Skip to main content

SaaS LTV Calculator

Ready to calculate
LTV = ARPA × GM / Churn.
ARPA + expansion + GM + churn.
NRR + CAC targets.
100% Free.
No Data Stored.

How it Works

01Enter ARPA

Average Revenue Per Account per month, or check the box and enter total revenue + accounts to compute ARPA.

02Enter Gross Margin

Revenue minus COGS, as % of revenue. Typical SaaS: 70-85%. Defaults to 100% (revenue LTV without margin).

03Enter Churn (and Expansion)

Monthly customer churn (%); optional account-expansion revenue ($/mo). LTV = (ARPA + Expansion) × GM / Churn.

04Get LTV + CAC Targets

Output: LTV, customer lifespan, NRR, plus target CAC for 3:1 and 5:1 LTV:CAC ratios (the SaaS health benchmarks).

What is a SaaS LTV Calculator?

Customer Lifetime Value (LTV) is the foundational unit-economics metric in Software-as-a-Service businesses — every founder pitch deck, every board meeting, every venture-investor diligence package centers on it. The defining identity is LTV = (ARPA + Expansion) × Gross Margin / Churn, where ARPA is Average Revenue Per Account per month, Gross Margin is revenue minus COGS as a percent (typically 70-85% for SaaS), Churn is the monthly customer attrition rate, and Expansion is upsell/cross-sell revenue per account per month. The formula represents the discounted lifetime profit a customer generates — the amount you can spend acquiring them while still being economical.

Our SaaS LTV Calculator handles the full workflow with 20 currency options (USD, EUR, GBP, BDT, INR, CAD, AUD, JPY, CHF, CNY, BRL, MXN, SGD, HKD, KRW, SEK, NOK, NZD, PLN, TWD) and dual ARPA input modes: direct entry for known ARPA, OR "I don't know the ARPA" checkbox that exposes total revenue + accounts fields and computes ARPA = revenue / accounts automatically. Output: LTV, customer lifespan (= 1/churn months), Net Revenue Retention (NRR), effective ARPA (ARPA + expansion), unit-economics classification (5 bands from "Very low" to "Excellent"), and target Customer Acquisition Cost (CAC) for the standard 3:1 and 5:1 LTV:CAC benchmarks — the David Skok / Bessemer industry health thresholds.

Smart warnings catch the most common SaaS unit-economics red flags: high monthly churn (> 10% — limits LTV severely), low gross margin (< 50% — atypical for SaaS), exceptional NRR (> 130% — top-decile achievement worth verifying), unsustainable NRR (< 100% — cohort revenue shrinks), and consumer-tier ARPA (< $5/mo — formula less meaningful, use cohort LTV instead).

Designed for SaaS founders modeling unit economics, venture-capital analysts running diligence, board members reviewing key metrics, sales-ops teams setting acquisition targets (LTV/CAC ratio), customer-success teams quantifying retention impact, and finance teams projecting cohort economics — runs entirely in your browser, no account, no data stored.

Pro Tip: Pair this with our Reserve Ratio Calculator for banking analysis. The standard SaaS health benchmarks: LTV:CAC ≥ 3:1 (healthy), ≥ 5:1 (excellent), > 12 month CAC payback period flagged as risk by venture investors.

How to Use the SaaS LTV Calculator?

Enter ARPA (Average Revenue Per Account): in monthly currency units. Sources: your billing system (Stripe, Recurly, Chargebee), accounting software, or board reports. If you don't know ARPA, check the box and enter total monthly revenue + total active accounts; the calculator computes ARPA = revenue / accounts.
Enter Gross Margin (%): revenue minus COGS as a percent of revenue. SaaS COGS typically include: hosting (AWS / GCP / Azure), customer support, payment processing fees, third-party APIs, account management. Typical SaaS gross margin: 70-85%. If gross margin is unknown or you're computing pure revenue LTV, use 100% (the default).
Enter Monthly Churn (%): customer churn rate per month — fraction of customers who cancel each month. Best-in-class SaaS: < 1% monthly. Healthy SaaS: 1-3% monthly. Concerning: > 5% monthly. Annual equivalent: 1 - (1-monthly)^12 — at 3%/mo monthly = 31% annual; at 5%/mo = 46% annual.
Enter Account Expansion (optional): additional revenue per account per month from upsells, cross-sells, seat additions, plan upgrades. Default 0; for healthy SaaS with active expansion motion (Slack-style seat growth, HubSpot-style multi-product), expansion can equal or exceed initial ARPA over time.
Apply LTV = (ARPA + Expansion) × GM / Churn: the calculator returns LTV in your selected currency. Worked example: $100/mo ARPA + $20 expansion, 80% GM, 3% churn → LTV = (100 + 20) × 0.80 / 0.03 = $3,200.
Read Customer Lifespan + NRR: Customer lifespan (months) = 1 / churn. At 3% monthly churn, average customer lives 33 months = 2.75 years. Net Revenue Retention (NRR): annual cohort revenue retention including expansion. NRR > 100% means cohort grows over time (best-in-class SaaS 110-130%).
Apply LTV:CAC Health Benchmarks: the calculator shows target Customer Acquisition Cost for the standard ratios — LTV:CAC = 3:1 (healthy SaaS, every $1 acquisition spend returns $3 lifetime value) and 5:1 (capital-efficient, often required by venture investors for Series A+). LTV:CAC < 1:1 means losing money on every customer; < 2:1 raises sustainability concerns.
For Mature SaaS — Use Cohort LTV Instead: the simple formula assumes constant churn and ARPA over time. For high-precision unit economics, build a cohort-based LTV model: sum actual revenue per month per cohort, discount to present value at 10-20% cost-of-capital, and compare to actual cohort CAC. The simple formula gives a starting estimate; cohort LTV gives the truth.

How is SaaS LTV calculated?

SaaS Customer Lifetime Value is the cornerstone of subscription-business unit economics — popularized by David Skok's "SaaS Metrics 2.0" series at forentrepreneurs.com (2012-2018) and now standard in every SaaS pitch deck and board package. The formula is one division but encodes the discounted-lifetime-profit logic of recurring-revenue businesses.

References: David Skok, "SaaS Metrics 2.0" (forentrepreneurs.com); ChartMogul SaaS Benchmarks Reports; OpenView Partners Annual SaaS Benchmarks; Bessemer Venture Partners "State of the Cloud"; Mark Roberge — The Sales Acceleration Formula (HubSpot CRO).

Core Formula

LTV = (ARPA + Expansion) × Gross Margin / Churn

Where ARPA = monthly Average Revenue Per Account; Expansion = monthly upsell/cross-sell revenue per account; Gross Margin = revenue minus COGS as decimal; Churn = monthly customer attrition rate as decimal.

Derivation

Customer lifespan (months) = 1 / monthly churn rate (geometric series).

Average monthly profit per customer = (ARPA + Expansion) × Gross Margin.

LTV = lifespan × monthly profit = (ARPA + Expansion) × Gross Margin / Churn.

LTV:CAC Health Benchmarks

  • LTV:CAC < 1:1: losing money on every customer — fundamentally unsustainable.
  • LTV:CAC = 1:1 to 2:1: marginal — break-even or slight profitability; insufficient to support growth.
  • LTV:CAC = 3:1 (target): healthy SaaS unit economics. Each $1 spent on acquisition returns $3 in lifetime value.
  • LTV:CAC = 5:1 (excellent): capital-efficient SaaS; often required by venture investors for Series A+.
  • LTV:CAC > 7:1: potentially under-investing in growth; consider increasing acquisition spend.

Worked Example — Mid-Market B2B SaaS

A B2B SaaS sells project-management software at $200/account/month average. 80% gross margin, 2% monthly churn, $30/account/month expansion (seat additions, premium upgrades).

  • Effective ARPA: 200 + 30 = $230/mo.
  • LTV = 230 × 0.80 / 0.02 = $9,200.
  • Customer lifespan = 1/0.02 = 50 months ≈ 4.2 years.
  • NRR ≈ (230/200) × (1 - 0.02) × 100 = 113% (excellent).
  • Target CAC for 3:1 ratio: ≤ $9,200 / 3 = $3,067 max.
  • Target CAC for 5:1 ratio: ≤ $9,200 / 5 = $1,840 max.

Worked Example — SMB SaaS with Higher Churn

An SMB SaaS sells email-marketing software at $50/account/month. 75% gross margin, 5% monthly churn, $5/account/month expansion.

  • Effective ARPA: 50 + 5 = $55/mo.
  • LTV = 55 × 0.75 / 0.05 = $825.
  • Customer lifespan = 1/0.05 = 20 months = 1.7 years.
  • NRR ≈ (55/50) × (1 - 0.05) × 100 = 105%.
  • Target CAC for 3:1 ratio: ≤ $275 max — challenging for paid acquisition; need product-led growth or affiliate channels.

Industry SaaS Benchmarks (2024 Public SaaS Median, OpenView)

  • Median ARR Growth (private): 30-50% YoY for Series A; 20-40% for B-C; 15-30% for D-E.
  • Median Net Revenue Retention: 105-110% (top-decile 130%+).
  • Median Gross Margin: 78% (range 60-90%; AI/infra companies lower due to compute COGS).
  • Median Monthly Churn: 2.5% (gross customer churn); 1.0% NRR-adjusted.
  • Median LTV:CAC ratio: 3.5x (healthy benchmark; Bessemer says 3x is mandatory, 5x is excellent).
  • Median CAC Payback Period: 18 months (target < 12 months for capital-efficient SaaS).
  • Median Magic Number (sales efficiency): 0.7-1.0 (above 1.0 = invest more in sales/marketing).
  • Median Rule of 40: Growth Rate + Profit Margin = 40+ (top SaaS hits 60+).
Real-World Example

Worked Example — Decide Acquisition Spend Based on LTV:CAC

Question: A SaaS founder is reviewing whether to invest more in paid Google Ads to grow MRR. Current metrics: ARPA $150/mo, gross margin 75%, monthly churn 4%, account expansion $20/mo, current blended CAC $1,200. Should they increase paid-acquisition spend?

Step 1 — Compute Current LTV.

  • Effective ARPA = 150 + 20 = $170/mo.
  • LTV = 170 × 0.75 / 0.04 = $3,188.
  • Customer lifespan = 1/0.04 = 25 months = 2.1 years.
  • NRR ≈ (170/150) × (1 - 0.04) × 100 = 109% — above 100% (healthy expansion-side dynamics).

Step 2 — Compute Current LTV:CAC Ratio.

  • LTV:CAC = 3,188 / 1,200 = 2.66 : 1.
  • Below 3:1 healthy threshold but above 1:1 break-even.
  • Capital efficiency is moderate; not "excellent" by VC standards.

Step 3 — Determine Target CAC for 3:1 Ratio.

  • Target CAC = LTV / 3 = 3,188 / 3 = $1,063.
  • Current CAC ($1,200) is 12.9% above target — modest gap.
  • To reach 3:1, either reduce CAC by ~12% OR increase LTV by ~13% (e.g. raise ARPA, reduce churn).

Step 4 — Assess Increase in Paid-Acquisition Spend.

  • If paid-acquisition CAC is < $1,200 marginal cost: increasing paid-acquisition spend brings blended CAC DOWN — push spend until marginal CAC = $1,200.
  • If paid-acquisition CAC is > $1,200: diminishing returns; increasing spend pushes blended CAC UP and LTV:CAC ratio further BELOW 3:1.
  • Diagnostic test: compare paid-channel CAC alone (Google Ads only, calculate cost / new customers from that channel) to LTV. If paid CAC = $2,500, that's 1.3:1 LTV:CAC — destroying value at the margin.

Step 5 — Recommendation.

  • Don't increase paid spend yet. Current LTV:CAC is at 2.66:1, below 3:1 healthy threshold.
  • Priority actions for healthier LTV: (1) Reduce churn from 4% to 3% — would raise lifespan to 33 months and LTV to $4,250 (improving LTV:CAC to 3.5:1). (2) Increase ARPA via plan price increase or upsell. (3) Improve product-market fit to drive organic / referral acquisition (which has near-zero CAC).
  • If you must increase paid spend, only do so for channels where marginal CAC < $1,063 (the 3:1 target). Pause channels above this threshold.
  • Track CAC payback period (months to recover CAC from gross margin per month): currently 1,200 / (170 × 0.75) = 9.4 months — within healthy < 12 month threshold.

Who Should Use the SaaS LTV Calculator?

1
Compute LTV for monthly board reports, fundraising decks, and investor updates. Standard metric in every SaaS pitch — alongside ARR, NRR, growth rate, and burn multiple.
2
Evaluate target-company unit economics. VCs look for LTV:CAC > 3:1 (mandatory), > 5:1 (excellent). Below 2:1 is a red flag for sustainability.
3
Set acquisition spend caps based on target LTV:CAC ratios. Pause channels where marginal CAC exceeds LTV/3.
4
Quantify the LTV impact of churn-reduction initiatives: 1% churn reduction adds 33% to customer lifespan (and LTV) at typical 3% monthly churn baseline.
5
Project cohort economics for budgeting; combine with new-customer additions to forecast 12-24 month MRR growth.
6
Model ARPA increases via price changes; predict effect on LTV (proportional) and on churn (typically slight increase) — net effect usually positive on LTV.
7
Quantify upsell/expansion impact on LTV. $20/mo expansion can double LTV from $1,500 to $3,000 at typical SaaS economics — most-leveraged tactic for unit-economics improvement.

Technical Reference

SaaS Metrics History. The modern SaaS unit-economics framework was popularized by David Skok at Matrix Partners through his "SaaS Metrics 2.0" blog series (forentrepreneurs.com, 2012-2018). The core LTV formula and 3:1 LTV:CAC benchmark became industry standard. Bessemer Venture Partners' "State of the Cloud" annual reports and OpenView Partners' annual SaaS Benchmarks have refined and quantified the benchmarks for thousands of SaaS companies. The formal academic foundation is in customer-equity models from Blattberg-Deighton (1996) and Rust-Lemon-Zeithaml (2004).

Definitions.

  • ARPA (Average Revenue Per Account): total monthly revenue / total active accounts. Synonyms: ARPC (per customer), ARPU (per user — distinct if accounts have multiple users).
  • Gross Margin: (Revenue − COGS) / Revenue × 100%. SaaS COGS include hosting (AWS / GCP / Azure), customer support staff allocated to direct support, payment processing fees (Stripe ~3%), third-party APIs, account management. Excludes sales, marketing, R&D, G&A.
  • Churn (gross customer churn): customers lost / starting customers per period. Best-in-class SaaS < 1% monthly; healthy 1-3%; concerning > 5%.
  • Net Revenue Retention (NRR): (Starting MRR − Churn MRR + Expansion MRR) / Starting MRR × 100%. Key SaaS retention metric; > 100% means cohort grows over time.
  • Account Expansion: revenue growth per existing account (upsell, cross-sell, seat additions, plan upgrades). Doesn't include new-customer revenue.
  • Customer Lifespan: 1 / monthly churn rate. Geometric series sum.
  • CAC (Customer Acquisition Cost): total acquisition spend / new customers acquired in period. Includes sales, marketing, paid acquisition, sales-team compensation allocated to new business.
  • CAC Payback Period: CAC / (ARPA × Gross Margin) months. Target < 12 months for capital-efficient SaaS.

SaaS Industry Benchmarks (2024 OpenView / Bessemer Reports).

  • Median ARR (private SaaS): Series A $5M, Series B $15M, Series C $40M, Series D $100M+.
  • Median ARR Growth: Series A 100%+, B 80%, C 50%, D 30-40%, E+ 20-30%.
  • Median Gross Margin: 76% (B2B SaaS); 70% (consumer SaaS); 60-70% (AI/infra-heavy).
  • Median Monthly Churn: SMB 3-5%; mid-market 1.5-2.5%; enterprise < 1%.
  • Median NRR: SMB 95-105%; mid-market 105-115%; enterprise 110-125%; top-decile (Snowflake, Datadog) 130%+.
  • Median LTV:CAC: 3.0-3.5x healthy; > 5x excellent; > 7x flag for under-investment in growth.
  • Median CAC Payback: 12-18 months; < 12 months capital-efficient.
  • Median Magic Number (sales efficiency): 0.7-1.0 healthy; > 1.0 invest more in S&M.
  • Median Rule of 40: Growth + Profit Margin = 40+ healthy; 60+ top SaaS.

Cohort-Based LTV vs Simple Formula. The simple formula LTV = ARPA × GM / Churn assumes constant churn and ARPA over time. Reality:

  • Cohort decay is non-constant: early-cohort churn is typically much higher than mature-cohort churn (the "trial conversion" cliff at month 1-3, then settling pattern).
  • Expansion revenue grows over time: seat additions, plan upgrades, cross-sell to additional products typically take 6-24 months to materialize.
  • Pricing changes affect ARPA: annual price increases of 5-10% are typical for established SaaS.
  • For high-precision LTV: sum actual revenue per month per cohort, discount to present value at 10-20% cost-of-capital, compare to actual cohort CAC. Modern SaaS analytics tools (ChartMogul, Profitwell, Stripe Sigma) compute cohort LTV automatically.

The 3:1 and 5:1 Benchmarks — Origin and Logic. The 3:1 LTV:CAC benchmark originated with David Skok (2012) as an empirical observation across hundreds of SaaS companies — companies above 3:1 tend to grow sustainably, those below 3:1 face cash burn. The 5:1 benchmark was introduced by Bessemer Venture Partners as the threshold for capital efficiency required for venture investment. Logic: 3:1 implies 33% gross-profit margin on customer acquisition spending; 5:1 implies 20% gross-profit margin. Ratios above 7:1 may indicate under-investment in growth (you're leaving market share on the table to competitors).

Modern Refinements and Cautions. (1) Discounted LTV: for highly seasonal or long-cycle SaaS, discount future cash flows by cost-of-capital (10-20% annual rate). Reduces LTV by 10-30% vs undiscounted. (2) Magic Number: alternative to LTV:CAC; sales efficiency = (Net New ARR per quarter) / (Sales & Marketing spend per quarter). > 1.0 means invest more in S&M; < 0.5 means cut. (3) Rule of 40: SaaS "north star" metric — Growth + Profit Margin = 40+. Top SaaS hits 60+. Captures the growth-vs-profitability tradeoff. (4) Dollar-Based Net Retention (DBNR): alternate name for NRR. (5) Burn Multiple: Net Burn / Net New ARR. Top SaaS < 1.0; healthy < 1.5; concerning > 2.0. References: David Skok forentrepreneurs.com; Bessemer Venture Partners "State of the Cloud" 2024; OpenView Partners 2023 SaaS Benchmarks Report; ChartMogul SaaS Benchmarks; Mark Roberge — The Sales Acceleration Formula.

Conclusion

Customer Lifetime Value is the cornerstone of SaaS unit economics — one formula (LTV = (ARPA + Expansion) × Gross Margin / Churn) that captures the discounted lifetime profit per customer and underpins every acquisition / retention / pricing decision in subscription businesses. Compare to Customer Acquisition Cost (CAC) via the LTV:CAC ratio — the standard SaaS-health benchmark: ≥ 3:1 is healthy, ≥ 5:1 is excellent and capital-efficient, < 1:1 is unsustainable.

Three operational reminders: (1) The simple formula assumes constant churn and constant ARPA over time — real SaaS cohorts vary. For high-precision unit economics, build cohort-based LTV models with actual time-series cash flows discounted to present value (10-20% cost of capital). (2) Customer churn and revenue churn are different — make sure you're using the right one for your purpose. NRR (Net Revenue Retention, including expansion) is the modern SaaS gold-standard retention metric. (3) Best-in-class SaaS hits 110-130% NRR, < 1% monthly churn, 80-85% gross margin, and LTV:CAC > 5:1. If you're below industry benchmarks, focus on the highest-leverage lever: expansion revenue (relatively easy to add via product features) and churn reduction (highest ROI on customer-success investment) typically dominate ARPA changes and gross-margin optimization for total LTV impact.

Frequently Asked Questions

What is the SaaS LTV Calculator?
It implements the standard SaaS unit-economics formula LTV = (ARPA + Expansion) × Gross Margin / Churn. 20 currency options (USD, EUR, GBP, BDT, INR, CAD, etc.); ARPA can be entered directly or computed from total revenue / accounts. Output: LTV, customer lifespan (1/churn), Net Revenue Retention, target CAC for 3:1 and 5:1 LTV:CAC benchmarks, and unit-economics classification across 5 bands.

Pro Tip: Pair this with our Reserve Ratio Calculator for banking analysis.

What is SaaS LTV?
Customer Lifetime Value — the discounted lifetime profit a customer generates for a SaaS business. Standard formula: LTV = (ARPA + Expansion) × Gross Margin / Churn, where ARPA is monthly Average Revenue Per Account, Gross Margin is revenue minus COGS as %, Churn is monthly customer attrition rate, and Expansion is upsell/cross-sell revenue per account per month. The foundational metric of SaaS unit economics — every founder pitch deck, board package, and venture diligence centers on it. Used to set acquisition spend caps via the LTV:CAC ratio.
What's the formula for LTV?
LTV = (ARPA + Expansion) × Gross Margin / Churn. Without expansion: LTV = ARPA × GM / Churn. Worked example: $100/mo ARPA + $20 expansion, 80% gross margin, 3% monthly churn → LTV = (100 + 20) × 0.80 / 0.03 = $3,200. Customer lifespan: 1 / monthly churn = 1/0.03 = 33 months ≈ 2.75 years. The formula assumes constant churn and ARPA over time.
What's a healthy LTV:CAC ratio?
3:1 is the standard healthy benchmark (David Skok, 2012). Every $1 spent on acquisition returns $3 in lifetime value. 5:1 is excellent and indicates capital-efficient SaaS (often required by venture investors for Series A+). < 1:1 means losing money on every customer (fundamentally unsustainable). 1:1 to 2:1 = marginal, insufficient for growth. > 7:1 may indicate under-investment in growth — consider increasing acquisition spend. Actual SaaS median (OpenView 2023): 3.0-3.5x for growth-stage companies.
What's a typical SaaS churn rate?
Best-in-class: < 1% monthly (enterprise SaaS like Snowflake, Datadog, ServiceNow). Healthy: 1-3% monthly (typical mid-market B2B SaaS). Concerning: 3-5% monthly (typical SMB SaaS). Red flag: > 5% monthly (limits LTV severely; product-market fit issues). Annual equivalent: 1 − (1 − monthly)^12. At 3% monthly = 31% annual; at 5% monthly = 46% annual. Customer churn vs revenue churn: customer churn counts lost accounts; revenue churn weights by ARPA. NRR (Net Revenue Retention) includes expansion and is the modern gold-standard retention metric.
What is Net Revenue Retention (NRR)?
NRR = (Starting MRR − Churn MRR + Expansion MRR) / Starting MRR × 100%. Measures cohort revenue retention including expansion. NRR > 100% means cohort revenue grows over time from upsells/cross-sells outweighing churn. Best-in-class SaaS: 110-130% (Snowflake 130%+, Twilio 125%, Datadog 120%+). Healthy: 100-110%. Concerning: < 100% (cohort revenue shrinks). Modern gold-standard SaaS retention metric — supersedes simple customer churn for revenue-focused analysis.
What's a typical SaaS gross margin?
70-85% for typical SaaS; OpenView 2024 median is 76%. SaaS COGS include: hosting (AWS / GCP / Azure), payment processing fees (Stripe ~3%), customer support staff allocated to direct support, third-party APIs (Twilio, SendGrid), account management. Excludes sales, marketing, R&D, G&A. By segment: B2B mid-market 75-85%; B2B enterprise 80-90%; consumer SaaS 70-80%; AI/infrastructure SaaS 60-70% (compute COGS). Gross margin < 50% is atypical for SaaS — verify your COGS allocation; may indicate the business is more services-heavy than software.
How do I calculate ARPA?
ARPA = Total Monthly Revenue / Total Active Accounts. Sources: billing system (Stripe, Recurly, Chargebee), accounting software, board reports. Worked example: $1M MRR with 5,000 paying accounts → ARPA = $200/mo. The calculator handles this — check the "I don't know the ARPA" box and enter total revenue + accounts; it computes ARPA automatically. Different scopes: ARPC (Average Revenue Per Customer); ARPU (per User, used when accounts have multiple users — Slack-style models); ARPA is the most common SaaS metric.
What's account expansion?
Additional revenue per existing account from upsells, cross-sells, seat additions, or plan upgrades. Distinct from new-customer revenue. Examples: Slack adds seats as customer's team grows; HubSpot upsells from Hub to Hub Suite; Datadog adds new product modules to existing accounts. Best-in-class SaaS achieves expansion revenue equal to or exceeding initial ARPA over a customer's lifetime — drives Net Revenue Retention > 100%. Add expansion to ARPA in the LTV formula: LTV = (ARPA + Expansion) × GM / Churn. Expansion is one of the highest-leverage SaaS growth drivers.
What's a customer lifespan in SaaS?
1 / monthly churn rate. At 1% monthly churn → 100 months = 8.3 years (best-in-class enterprise). At 3% monthly → 33 months = 2.75 years (healthy mid-market). At 5% monthly → 20 months = 1.7 years (typical SMB). At 10% monthly → 10 months (concerning, consumer-tier). Geometric-series derivation: probability customer survives N months = (1 − churn)^N; expected value sums to 1/churn months. Used directly in LTV: LTV = lifespan × monthly profit = (1/churn) × (ARPA × GM) = ARPA × GM / churn.
What's the difference between LTV and customer lifetime revenue?
LTV (Customer Lifetime Value) includes the gross-margin adjustment — it represents the lifetime PROFIT per customer, not revenue. Customer lifetime REVENUE = ARPA / churn (no GM adjustment). Difference: at 80% GM, LTV is 80% of customer lifetime revenue. For acquisition decisions and unit-economics analysis, ALWAYS use the gross-margin-adjusted LTV — that's what venture investors and boards expect. Setting GM = 100% in the calculator gives revenue LTV (no margin); useful for top-line modeling but not for capital-efficiency analysis. The default 100% GM in the calculator is intentional — encourages users to enter actual GM for proper analysis.

Author Spotlight

The ToolsACE Team - ToolsACE.io Team

The ToolsACE Team

Our ToolsACE finance team built this calculator to handle the foundational <strong>SaaS Customer Lifetime Value (LTV)</strong> formula used by every SaaS founder, board, and venture investor. The defining identity is <strong>LTV = (ARPA + Expansion) × Gross Margin / Churn</strong>, where ARPA is Average Revenue Per Account per month, Gross Margin is revenue minus COGS as a percent, Churn is monthly customer attrition rate, and Expansion is upsell/cross-sell revenue per account per month. Output: LTV in 20 currencies, customer lifespan (= 1/churn), Net Revenue Retention (NRR), effective ARPA (with expansion), and target CAC for the standard <strong>3:1 and 5:1 LTV:CAC benchmarks</strong>. The calculator handles two ARPA-input modes: direct entry, OR "I don't know the ARPA" checkbox that exposes total revenue + accounts fields and computes ARPA = revenue / accounts. <strong>Smart warnings</strong> flag high churn (&gt; 10% monthly), low gross margin (&lt; 50%), exceptional NRR (&gt; 130%), unsustainable NRR (&lt; 100%), and consumer-tier ARPA (&lt; $5/mo).

Standard SaaS unit-economics formulas (David Skok, OpenView, Bessemer Venture Partners)ChartMogul SaaS Metrics Reference; SaaSter ReportsMark Roberge — The Sales Acceleration Formula (HubSpot CRO)

Disclaimer

The simple LTV formula assumes constant churn and constant ARPA over time — real SaaS cohorts vary significantly. For high-precision unit economics, use cohort-based LTV: sum actual revenue by month for each cohort, discount to present value with appropriate cost-of-capital rate (typically 10-20% for SaaS), and compare to actual cohort CAC. Churn definitions matter: customer churn (count of accounts) vs revenue churn (revenue lost) vs net revenue retention (revenue lost net of expansion). The 3:1 LTV:CAC benchmark is industry standard (David Skok, 2012); the 5:1 benchmark applies to capital-efficient SaaS often required by venture investors. Best-in-class SaaS metrics: NRR 120-140%, gross margin 80-85%, monthly churn < 1%, LTV:CAC 5:1+. For consumer SaaS (B2C with low ARPA), use cohort-based LTV with explicit time-series cash flows. References: David Skok forentrepreneurs.com; ChartMogul SaaS Benchmarks; OpenView 2023 SaaS Benchmarks Report; Bessemer State of the Cloud.