How is LTV calculated?

The simple SaaS formula is LTV = ARPU ÷ monthly churn rate. A more accurate version adjusts for gross margin: LTV = (ARPU × gross margin) ÷ monthly churn rate, because only the margin — not the full revenue — is real profit from a customer. If ARPU is $100, gross margin 70%, and churn 2%, margin-adjusted LTV = ($100 × 0.70) / 0.02 = $3,500.

What is a healthy LTV:CAC ratio?

The benchmark for SaaS is 3:1 or higher. If it costs $1,000 to acquire a customer (CAC) and their LTV is $3,000, the ratio is 3:1. Below 3:1 means you're overspending on acquisition relative to value. Above 5:1 may mean you're underinvesting in growth.

What is CAC payback period?

CAC payback period = CAC / (ARPU × gross margin). It is the number of months to recover the cost of acquiring a customer. Best-in-class SaaS targets under 12 months payback. Above 18 months is a concern for cash-constrained companies.

How can I increase LTV?

LTV increases by reducing churn (biggest lever), increasing ARPU through upsells and price increases, and expanding usage-based revenue. A 20% churn reduction increases LTV by 25%. Cross-selling to existing customers is 5–25× cheaper than acquiring new ones.

What is negative churn?

Negative net revenue churn occurs when expansion revenue (upsells, seat additions) from existing customers exceeds revenue lost from churned customers. This means existing customers grow faster than you lose them — a hallmark of elite SaaS businesses.

Is my data sent to a server?

No. The LTV calculation runs entirely in your browser with JavaScript. No ARPU, churn, CAC, or business figures are uploaded, logged, or stored anywhere. You can model sensitive unit economics without any privacy concern.

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Free Customer LTV Calculator — SaaS Lifetime Value & LTV:CAC Ratio

Customer Lifetime Value (LTV or CLV) is the total revenue a business expects from a single customer over their entire relationship. For SaaS, LTV = ARPU / Monthly Churn Rate. This calculator computes LTV, the LTV:CAC ratio (target: 3:1 or higher), and CAC payback period.

Free — No SignupRuns in BrowserData Never Uploaded

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Calculate customer lifetime value and LTV:CAC ratio for your SaaS business.

Customer lifetime value from ARPU and monthly churn rate
Gross-margin-adjusted LTV reflecting actual profit per customer
Average customer lifespan in months derived from churn rate
LTV:CAC ratio with a health verdict against the 3:1 benchmark
CAC payback period — months of gross profit to recover acquisition cost
Client-side only — no revenue or cost figures are uploaded or stored

Features

Everything you need in one Customer LTV Calculator

Customer lifetime value

Computes LTV from ARPU and churn, and the margin-adjusted version that reflects the actual gross profit a customer generates.

LTV:CAC ratio with a verdict

Divides LTV by acquisition cost and tells you whether the ratio is healthy, thin, or losing money — against the 3:1 benchmark.

CAC payback period

Shows how many months of gross profit it takes to recover the cost of acquiring a customer — a key cash-flow signal.

Average customer lifespan

Converts churn into an expected lifespan in months, so the abstract LTV number has a concrete time horizon behind it.

How It Works

How to use Customer LTV Calculator

Enter ARPU and churn rate

Input your average revenue per user (monthly) and monthly churn rate percentage.

Enter CAC (optional)

Add your customer acquisition cost to see the LTV:CAC ratio and payback period.

See LTV metrics

The calculator shows LTV, LTV:CAC ratio, payback period, and whether the ratio indicates a healthy business.

Format Comparison

LTV:CAC ratio benchmarks

LTV : CAC	What it means
Below 1:1	Losing money on every customer — unsustainable
1:1 – 3:1	Thin — covering costs but little room to scale
3:1 – 5:1	Healthy — the widely cited target zone
Above 5:1	Strong, but may signal underinvestment in growth

Troubleshooting

How to fix common syntax errors

Most “invalid JSON” failures come from a small set of mistakes. Paste the failing JSON above, click Validate, and the tool points you at the exact line and column.

Using raw revenue instead of gross-margin-adjusted revenue in LTVLTV = $100 ARPU / 2% churn = $5,000 (ignoring 30% COGS)

The economically meaningful LTV is (ARPU × gross margin) / churn. At 70% gross margin, the real LTV is $3,500, not $5,000. Using gross revenue overstates LTV and inflates the LTV:CAC ratio — making unit economics appear healthier than they are.

Using annual ARPU instead of monthly in the LTV formulaLTV = $1,200/year ARPU / 2% monthly churn = $60,000

The SaaS LTV formula uses monthly ARPU and monthly churn: LTV = monthly ARPU / monthly churn rate. Convert annual ARPU to monthly first ($1,200 / 12 = $100/month). Mixing annual revenue with monthly churn inflates LTV by 12×.

Using annual churn rate instead of monthly in the LTV formulaLTV = $100 ARPU / 24% annual churn = $417

Convert annual churn to monthly before using it: monthly churn = 1 − (1 − annual churn)^(1/12). For 24% annual churn, monthly churn ≈ 2.2%. LTV = $100 / 0.022 = $4,545 — very different from $417. Always use matching time units (monthly ARPU with monthly churn).

Excluding overhead from CAC — using only ad spendCAC = total ad spend / new customers (ignoring sales salaries)

True CAC includes all sales and marketing costs: advertising, salaries of sales and marketing staff, tools, agency fees, content production, and events — divided by new customers acquired in the same period. Using ad spend alone understates CAC and inflates the LTV:CAC ratio.

Treating LTV as a fixed number rather than recalculating as churn changesLTV target set at $5,000 and left unchanged for 12 months

LTV changes every time ARPU or churn changes. Recalculate monthly as part of your SaaS metrics review. A churn reduction from 3% to 2% increases LTV by 50% — a significant change that should immediately update your acquisition budget.

Confusing total contract value (TCV) with LTVAnnual contract of $12,000 treated as LTV

TCV is the value of a specific contract; LTV is the expected revenue across the entire customer lifetime. A $12,000/year customer with 24% annual churn has an LTV of approximately $50,000 (ARPU $1,000/month ÷ 2% monthly churn). TCV only counts one contract, not the full relationship.

FAQ

Frequently asked questions

Customer Lifetime Value (LTV) is the total revenue expected from a customer before they churn. For SaaS with monthly billing: LTV = ARPU / Monthly Churn Rate. If ARPU is $100/month and churn is 2%, LTV = $5,000.

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References

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