LTV Calculator
Lifetime value is the gross profit one customer delivers before they leave. Enter ARPU, margin and churn to see LTV, expected lifetime and the effect of expansion.
Inputs
Average upsell/seat growth from existing accounts.
Result
$1,307
customer lifetime value (gross profit)
At 3.00% monthly churn the average customer stays 33.3 months and contributes $1,307 of gross profit. With 1.00% monthly expansion, LTV rises to $1,960.
- Expected lifetime
- 33.3 months
- Monthly gross profit
- $39.20
- LTV (gross profit)
- $1,307
- LTV (revenue basis)
- $1,633
- LTV with expansion
- $1,960
- First-year value
- $470
Formula
- expected lifetime (months) = 1 ÷ monthly churn rate
- LTV = (ARPU × gross margin) ÷ monthly churn rate
- LTV with expansion = (ARPU × gross margin) ÷ (churn rate − expansion rate)
- revenue-basis LTV = ARPU ÷ churn rate
Methodology
The standard LTV formula assumes a constant churn rate, which makes it a geometric series that collapses to ARPU × margin ÷ churn. It is an approximation, but a reliable one for planning at a portfolio level.
Use gross profit rather than revenue. Hosting, payment fees and support cost real money on every subscription month, and a revenue-based LTV overstates value by exactly your cost of goods sold.
When expansion revenue is meaningful, subtract it from churn to get net revenue churn. If expansion exceeds churn the formula tends to infinity, which is mathematically true and practically meaningless — cap the horizon at three to five years instead.
These are modelling estimates based on standard SaaS metric definitions. Real results depend on your billing data, contract terms and accounting treatment, so reconcile against your finance system before reporting numbers externally.
Example calculation
- A product charges $49 a month at an 80% gross margin, with 3% monthly churn.
- Expected lifetime: 1 ÷ 0.03 = 33.3 months.
- Monthly gross profit: $49 × 0.80 = $39.20.
- LTV: $39.20 ÷ 0.03 = $1,307. Adding 1% monthly expansion, net churn is 2% and LTV becomes $1,960.
Frequently asked questions
Should LTV use revenue or gross profit?
Gross profit. It is the only version that can be compared to CAC honestly, because CAC is a cash cost and revenue you never keep cannot pay it back.
What churn rate should I enter?
Use monthly revenue churn if you have it, otherwise customer churn. Take an average over the last three to six months rather than a single month, which is usually noisy.
Why does my LTV look enormous?
Very low churn produces very long lifetimes — 0.5% monthly churn implies a 200-month customer. Most companies cap LTV at 36 or 60 months for planning, because no forecast holds for sixteen years.
How does LTV relate to CAC?
LTV ÷ CAC is the return on each acquisition dollar. Aim for 3× or better; below 1× you lose money on every customer, and far above 5× usually means you are underspending on growth.
Should LTV be discounted for time value?
For long lifetimes, yes — money arriving in year four is worth less than money today. A simple approach is to cap the horizon; a rigorous one is to discount future gross profit at your cost of capital.
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