Customer LTV Calculator
Calculate customer lifetime value, LTV:CAC ratio, and payback period for your SaaS business.
Your metrics
Results
Average Customer Lifetime
20 months
Customer LTV
$1,000
ARPU ($50) x Lifetime (20 mo)
Gross Margin LTV
$800
LTV ($1,000) x Margin (80%)
Monthly value per customer
$40 /mo
What is Customer Lifetime Value (LTV)?
Customer Lifetime Value (LTV) is the total revenue a business expects to earn from a single customer account over the entire duration of their relationship. For SaaS companies, LTV is one of the most important metrics because it tells you how much a customer is worth and how much you can afford to spend acquiring new customers.
A higher LTV means each customer contributes more revenue over time, which gives you more room to invest in acquisition, product development, and customer success. Understanding your LTV helps you make smarter decisions about pricing, retention spending, and growth strategy.
How to calculate LTV for SaaS
The standard formula for calculating customer lifetime value in SaaS is:
Customer LTV = ARPU x (1 / Monthly Churn Rate)
Gross Margin LTV = Customer LTV x Gross Margin %
LTV:CAC Ratio = Gross Margin LTV / CAC
CAC Payback Period = CAC / (ARPU x Gross Margin %)
The key insight is that 1 / churn rate gives you the average customer lifetime in months. For example, if your monthly churn rate is 5%, the average customer stays for 20 months (1 / 0.05 = 20). Multiply that by your average revenue per user to get the total lifetime value.
Gross Margin LTV is often more useful than raw LTV because it accounts for your cost of delivering the service. Most SaaS companies have gross margins between 70% and 85%, so gross margin LTV gives a more realistic picture of the profit each customer generates.
What is a good LTV:CAC ratio?
The widely accepted benchmark for a healthy SaaS business is an LTV:CAC ratio of 3:1 or higher. This means you earn at least three dollars in customer lifetime value for every dollar you spend on acquisition.
You are losing money on every customer you acquire. Either reduce CAC or improve retention urgently.
Marginal economics. You are covering acquisition costs but have little margin for operating expenses and growth investment.
Healthy ratio. You have strong unit economics and room to invest in growth while staying profitable.
Excellent economics, but consider whether you are under-investing in growth. You may be able to spend more on acquisition to accelerate.
How to improve customer LTV
There are three main levers for increasing customer lifetime value: reduce churn, increase ARPU, or improve gross margin.
Reduce churn rate
Churn reduction has the biggest impact on LTV because it compounds over time. Focus on onboarding improvements, proactive customer success, and understanding why customers leave. Even a 1% reduction in monthly churn can dramatically increase lifetime value.
Increase ARPU through expansion revenue
Upselling existing customers to higher plans, adding usage-based pricing, or introducing add-ons can increase ARPU without increasing acquisition costs. Expansion revenue is one of the most efficient ways to grow because you are selling to customers who already trust your product.
Improve gross margin
Optimizing infrastructure costs, automating support, and improving operational efficiency can increase your gross margin. Most mature SaaS companies target gross margins above 75%. Higher margins mean more of each revenue dollar contributes to profit and customer lifetime value.
Understand cancellation reasons
You cannot fix churn if you do not know why customers leave. Collecting honest cancellation feedback helps you identify patterns and prioritize improvements that will have the biggest impact on retention and LTV.
Frequently asked questions
What's the difference between LTV and CLV?
LTV (Lifetime Value) and CLV (Customer Lifetime Value) are the same metric — both refer to the total revenue a business can expect from a single customer account throughout their entire relationship. SaaS companies tend to use LTV more frequently, while e-commerce and retail businesses often use CLV. The calculation and meaning are identical regardless of which abbreviation you use.
How does churn rate affect LTV?
Churn rate has an inverse relationship with LTV. The formula for average customer lifetime is 1 divided by the monthly churn rate, so even small changes in churn have a massive impact. For example, reducing monthly churn from 5% to 3% increases average customer lifetime from 20 months to 33 months — a 67% increase in LTV. This is why reducing churn is one of the most powerful levers for growing SaaS revenue.
What is a good LTV for SaaS?
There is no universal 'good' LTV number because it depends on your pricing, market, and cost structure. Instead, evaluate LTV relative to your Customer Acquisition Cost (CAC). A healthy SaaS business typically has an LTV:CAC ratio of at least 3:1, meaning your customer lifetime value is at least three times what you spend to acquire each customer. An LTV:CAC ratio below 1:1 means you are losing money on every customer you acquire.
How do you calculate LTV with different plan tiers?
To calculate LTV with multiple plan tiers, you can either calculate a blended LTV using your weighted average ARPU across all plans, or calculate LTV separately for each tier. The per-tier approach is more accurate because different plans often have different churn rates — enterprise plans typically have lower churn than starter plans. Use the formula LTV = ARPU × (1 / churn rate) for each tier, then weight by the percentage of customers on each plan.