Customer Lifetime Value (LTV) Calculator

An LTV calculator (Customer Lifetime Value) tells you how much gross profit the average paying customer will generate over the life of their relationship with you. It's the second half of the unit-economics question (CAC being the first) and the single most important number in any SaaS, subscription, or marketplace business. This free LTV calculator uses the standard formula — (ARPU × gross margin) ÷ monthly churn rate — and shows your LTV-to-CAC ratio if you also paste in CAC. Sub-3:1 is a warning; sub-1:1 means you're burning money on every customer you acquire.

The LTV formula this calculator uses

LTV = (Average Revenue Per User × Gross Margin) ÷ Monthly Churn Rate. This LTV calculator uses the simplified contractual-LTV formula — the same one found in SaaS Metrics 2.0 (David Skok), the Bessemer Cloud Index, and every modern SaaS finance template. If your ARPU is $29/month, gross margin is 75%, and monthly churn is 4%, then LTV = (29 × 0.75) ÷ 0.04 = $543.75 per customer. The LTV calculator computes this instantly and also surfaces expected lifetime (1 / churn rate) so you can sanity-check whether the number matches your cohort reality.

LTV : CAC — the ratio that actually matters

LTV in isolation is meaningless; LTV : CAC is the ratio investors and founders actually use. A 3:1 ratio is the standard healthy benchmark — you generate three dollars of margin-adjusted lifetime revenue for every dollar spent acquiring the customer. 1:1 means you break even (and lose money once you account for underestimated costs); above 5:1 often means you're underspending on growth and leaving market share on the table. The LTV calculator computes the ratio automatically when you enter both LTV inputs and CAC; the verdict (Healthy / Marginal / Unsustainable) uses these standard thresholds.

When the LTV calculator gives a misleading answer

The contractual-LTV formula assumes constant monthly churn. If your real churn curve is front-loaded (a common SaaS pattern: 20% in month one, then 2% from month two onwards), the LTV calculator will overestimate lifetime value. If churn is unrealistically low (under 0.5%/month), the LTV calculator will return absurd lifetimes — possibly hundreds of months — and warn you. For cohort-based or front-loaded churn, run the LTV calculator per cohort: month-1, month-2, month-3+ — and use the steady-state churn rate. The Unbuilt Lab Blueprint Pack's GTM doc covers cohort LTV in depth for your idea.

Frequently asked questions

What is LTV (Customer Lifetime Value)?

LTV, or Customer Lifetime Value, is the total gross profit a business expects from one customer over the lifetime of their relationship. The standard SaaS formula is (ARPU × Gross Margin) ÷ Monthly Churn Rate. LTV is the natural counterweight to CAC — high LTV justifies high CAC; low LTV demands low CAC.

What's a good LTV : CAC ratio?

3:1 is the standard healthy benchmark — three dollars of margin-adjusted revenue for every dollar of acquisition cost. 1:1 means break-even after costs and is usually a warning. Above 5:1 often indicates underspending on growth. The LTV calculator computes the ratio automatically when you enter ARPU, margin, churn, AND CAC.

Why does the LTV calculator ask for monthly churn rate?

Because LTV is sensitive to churn — a 2% monthly churn gives an expected 50-month lifetime, a 4% rate halves that to 25 months. Get the churn input right (use trailing-90-day data from a steady-state cohort, not your best month) and the LTV calculator returns a realistic number; use vibes for churn and the LTV calculator will return vibes back.

Should I use gross margin or net margin in the LTV formula?

Use gross margin — revenue minus the cost of serving the customer (hosting, payment processor fees, support cost, third-party APIs). Net margin (post-everything) is the wrong number for LTV because it bakes in fixed costs that don't scale with one more customer. Most SaaS businesses run 75-85% gross margin; consumer subscriptions vary widely.

Related free resources: CAC calculator · Pricing & Margin calculator