Customer LTV Calculator

Model customer lifetime value from ARPU, churn rate and margin. Compare against CAC to determine if your business is scalable.

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Metrics

Values

What LTV Measures

Customer Lifetime Value (LTV) is the total net profit a customer generates over their relationship with your business. It's the ceiling on what you can afford to spend acquiring one.

Formulas

  • Simple LTV = ARPU × (1 ÷ churn) × margin
  • Discounted LTV = ARPU × margin ÷ (churn + discount_rate)
  • LTV:CAC ratio = LTV ÷ CAC
  • Payback period (months) = CAC ÷ (ARPU × margin)

Why Discounting Matters

$100 in 5 years is worth less than $100 today. Discounted LTV accounts for the time value of money — typically 8–15% for SaaS, 20%+ for higher-risk businesses.

Benchmarks

LTV:CACInterpretation
< 1:1Losing money on every customer
1:1 – 3:1Marginal — need to reduce CAC or increase LTV
3:1 – 5:1Healthy range (rule of thumb for SaaS)
> 5:1Underinvesting in growth — can afford higher CAC

Common Mistakes

  • Using revenue LTV instead of profit LTV — inflates the ratio by 3–5x.
  • Ignoring discounting for high-churn businesses.
  • Using historical averages without segmenting by cohort — different cohorts can have LTVs 3x apart.
  • Forgetting expansion revenue (upsells, add-ons) — net revenue LTV is often 20–40% higher than gross.

LTV FAQ

What's a good LTV:CAC ratio?

3:1 is the industry standard for SaaS. 5:1+ suggests you should spend more on acquisition. Under 1:1 means you lose money on every customer.

Why is my LTV so high?

Most likely: no discount rate, or using revenue LTV instead of profit. Both inflate the number massively.

Should I use gross or net revenue for LTV?

Always profit-based. Revenue LTV is 3–5x larger than profit LTV for most businesses and useless for decision-making.

How do I include expansion revenue?

Add expansion ARPU to base ARPU, or model expansion separately and add. For SaaS with 10%+ net revenue retention growth, this matters a lot.