Should I use gross churn or net revenue churn?

This formula uses customer (logo) churn, which assumes every remaining customer pays the same ARPU going forward. If your expansion revenue from upsells offsets your churn, net revenue retention paints a more accurate — often more favorable — picture than logo churn alone.

What counts as a good LTV:CAC ratio?

3:1 or higher is the commonly cited healthy benchmark for venture-backed SaaS. Below 1:1 means you’re losing money on every customer before considering fixed costs; ratios far above 5:1 sometimes suggest under-investment in growth rather than unusual efficiency.

Business & Enterprise

SaaS Customer Lifetime Value (LTV) Calculator

Estimate how much revenue a customer generates over their lifetime, and whether your acquisition cost is sustainable.

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Formula

How LTV is calculated

LTV = ARPU × Gross Margin ÷ Monthly Churn Rate

ARPUAverage revenue per account, per month

Gross marginRevenue left after direct costs of serving the customer (hosting, support)

1 ÷ churn rateAverage customer lifetime in months

Example

Worked example

A SaaS product charges $80/month, runs a 75% gross margin, and loses 3% of customers each month. Average lifetime is 1 ÷ 0.03 ≈ 33.3 months. LTV = $80 × 0.75 × 33.3 ≈ $2,000. Against a $500 CAC, that’s a 4:1 LTV:CAC ratio — comfortably above the commonly cited 3:1 healthy threshold.

FAQ

Common questions

LTV divides by churn, not multiplies, so a small change compounds. Cutting monthly churn from 3% to 2% pushes average lifetime from about 33 months to 50 months — a 50% increase in LTV from a one-point change.

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