LTV Calculator
Estimate Customer Lifetime Value to understand long-term revenue potential.
Formula
LTV = (ARPU ÷ Monthly Churn Rate) × Gross MarginWhat is LTV?
Customer Lifetime Value (LTV) is the estimated total gross profit you expect to earn from a single customer over the entire duration of their relationship with your business. It is paramount to measure your LTV to ensure you aren't spending too much to acquire customers, a metric tracked by Customer Acquisition Cost (CAC).
How to calculate LTV
Calculate your average customer lifespan by taking the inverse of your churn rate (1 ÷ Churn Rate), multiply it by your ARPU, and apply your Gross Margin to see the actual profit generated per account.
Example calculation
If your ARPU is $100, your monthly churn rate is 5% (meaning an average lifespan of 20 months), and your gross margin is 80%, the calculation is: ($100 ÷ 0.05) × 0.80 = $1,600 LTV.
Why LTV matters for SaaS
LTV acts as the ceiling for your acquisition costs. By understanding how much profit a user brings in over their lifecycle, you can confidently set marketing budgets, justify acquisition campaigns, and optimize for long-term retention over short-term sales.
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