SaaS Lifetime Value (LTV) Calculator
This calculator estimates the total revenue a SaaS business can expect from a single customer over their entire relationship.
Enter your Average Revenue Per Account (ARPA), Gross Margin, and Churn Rate to calculate LTV.
Input Your SaaS Metrics
Understanding SaaS Lifetime Value (LTV)
What is LTV?
Lifetime Value (LTV) estimates the total revenue a business earns from a customer before they churn. It helps determine how much you should spend to acquire customers (CAC).
LTV Formula
The core LTV formula is:
LTV = ARPA × Gross Margin × Customer Lifetime
Where Customer Lifetime = 1 / Churn Rate (for monthly churn).
Key Relationships
- Higher ARPA → Higher LTV
- Lower Churn → Longer Lifetime → Higher LTV
- Higher Margin → More Profitable LTV
Example Calculation
ARPA = $100, Gross Margin = 80%, Churn = 5%:
1. Customer Lifetime = 1 / 0.05 = 20 months
2. LTV = $100 × 0.80 × 20 = $1,600
Real-World SaaS LTV Examples
Example 1: Low Churn Enterprise SaaS
Scenario: Enterprise software with low churn.
Inputs: ARPA = $500, Gross Margin = 85%, Churn = 1%
Calculations:
1. Lifetime = 1 / 0.01 = 100 months (~8.3 years)
2. LTV = $500 × 0.85 × 100 = $42,500
Conclusion: High LTV justifies significant CAC.
Example 2: High Churn SMB App
Scenario: Small business tool with higher churn.
Inputs: ARPA = $50, Gross Margin = 75%, Churn = 8%
Calculations:
1. Lifetime = 1 / 0.08 = 12.5 months
2. LTV = $50 × 0.75 × 12.5 = $468.75
Conclusion: Lower LTV requires efficient acquisition.
Example 3: Freemium Conversion
Scenario: Freemium product with premium conversion.
Inputs: ARPA = $15, Gross Margin = 70%, Churn = 3%
Calculations:
1. Lifetime = 1 / 0.03 ≈ 33.3 months
2. LTV = $15 × 0.70 × 33.3 ≈ $350
Conclusion: Volume needed due to modest LTV.
Frequently Asked Questions
1. What's the difference between LTV and CLV?
LTV (Lifetime Value) typically refers to revenue, while CLV (Customer Lifetime Value) often refers to profit. This calculator shows both.
2. How do I reduce churn to improve LTV?
Improve onboarding, customer success, and product stickiness. Even small churn reductions significantly impact LTV.
3. Should I use monthly or annual churn?
This calculator uses monthly churn. For annual churn, divide by 12 first.
4. What's a good LTV:CAC ratio?
3:1 is often cited as healthy, meaning LTV is 3x Customer Acquisition Cost.
5. How does expansion revenue affect LTV?
Upsells increase ARPA over time. For precise calculations, use a multi-year model.
