LTV calculator
Customer lifetime value (LTV) estimates how much a customer is worth over the whole time they pay you. Enter monthly revenue per customer, gross margin and monthly churn. You get revenue LTV and margin-adjusted LTV; the second is the one to compare with CAC.
Your numbers
ARPU divided by monthly churn. Ignores the cost of serving the customer.
Revenue LTV times gross margin. Compare this one with CAC.
How it is calculated
Margin-adjusted LTV = ARPU × gross margin / monthly churn rate
Expected lifetime in months = 1 / monthly churn rate
Churn and margin are entered as percentages and converted to fractions. With 3.5% monthly churn, the expected lifetime is 1 / 0.035, about 28.6 months.
Before you rely on it
- Use a churn rate you trust. A few months of data from a new product can make churn look lower (or higher) than it will be. The formula assumes churn stays constant.
- Use gross margin, not operating margin. Gross margin is revenue minus the direct cost of delivering the product (hosting, payment fees, support), divided by revenue.
- Customer churn or revenue churn. If customers pay very different amounts, revenue churn may describe your base better than customer churn. Say which one you used.
- Expansion is not included. If customers tend to upgrade over time, this simple formula understates LTV. If they tend to downgrade, it overstates it.
- Compare with CAC. Divide margin-adjusted LTV by the result of the CAC calculator.
More on SaaS formulas in 5 KPIs every SaaS company should track.
Common questions
Should I use monthly or annual churn?
Monthly, because ARPU is monthly. If you only have annual churn, convert it: monthly churn = 1 minus (1 minus annual churn) to the power of 1/12. For 30% annual churn that is about 2.9% a month.
What if churn changes a lot from month to month?
Use an average over the last three to six months, or the churn of customers who have been with you longer if early churn is much higher than later churn. The formula assumes churn stays constant.
Why multiply by gross margin?
Revenue LTV counts every dollar a customer pays, including what it costs you to serve them. Multiplying by gross margin leaves the gross profit that has to cover acquisition and everything else, which is the fair figure to compare with CAC.
How should I read LTV:CAC?
Divide margin-adjusted LTV by CAC. David Skok's SaaS metrics guide says the best SaaS businesses have a ratio above 3. Below 1, each new customer costs more than it brings in.
Does this work for businesses without subscriptions?
Only roughly. The formula assumes recurring revenue and a steady churn rate. For repeat purchases, a common approach is average order value times purchases per year times gross margin times expected years as a customer.
Sources
- David Skok, SaaS Metrics 2.0 (forEntrepreneurs), read 24 September 2026
Work it out from your own data
clariBI connects Stripe and your other business apps. On Starter and up you can ask for ARPU, churn or LTV in plain English; it calculates the figures from your connected data and shows the numbers it used.