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Customer Lifetime Value (LTV) Calculator

Compute customer LTV from ARPU, gross margin, and monthly churn (simple or discounted).

Written by Golam Rabbani, Founder & Lead Engineer

Average revenue per user per month.

Revenue minus COGS, as a percent. 0-100.

Percentage of customers that leave each month.

If provided, we compute LTV:CAC ratio.

How to use this customer lifetime value (ltv) calculator

  1. Pick a mode: Simple (ARPU ÷ churn) or Discounted (also factor in cost of capital).
  2. Enter monthly ARPU, gross margin %, and monthly churn %.
  3. For Discounted mode, also enter a monthly discount rate (often 1% per month ≈ 12% annual).
  4. Optionally add your CAC to see the LTV:CAC ratio and benchmark band.
  5. Press Calculate LTV to view the result, then use Copy or Reset.

About this customer lifetime value (ltv) calculator

Customer Lifetime Value (LTV) is the present value of the gross profit a customer generates over their lifetime. The canonical SaaS formula from David Skok / For Entrepreneurs is LTV = (ARPU × Gross Margin %) ÷ Customer Churn Rate. The discounted variant adds a monthly discount rate to the denominator to account for the time value of money: LTV = (ARPU × Gross Margin) ÷ (Churn + Discount rate).

Worked example. A subscription product has monthly ARPU of $50, gross margin of 70%, and monthly churn of 3%. Simple LTV = ($50 × 0.70) ÷ 0.03 = $1,166.67. Average customer lifespan = 1 ÷ 0.03 = 33.3 months. If CAC is $300, the LTV:CAC ratio is $1,166.67 ÷ $300 = 3.89, comfortably above the LTV:CAC ≥ 3 SaaS benchmark. Switching to Discounted mode with a 1% monthly discount drops LTV to ($50 × 0.70) ÷ (0.03 + 0.01) = $875, a more conservative number suitable for finance models.

LTV assumes constant churn and margin. If retention improves or churn is non-constant, segment cohorts and recompute.

FAQ

What is the standard LTV formula?
LTV = (ARPU × Gross Margin %) ÷ Churn Rate, where ARPU and churn are measured over the same period. This is the formula most SaaS investors use in due-diligence models.
When should I use the discounted variant?
When you need a present-value LTV — for board reporting, finance modeling, or comparing to CAC paid today. Use your weighted average cost of capital divided by 12 as a starting discount rate.
What LTV:CAC ratio is healthy?
The widely-cited benchmark is 3:1 or higher. Below 1:1 means you lose money on each customer; 1-3 is marginal; above 5 may signal under-investment in growth.
Should I use gross or net revenue retention instead?
If you have expansion revenue, replace churn with (gross churn − expansion %) to compute net revenue retention LTV. The formula otherwise is identical.
Why is the simple formula sometimes called the "geometric series" LTV?
It is the limit of an infinite geometric series of monthly gross profits discounted by retention: Σ (ARPU × margin) × (1 − churn)^t. Summing this series gives ARPU × margin ÷ churn — the formula used here.
Does this calculator store any input?
No. The computation runs entirely in your browser; closing the tab erases everything.