LTV Calculator: Customer Lifetime Value and LTV:CAC Ratio
LTV = (monthly ARPA × gross margin %) ÷ monthly churn %. Enter those three numbers to get customer lifetime value and average lifetime in months, then switch to the LTV : CAC tab to check the ratio against the 3 : 1 benchmark.
Customer Acquisition Cost (CAC)
How much you spend, on average, to win one new customer.
Customer Lifetime Value (LTV)
The total gross profit you earn from an average customer before they churn.
LTV : CAC Ratio
The single most-watched SaaS efficiency number. 3:1 is the healthy benchmark.
MRR & ARR
Monthly and annual recurring revenue from your customer base.
Churn Rate
The percentage of customers you lose in a period — and the lifetime it implies.
Customer Retention Rate
The percentage of customers you kept, excluding new ones you added.
SaaS Valuation
A revenue-multiple estimate. Faster growth earns a higher multiple.
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What Is Customer Lifetime Value (LTV)?
Customer lifetime value is the total gross profit you earn from an average customer across their entire relationship with you, before they churn. In SaaS it is the number that justifies acquisition spend: it tells you what a customer is actually worth, so you know how much you can afford to spend winning one. Paired with customer acquisition cost, LTV is what separates a business that grows profitably from one that buys revenue at a loss.
You will see it written three ways, LTV, CLV or CLTV, and they all mean customer lifetime value. It is unrelated to the loan-to-value ratio used in mortgages, which shares the initials but nothing else.
The SaaS LTV Formula
Say a customer pays $50/month (your ARPA, average revenue per account), your gross margin is 80%, and monthly churn is 3%. Average lifetime is 1 ÷ 0.03 ≈ 33.3 months. LTV = $50 × 0.80 × 33.3 ≈ $1,333. That is the profit, not the revenue, one customer returns over their lifetime.
Why gross margin, not revenue
Revenue LTV inflates the number by ignoring the cost of serving a customer: hosting, support and payment processing. Margin-based LTV is the honest figure, and it is the only version worth comparing to CAC. At an 80% gross margin, a revenue-based LTV overstates true customer value by 25%.
How to Calculate LTV in Three Steps
- Find monthly ARPA. Divide monthly recurring revenue by the number of paying accounts. Annual plans count as one twelfth of the annual price per month.
- Find gross margin. Revenue minus the direct cost of delivering the product (hosting, support, payment fees, third-party APIs), divided by revenue.
- Find monthly churn. Customers lost in the month divided by customers at the start of the month. The churn rate calculator does this for you.
Enter the three numbers above and the calculator returns LTV plus average customer lifetime in months. Use figures from the same period and the same customer segment, or the result mixes customers who behave very differently.
LTV to CAC Ratio Calculator
The calculator has a separate LTV : CAC tab. Enter your lifetime value and your customer acquisition cost and it returns the ratio with a verdict:
| LTV : CAC | What it means |
|---|---|
| Below 1 : 1 | You lose money on every customer you acquire. |
| 1 : 1 to 3 : 1 | Below the benchmark; fix retention or acquisition cost before scaling spend. |
| 3 : 1 to 5 : 1 | Healthy: efficient acquisition with room to reinvest. |
| Above 5 : 1 | Likely under-investing; you could spend more to grow faster. |
Not sure what your CAC is? Divide total sales and marketing spend for a period by the new customers won in it, or use the CAC calculator.
Churn Is the Multiplier
Lifetime is the inverse of churn, so churn moves LTV more than anything else. Here is what happens as you cut monthly churn on the same $50 ARPA, 80% margin customer:
| Monthly churn | Avg lifetime | LTV |
|---|---|---|
| 7% | ~14 months | ~$570 |
| 5% | 20 months | $800 |
| 3% | ~33 months | ~$1,333 |
| 1% | 100 months | $4,000 |
Halving churn doubles LTV. That is why retention work usually beats acquisition work for improving unit economics.
How to Increase Customer Lifetime Value
Three levers move LTV, in order of leverage:
- Cut churn. Because lifetime is the inverse of churn, retention work multiplies LTV faster than anything else. Better onboarding and annual plans are where most of the gain lives.
- Raise ARPA. Upsells, expansion revenue and moving customers to higher tiers lift the revenue half of the formula on customers you already have.
- Improve gross margin. More efficient hosting, support and delivery mean more of each dollar becomes profit, which flows straight into LTV.
Built and tested by Alston Antony: AI SEO strategist, reviewer of 500+ SaaS tools, and runner of a 15,000-member lifetime-deal community. Free founder math, no analytics subscription required.
Frequently Asked Questions
How do you calculate LTV?
For a subscription business, LTV = (monthly ARPA × gross margin %) ÷ monthly churn rate %. ARPA is average revenue per account per month, gross margin strips out the cost of serving the customer, and dividing by churn converts a monthly figure into a full lifetime. A $50 ARPA, 80% margin and 3% monthly churn gives an LTV of about $1,333.
How do you calculate the LTV to CAC ratio?
Divide customer lifetime value by customer acquisition cost. An LTV of $1,200 and a CAC of $400 gives a 3 : 1 ratio. Use the LTV : CAC tab in the calculator above: enter both numbers and it returns the ratio with a verdict against the 3 : 1 benchmark.
What is a good LTV to CAC ratio?
3 : 1 is the common benchmark. Your lifetime value should be at least three times what it costs to acquire a customer. Below 1 : 1 you lose money on every customer, between 1 : 1 and 3 : 1 acquisition is not yet efficient enough to scale, and well above 5 : 1 you are likely under-investing in growth.
Does LTV here mean customer lifetime value or loan-to-value?
This is a customer lifetime value calculator, LTV as it is used in SaaS and subscription businesses, also written CLV or CLTV. It is not the loan-to-value ratio used for mortgages, HELOCs or auto loans. If you are sizing a loan you need a loan-to-value tool instead.
Should I use revenue or gross margin for LTV?
Gross margin. Revenue-based LTV overstates a customer's value because it ignores what it costs to serve them (hosting, support, payment fees). Margin-based LTV is the number to compare against CAC, because it reflects the profit a customer actually contributes.
How do I increase customer LTV?
Three levers, in order of impact: cut churn (it multiplies lifetime), raise ARPA through upsells, expansion and annual plans, and improve gross margin by making delivery more efficient. Reducing monthly churn from 5% to 3% raises average lifetime from 20 to about 33 months.
What is the difference between LTV and ARPA?
ARPA (average revenue per account) is what a customer pays you in a single month. LTV is what they are worth across their whole relationship with you: ARPA, adjusted for gross margin, multiplied by how many months they stay.
Is this LTV calculator free?
Yes. It is free, with no signup and no limits. Everything is computed in your browser and no numbers are stored or transmitted.