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Business & SaaS

Customer LTV

Calculate average lifetime value of a customer to determine acquisition spend.

Customer Lifetime Value (LTV or CLV) determines how much you can profitably spend to acquire a customer. The LTV:CAC ratio drives every growth investment decision in modern SaaS and e-commerce.

Calculator inputs

Enter your numbers

75%
2.5%

Results update as you change the inputs. Calculations run in your browser.

Customer LTV

$2370

avg Lifetime
40.0 months
max C A C
$790 (LTV:CAC 3:1)
ratio
Target CAC under $790
See the formula

Formula and method

LTV = (ARPU × Gross Margin) / Monthly Churn Rate

LTV = gross profit margin × average customer lifespan. Average lifespan = 1 / monthly churn rate. Industry standard for sustainable unit economics is LTV:CAC ratio of 3:1 or better.

Worked examples

SMB SaaS product

Avg Monthly Revenue per Customer ($):
99
Gross Margin (%):
72
Monthly Churn Rate (%):
3

Customer LTV: $2376

Enterprise software

Avg Monthly Revenue per Customer ($):
2500
Gross Margin (%):
80
Monthly Churn Rate (%):
0.8

Customer LTV: $250000

Assumptions and limits

  • Constant churn rate and ARPU throughout customer life
  • Simple average lifespan model

This tool provides an educational estimate. Rules, rates and personal circumstances can change the answer. Review the assumptions before relying on a result. Report a correction.

Common mistakes to avoid

  • Using revenue instead of gross profit in LTV — this overstates LTV by ignoring cost of goods.
  • Using annual churn rate in the monthly formula — convert to monthly first (annual churn / 12).
  • Ignoring expansion revenue — customers who upgrade have higher actual LTV than ARPU suggests.

Frequently asked questions

What is a good LTV:CAC ratio?

Generally: below 1:1 means you are losing money on every customer. 1:1 to 3:1 is breakeven to marginally profitable. Above 3:1 is healthy. Above 5:1 may mean underinvesting in growth.

How do I improve LTV?

Reduce churn (customer success, product improvements), increase ARPU (expansion revenue, upsells), or improve gross margins (pricing, efficiency). Churn reduction has the biggest compounding effect over time.

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