Free LTV Calculator
Customer Lifetime Value, computed the way serious operators use it. Add ARPU, gross margin, monthly churn, get gross and net LTV side by side. No signup, no email gate, no upsell.
Your inputs
ARPU divided by monthly churn.
Gross LTV multiplied by gross margin. This is the number to compare against CAC.
LTV gets used most by B2B SaaS founders stress-testing pricing decisions, and by ecommerce teams deciding how much to spend on first-order acquisition. The trap in both cases: optimistic churn assumptions inflate LTV by 2-3x.
The formula
Net LTV = Gross LTV × (Gross Margin % / 100)
Both numbers tell you something different. Gross LTV is the total revenue one customer generates before you account for the cost of serving them. Net LTV strips out hosting, payment processing, and support cost, leaving the contribution dollars that actually pay back acquisition. When people say "LTV:CAC of 3:1," they almost always mean net LTV against fully-loaded CAC. Use the net number for that comparison.
How to read your result
LTV in isolation is not very useful. It becomes useful when paired with CAC, payback period, and a sense of how stable your churn rate really is. The standard health checks operators use:
- LTV to CAC ratio around 3:1. One dollar of fully-loaded acquisition cost should return at least three dollars of net contribution over the customer's lifetime. Below 1:1, you lose money on every new customer. Above 5:1, you are probably under-investing in growth and a competitor with looser unit economics will eat into your market.
- CAC payback under 12 months for SMB, under 18 for mid-market. Net LTV divided by monthly contribution gives you the implied customer lifetime in months. If payback is longer than half that lifetime, growth is being funded by your balance sheet, not the customer base.
- Churn assumption is realistic. The formula assumes monthly churn is constant for the life of the customer. In practice, cohorts that survive past month 12 churn at materially lower rates. If you have cohort data, use the long-run churn rate of stable cohorts, not the headline blended number.
- Gross margin is gross profit margin, not gross revenue margin. One of the most common mistakes is using the wrong margin. Gross profit margin is revenue minus COGS (delivery and support cost), divided by revenue. It is not contribution margin and it is not operating margin.
Run the CAC calculator next, then divide net LTV by CAC for the ratio that actually matters. For the wider context, see our breakdown of the 5 SaaS KPIs every company should track, with formulas.
Industry benchmarks (2025 data)
LTV benchmarks vary wildly by ACV, contract length, and gross margin assumptions. These are net-LTV ranges synthesized from independent SaaS data sets. Treat them as a sanity check, not a target.
| Segment | Typical net LTV | Healthy LTV:CAC |
|---|---|---|
| B2B SaaS, ACV under $10k | $1,000 – $5,000 | 3.0x – 4.0x |
| B2B SaaS, ACV $10k – $50k | $15,000 – $80,000 | 3.0x – 5.0x |
| B2B SaaS, ACV above $50k | $120,000+ | 3.5x – 6.0x |
| D2C ecommerce | $80 – $400 | 2.5x – 4.0x |
| Marketplace | $50 – $300 | 3.0x – 5.0x |
Source ranges synthesized from publicly available SaaS benchmark reports (OpenView, SaaS Capital, ProfitWell). Your number being outside these bands does not mean you have a problem; ACV, contract length, geography, and the age of your cohort mix can move the medians significantly.
FAQ
Should I use monthly churn or annual churn?
Use monthly customer churn for this formula. The math assumes a constant monthly attrition rate. If you only track annual churn, the rough conversion is monthly = 1 - (1 - annual)^(1/12). For SaaS sold on annual contracts, churn calculated at the contract boundary is more honest than a monthly approximation.
What if my churn rate varies a lot month to month?
Use a trailing three-month or six-month average. A single bad month from a customer concentration event will blow up your LTV in the wrong direction. If churn has a clear trend (cohorts are getting stickier), prefer the most recent stable quarter over a long blended average.
Why does the calculator multiply by gross margin?
LTV without gross margin is revenue, not profit. The interesting number for an operator is contribution: how many dollars of gross profit one customer produces over their lifetime. That is what funds CAC, R&D, and everything else. Comparing a revenue-only LTV against fully-loaded CAC is apples to oranges, and tends to flatter the unit economics by 15-30%.
How should I read LTV:CAC ratio?
Around 3:1 is the rough industry standard for healthy SaaS. Below 1:1, each new customer loses money. Between 1:1 and 3:1, the unit economics work but there is little room to invest in growth. Above 5:1, you may be under-spending on acquisition. Track the ratio as a trend, not a single snapshot, since both LTV and CAC are moving averages.
Does this work for non-subscription businesses?
Partially. The churn-based formula assumes recurring revenue. For D2C ecommerce or marketplaces, LTV is better computed as average order value times annual purchase frequency times gross margin times retention period in years. If your business has both subscription and one-off revenue, compute LTV separately for each stream and add them.
Three common mistakes to avoid
Over a few hundred customer reviews with finance teams, the same handful of LTV errors show up again and again. They tend to overstate the number by 30-100%, which is more than enough to make a struggling business look healthy on paper.
- Using a too-recent cohort. A three-month-old cohort has not had enough time to show its real churn pattern. If you compute LTV off the first 90 days of a cohort, you will materially overstate retention for any product where churn front-loads after the trial period.
- Ignoring expansion revenue without modelling it. If you have meaningful net dollar retention above 100%, the simple LTV formula understates value. Conversely, if you assume NDR but actually have flat or declining accounts, the formula plus an upward adjustment is misleading. Pick one method and document the assumption.
- Mixing customer churn and revenue churn. Customer churn (one logo leaves) and revenue churn (one customer downgrades) are different. For LTV, use customer churn if ARPU is roughly flat across the base, and gross revenue churn if you have wide ARPU dispersion (an enterprise downgrade swamps a hundred SMB cancellations).
More guidance and worked examples live in our help center. Pricing and feature breakdown for analysts who want LTV updated daily lives on the pricing page.
Track LTV automatically in clariBI
Connect Stripe, HubSpot, your CRM, your billing system through native data integrations. clariBI computes gross and net LTV every day, splits the number by cohort, plan, and segment, and tells you when something material shifts. Ask in plain English using conversational analytics, get the answer charted. No spreadsheet maintenance.