LTV Calculator

Customer Lifetime Value (LTV) is one of the most critical metrics for any subscription-based or recurring-revenue business. It represents the total gross profit a company can expect to earn from a single customer account over the entire duration of that relationship. When you know your LTV, you can make smarter decisions about how much to invest in acquiring customers, which segments to prioritize, and whether your business model is fundamentally sustainable.

The standard LTV formula for subscription businesses multiplies the average monthly revenue per user by the gross margin percentage, then divides by the monthly churn rate. This produces a single dollar figure that estimates the total profit contribution of each customer. The formula also implies an average customer lifespan, calculated as one divided by the monthly churn rate. For example, a 5% monthly churn rate yields an average lifespan of 20 months.

LTV is most powerful when compared to Customer Acquisition Cost (CAC). The widely cited benchmark is that LTV should be at least three times CAC for a healthy SaaS business. A ratio below that threshold suggests the company is spending too aggressively on acquisition relative to the value customers generate, while a very high ratio may signal under-investment in growth.

This calculator takes three inputs: your average monthly revenue per user, your gross margin as a percentage, and your monthly churn rate. It instantly returns the estimated Customer Lifetime Value and the average customer lifespan in months. Use these numbers to evaluate pricing changes, assess the impact of reducing churn, or build financial projections for investors.