5× the churn of enterprise customers — track LTV by segment.
Using annualized churn instead of monthly: The formula requires monthly churn rate. Annual churn / 12 ≠ monthly churn due to compounding.
Related SaaS Calculators
LTV is one piece of the unit economics puzzle. Use these calculators to build a complete picture of your SaaS health:
Financial Health
ARR Calculator — Calculate annual recurring revenue from monthly subscriptions and annual contracts
MRR Calculator — Break down new, expansion, contraction, and churned MRR
Churn Rate Calculator — Measure customer and revenue churn with annualized projections
NRR Calculator — Track net revenue retention and gross revenue retention rates
Burn Rate Calculator — Calculate net burn rate, cash runway, and burn multiple
Growth Rate Calculator — Calculate MoM, YoY, and CAGR growth rates from revenue data
Break-Even Calculator — Find the units and revenue needed to cover all costs and reach profitability
Customer Metrics
CAC Calculator — Measure customer acquisition cost and LTV:CAC ratio
Payback Period Calculator — Calculate how long it takes to recover customer acquisition costs
Viral Coefficient Calculator — Measure your K-factor and model viral growth scenarios
Pricing & Valuation
SaaS Valuation Calculator — Estimate your company value using ARR multiples and growth-rate benchmarks
Equity Dilution Calculator — Model how funding rounds affect founder ownership over time
Markup Calculator — Calculate markup percentage, selling price, profit, and gross margin
Ready to maximize customer lifetime value?
Founderpath helps SaaS founders improve retention and grow without giving up equity.
Once you know your LTV:CAC ratio, the next step is funding growth efficiently. Founderpath provides non-dilutive capital so you can scale proven channels and invest in retention — while keeping 100% of your equity.
Monitor how LTV evolves as you improve retention, raise prices, or expand into new segments. Get alerted when LTV:CAC dips below healthy thresholds.
See which acquisition channels and customer segments deliver the highest lifetime value — so you can double down on what works.
Compare your LTV and churn metrics to SaaS companies at your stage and ARR range using anonymized industry data.
Forecast the LTV impact of reducing churn by 1%, increasing ARPU through upsells, or improving gross margin — before you invest resources.
Once you know your LTV:CAC ratio supports it, use non-dilutive capital to scale your best acquisition channels while keeping 100% of your equity.
Frequently Asked Questions
Customer Lifetime Value (LTV), also called CLV or CLTV, is the total gross profit a business expects to earn from a single customer over the entire relationship.
For SaaS companies, the standard formula is:
LTV measures how valuable each customer is to your business — and critically, determines how much you can afford to spend acquiring them (your CAC budget).
The most common SaaS LTV formula derives lifespan from churn rate:
This is equivalent to: LTV = Monthly Gross Profit per Customer / Monthly Churn Rate
Example: $200 ARPU × 75% gross margin / 3% monthly churn = $5,000 LTV, with an implied lifespan of 33.3 months.
The churn-based formula captures the compounding nature of retention — small improvements in churn create outsized LTV gains because lifespan = 1 / churn rate.
LTV benchmarks vary significantly by customer segment:
- Self-serve / PLG:$200–$1,000 — high volume, low ARPU, low churn is critical
- SMB SaaS:$500–$5,000 — manageable with good onboarding and product stickiness
- Mid-market:$5,000–$50,000 — supports dedicated CS investment
- Enterprise:$50,000–$500,000+ — justifies field sales and long sales cycles
The absolute LTV number matters less than the LTV:CAC ratio — $1,000 LTV is fine with a $200 CAC (5:1), but problematic with an $800 CAC (1.25:1).
LTV:CAC ratio compares how much a customer is worth over their lifetime vs. how much it costs to acquire them. It's the most important indicator of SaaS unit economics.
- Below 1:1 — You lose money on every customer. Unsustainable.
- 1:1 to 3:1 — Marginal. After overhead and R&D, profitability is difficult. Most investors consider this too low.
- 3:1 to 5:1 — The sweet spot. Enough margin to reinvest in growth while maintaining healthy economics.
- Above 5:1 — Consider scaling spend. Your economics support more aggressive growth.
Churn rate has a direct inverse relationship with LTV. Because lifespan = 1 / churn rate, halving your churn doubles your LTV.
4% monthly churn → 25 month lifespan → LTV = $200 × 75% × 25 = $3,750
2% monthly churn → 50 month lifespan → LTV = $200 × 75% × 50 = $7,500
Same pricing, same margin — just half the churn produced double the LTV. This is why retention investments often have the highest ROI of any lever available to a SaaS company.
Always use gross margin. Revenue-based LTV (without margin) overstates customer value by ignoring the cost of delivering your service.
COGS that must be subtracted to get gross profit include:
- Cloud hosting and infrastructure
- Customer support labor and tooling
- Third-party API and data costs
- Payment processing fees
Gross profit LTV gives you the actual dollars available to cover sales, marketing, R&D, and G&A — making it the only valid number for LTV:CAC comparisons.
Three levers increase LTV — ranked by typical ROI:
1. Reduce churn (highest ROI)
- Improve onboarding to reach the “aha moment” faster
- Use customer health scores to catch at-risk accounts early
- Build sticky integrations that raise switching costs
- Offer annual contracts to eliminate monthly churn
2. Increase ARPU
- Upsell customers to higher tiers as they grow
- Add usage-based expansion pricing
- Cross-sell complementary products
3. Improve gross margin
- Optimize infrastructure costs at scale
- Automate support with self-serve resources and AI deflection
Yes — the Founderpath LTV Calculator is completely free to use. No signup or email required. Enter your ARPU, gross margin, and monthly churn rate to instantly see your LTV, average customer lifespan, LTV:CAC ratio, and benchmark comparisons.
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