LTV Calculator
Estimate gross-margin-adjusted customer lifetime value from your monthly ARPU, gross margin and churn rate — and check your LTV:CAC ratio against the 3:1 benchmark.
Reviewed by the CalcCafe editorial team · Last updated 18 July 2026 · How we test our tools
Example
Take a SaaS product with $100 monthly ARPU, an 80% gross margin and 2.5% monthly churn. Average customer lifetime is 100 ÷ 2.5 = 40 months. LTV = 100 × 0.80 × 40 = $3,200 of lifetime gross margin per customer. With a $1,000 CAC, the LTV:CAC ratio is 3,200 ÷ 1,000 = 3.2:1 — just above the 3:1 benchmark.
How it works
Average customer lifetime in months = 100 ÷ monthly churn %. LTV = monthly ARPU × (gross margin ÷ 100) × lifetime months, which simplifies to monthly gross margin per customer divided by the churn rate. LTV:CAC = LTV ÷ CAC. If churn or CAC is zero the tool returns 0 rather than an infinite value; in reality a churn rate of exactly zero just means you have not measured long enough.
Good to know
Always compute LTV on gross margin, not revenue. A customer paying $100 a month with an 80% gross margin generates $80 of margin — the money actually available to cover acquisition costs and operating expenses. Naive revenue-based LTV overstates value by exactly your cost of goods (hosting, support, payment fees, third-party APIs), which for SaaS typically runs 15-30% of revenue. Investors will margin-adjust your LTV regardless, so quoting revenue LTV only invites a markdown during diligence.
Churn dominates this formula because lifetime is its reciprocal: halving churn doubles LTV, while doubling ARPU merely doubles it with much more pricing risk. Going from 5% to 2.5% monthly churn moves average lifetime from 20 to 40 months, doubling LTV without touching price or margin. That is why retention work is usually the highest-leverage growth investment an early SaaS team can make — and why a rising-churn business cannot buy its way to health with more marketing spend.
Benchmark against LTV:CAC of at least 3:1. Below that, each cohort returns too little margin to fund operations and future acquisition; between 3:1 and 5:1 is the healthy zone most B2B SaaS investors expect; consistently above 5:1 often means you could grow faster by spending more. Pair the ratio with CAC payback (months to recover CAC from gross margin, ideally under 12) because a great ratio with a 30-month payback still consumes enormous cash.
Know this model’s limits. The 100÷churn formula assumes churn is constant forever, but real cohorts churn fastest in the first months and then flatten, and expansion revenue can make net churn negative — at which point the simple formula breaks down entirely (infinite LTV is not a business plan). For serious modelling, build cohort retention curves from at least 12 months of data and discount future margin at 10-15% annually; use this calculator for quick sanity checks and board-meeting arithmetic.
Frequently asked questions
Should LTV be based on revenue or gross margin?
Gross margin. Only margin is available to pay back acquisition costs and fund operations. Revenue-based LTV overstates customer value by your cost of goods sold — typically 15-30% of revenue for SaaS — and sophisticated investors will always margin-adjust the figure anyway.
Why does churn matter more than ARPU for LTV?
Because customer lifetime is the reciprocal of churn. Cutting monthly churn from 5% to 2.5% doubles average lifetime from 20 to 40 months and therefore doubles LTV, usually with less risk than doubling prices.
What LTV:CAC ratio should a SaaS startup target?
At least 3:1 is the standard benchmark; 3:1 to 5:1 is considered healthy. Persistently above 5:1 can mean you are under-investing in growth, while below 3:1 means each new customer destroys capital.
Is this calculator free and private?
Yes — it is completely free with no sign-up, and it runs entirely in your browser. Your ARPU, churn and CAC figures never leave your device.
People also ask
How do you calculate customer lifetime value?
Multiply monthly ARPU by your gross margin percentage, then divide by the monthly churn rate. For example, $100 ARPU at 80% margin with 2.5% monthly churn gives 100 x 0.8 x (100/2.5) = $3,200.
What does a 2.5% monthly churn mean for customer lifetime?
An average customer lifetime of 100/2.5 = 40 months, or about 3.3 years. The lifetime is the reciprocal of the churn rate, which is why small churn improvements have outsized effects on LTV.
Is LTV accurate if my churn rate changes over time?
The simple formula assumes constant churn, which real cohorts violate — churn is usually highest in the first few months and then flattens. Treat formula-based LTV as an upper-bound estimate and validate it against actual cohort retention curves once you have 12+ months of data.
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Sources & references
These tools follow our methodology and provide educational estimates only — verify important figures with a qualified professional.