LTV calculator: customer lifetime value

What is customer lifetime value (LTV)?

Customer lifetime value is the total gross profit you expect from an average customer over the whole time they stay. For a subscription business it comes down to three numbers: what a customer pays each month, how much of that you keep after direct costs, and how quickly customers leave.

LTV matters mostly as a ceiling: it’s the most you can spend to acquire a customer and still break even. That’s why it’s almost always quoted next to customer acquisition cost as the LTV:CAC ratio.

LTV formula for SaaS

The 1 ÷ churn lifetime comes from treating cancellation as a constant monthly probability: with 3% leaving each month, the expected time until a customer leaves is 1 ÷ 0.03 ≈ 33 months. Real cohorts usually churn faster in the first months and slower later, so the formula is an estimate, not a forecast.

Worked example

1. A SaaS charges an average of $79 a month. Hosting, support and payment fees take 20%, so gross margin is 80% and each customer brings $63.20 of gross profit a month.
2. Monthly customer churn is 3%, so the average customer stays 1 ÷ 0.03 ≈ 33.3 months.
3. LTV = $63.20 ÷ 0.03 ≈ $2,107. (Revenue LTV, before costs, is $79 ÷ 0.03 ≈ $2,633.)
4. CAC is $300, so LTV:CAC = $2,107 ÷ $300 ≈ 7.0 : 1, and CAC payback = $300 ÷ $63.20 ≈ 4.7 months.

Now try churn at 6% in the calculator: lifetime drops to about 17 months, LTV halves to about $1,053, and LTV:CAC falls to 3.5 : 1. Churn is the lever that moves LTV the most.

What is a good LTV:CAC ratio? Benchmarks

LTV itself has no universal benchmark: it’s a function of price, margin and churn. Churn varies a lot with price point — ChartMogul’s 2023 SaaS Retention Report (2,100+ SaaS businesses) found that only 2.7% of companies with ARPA under $10 a month had net revenue retention above 100%, against 41.1% of those with ARPA over $500.

Common LTV mistakes

• Using revenue instead of gross profit. Comparing revenue LTV with CAC overstates the ratio by your cost of service.
• Mixing monthly and annual numbers. Monthly ARPA needs monthly churn. Annual plans: divide the price by 12 and use monthly churn, or use annual figures on both sides.
• Measuring churn on a young, small cohort. Early churn is noisy and often lower than it will be. Use several months of data and check it with the churn rate calculator.
• Trusting huge lifetimes. At 1% churn the formula implies 100 months — over 8 years. Many teams cap LTV at 3–5 years because products, prices and markets change.
• Averaging across segments. A self-serve plan with 6% churn and an annual enterprise plan with 1% churn have very different LTVs; one blended figure describes neither.
• Comparing LTV with ads-only CAC. Fully loaded CAC belongs on the other side of the ratio.

How VisitTrack helps you measure LTV inputs

Your billing system knows ARPA and churn; VisitTrack adds the piece billing can’t see — where each customer came from — so you can compare LTV by acquisition channel, not just overall.

1. Connect your payment provider (revenue attribution): every payment is attributed to the referrer, campaign and landing page of the visit that led to it.
2. Identify signed-in users (People and identify) so the People tab shows each customer’s traits (plan, company), the source that first brought them in and the events they’ve done — handy for spotting which channel brings long-lived customers.
3. Compare revenue by source on the Revenue tab: a channel whose customers pay more or refund less has a higher LTV even at the same churn.
4. Feed channel-level CAC and LTV into this calculator to decide where the next dollar of acquisition goes.